Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1957 Supreme(AP) 64

HIGH COURT OF ANDHRA PRADESH
K.SUBBA RAO,JAGANMOHAN REDDY, JJ.
A. Santhanna Power of Attorney Holder(died) for Chunilal Lakshmi Chand Shah, Partner of C. L. Shah and Co., Kurnool
Versus
State of Madras (Now Andhra Pradesh)
Appeals Nos. 481 of 1951 and 295, 296, 993 and 994 of 1952 and C. M. P. Nos. 6718 and 6719 of 1956 against judgment and decree of Sub. J., Kurnool
Decided On : 22-03-1957

Advocates:
J.V. Srinivasa Rao for G. Jagadeesan and K.S. Ramaratnam, for Appellants; E. Venkatesam for Govt. Pleader (M. Seshachalapati), for the State (Respondent).
In A. S. Nos. 993 and 994 of 1952 :
Govt. Pleader (M. Seshachalapathi), for Appellant (the State); J. V. Srinivasa Rao, for Respondents.

The period of limitation for a suit for refund of tax illegally collected under the Madras General Sales Tax Act (IX of 1939) is six months from the date of the act complained of under Section 18 of the Act. However, the period of limitation is not applicable to suits for compensation or damages and, therefore, a suit for refund of tax illegally collected is not barred by limitation if it is filed within three years from the date of collection of the tax under Article 62 of the Limitation Act (IX of 1908).

Headnote:
SALES TAX - LEVY - JURISDICTION OF CIVIL COURTS - SUIT FOR REFUND OF TAX ILLEGALLY COLLECTED - LIMITATION - NOTICE UNDER SECTION 80, C. P. C. - SUFFICIENCY - SALE OF GOODS - PASSING OF PROPERTY - INTENTION OF PARTIES - APPROPRIATION OF GOODS - DELIVERY TO CARRIER - RESERVATION OF RIGHT OF DISPOSAL - F. O. R. CONTRACTS - PAYMENT AGAINST RAILWAY RECEIPT - EFFECT - SALES TAX (MADRAS) ACT (IX OF 1939), SS. 2 (h), 18, 23 (2) - LIMITATION ACT (IX OF 1908), ARTS. 62, 16.
Fact of the Case:

The plaintiffs, who were dealers in groundnut oil, brought three suits against the State of Madras for refund of sales tax collected from them under the Madras General Sales Tax Act (IX of 1939). The plaintiffs alleged that the sales in respect of which the tax was levied were completed outside the State of Madras and that, therefore, no tax was leviable under the Act. The defendant-State contended that the sales were completed within the State of Madras and that the tax was, therefore, leviable. The Subordinate Judge dismissed the suits on the ground that the suit in O. S. No. 28 of 1949 was barred by limitation and that the sales in the other two suits were completed within the State of Madras. The plaintiffs appealed to the High Court.
Finding of the Court:

The High Court held that the suit in O. S. No. 28 of 1949 was not barred by limitation and that the sales in the other two suits were completed outside the State of Madras. The Court further held that the explanation to the definition of sale in Section 2 (h) of the Madras General Sales Tax Act (IX of 1939) was ultra vires the State Legislature and that, therefore, the assessment for the year 1947-48 was defective.
Issues: 1. Whether the suit in O. S. No. 28 of 1949 was barred by limitation? 2. Whether the sales in the other two suits were completed within the State of Madras? 3. Whether the explanation to the definition of sale in Section 2 (h) of the Madras General Sales Tax Act (IX of 1939) was ultra vires the State Legislature?
Ratio Decidendi: 1. The period of limitation for a suit for refund of tax illegally collected under the Madras General Sales Tax Act (IX of 1939) is six months from the date of the act complained of under Section 18 of the Act. However, the period of limitation is not applicable to suits for compensation or damages and, therefore, a suit for refund of tax illegally collected is not barred by limitation if it is filed within three years from the date of collection of the tax under Article 62 of the Limitation Act (IX of 1908). 2. The property in goods sold passes to the buyer when the seller delivers the goods to the carrier or other bailee for the purpose of transmission to the buyer and does not reserve the right of disposal under Section 23 (2) of the Sale of Goods Act (III of 1930). However, the intention of the parties may be otherwise and the property in the goods may not pass to the buyer until the conditions imposed by the seller are fulfilled under Section 25 of the Sale of Goods Act (III of 1930). 3. The explanation to the definition of sale in Section 2 (h) of the Madras General Sales Tax Act (IX of 1939) is ultra vires the State Legislature as it enables sales tax to be levied not only on the sale of goods but also on contracts of sale by reason of the goods being in the State.
Final Decision: The appeals were allowed in part. The plaintiffs were granted a refund of the tax on the turnover of Rs. 1,95,710-12-0 being sales outside the Province. There was a decree for the refund of the tax on the above turnover with proportionate costs here and in the Court below. Appeals Nos. 295 and 296 of 1952 were allowed with costs throughout. In A. S. 296 of 1952 there was a decree for declaration and injunction as prayed for with respect to Rs. 87,632-2-9 being tax sought to be collected. In A. S. No. 295 of 1952 there was a decree for Rs. 3,400/-. Appeals of the State Nos. 993 and 994 of 1952 were dismissed with costs.

