Judgement

SUBBA RAO, J.: This appeal by certificate raises the question whether a suit for the refund of sales-tax assessed under a provision of the Madras General Sales Tax Act, 1939 (Act IX of 1939) declared to be ultra vires the powers of the State Legislature would lie.

2. The appellants are a private company incorporated under the Indian Companies Act. They carry on the business of building contractors. During the years 1948-49 to 1952-53 they were assessed to sales-tax by the State of Madras on the basis that the contracts executed by them were "works contracts". On April 5, 1954, the High Court of Judicature at Madras held in Gannon Dunkerely and Co. (Madras) Ltd. v. The State of Madras (1954) 5 STC 216 that the relevant provision of the Madras General Sales Tax Act empowering the State of Madras to assess indivisible building contracts to sales-tax was ultra vires the powers of the State Legislature. On July 5, 1954, the appellants issued a notice to the State of Madras under S. 80 of the Code of Civil Procedure claiming the refund of the amounts collected from them. As the demand was not complied with, on March 23, 1955, they fled O. S. No. 2272 of 1955 in the City Civil Court, Madras, for the recovery of a sum of Rs 36320-1-11, being the total amount