Judgement

JAGANMOHAN REDDY, J. : -

These are three plaintiffs first appeals being A. S. No. 481 of 1951 in O. S. No. 28 of 1949, A. S. No 295 of 1952 in O. S. No 34 of 1950 and A. S. No. 296 of 1952 in O. S. No. 100 of 1949, against the judgment and decree of the Subordinate Judge, Kurnool dated 22nd February, 1951 in the aforesaid three suits which were tried together by common consent. In O. S. No. 28 of 1949 the plaintiff is Chunilal Lakshmichan Shaha, partner of C L. Shah and Co., purporting to file the suit on behalf of the dissolved firm and in O. S. No. 100 of 1949 and 34 of 1950 and M/s. Kanti Brothers are the plaintiff. All these suits were brought against the State of Madras in respect of the sales tax assessments. It was alleged in O. S. No. 28 of 1949 that a sum of Rs. 16,000/- were collected from the firm by coercion for the year 1945-46 and with respect to O. S. Nos. 100 of 1949 and 34 of 1950 for years 1947-48 and 1946-47, Rs. 37,632-2-9 and Rs. 3,402/- were imposed respectively upon the plaintiffs and while in the former case steps were being taken by the defendant-respondent for the collection of the amount by coercive process, in the latter it was stated that the plaintiffs had paid the sum under protest, though the claim with respect to this was confined to only Rs. 3,400/- in order to avoid payment of heavy court-fee. The plaintiffs alleged in all these three suits that the goods were being sent by railway to places beyond the Province of Madras, the railway receipts, invoices for the goods and the hundis being lodged with the bankers of the firm to be discounted and for collection of the amounts from the buyers with instructions to deliver the receipts to the buyers only on payment of money.

It was, therefore, contended that the ownership of the goods continued to be in the plaintiff firm till the actual payment by the buyers outside the Province where the goods would be transferred to them. In these circumstances, the plaintiffs averred that the respondent-defendant had no right to impose sales-tax on such transactions and the collections in O. S. No. 28 of 1949 and 34 of 1950 for Rs. 16,000/- and Rs. 3,400/- respectively was illegal and ultra vires and prayed for a decree for the amounts with subsequent interest and costs while in O. S. No. 100 of 1949 the plaintiff prayed for a declaration that the levy of sales tax was illegal and ultra vires and for orders restraining the defendant from collecting the above tax.

In all the three suits notices under S. 80, C. P. C. were issued. The defendant-respondent denied the allegations of the plaintiffs, among others the allegation that the property in the goods continued in the seller or that the ownership of the goods continued in the plaintiffs till the payment of the value of the goods, or the truth of the plaintiffs assertion that they had a right of disposal of the goods till the payment.

The respondent further contended that in so far as it was aware of the terms of the suit transactions, the sale was complete within the Province of Madras, that the order of the Board of Revenue rejecting the plaintiffs objection was right and therefore no suit would lie impeaching the correctness of the judgment, and that the suit was not in accordance with the notices given by the plaintiffs.

In so far as O. S. No. 28 of 1949 was concerned the defendant took the plea that the suit was barred by limitation and that the defendant was not aware of the truth of the allegations that the plaintiff was entitled to sue on behalf of the firm and with respect to O. S. No. 100 of 1949 the adequacy of the court-fee paid was also raised.

Except for this difference in the two suits, three common issues were raised in all the suits (1) relating to the suit transactions taking place outside the State of Madras and if so the levy of sales-tax being illegal, (2) jurisdiction of the Court to try the suits, and (3) the suits being in accordance with the suit notices. The Subordinate Judge dismiss

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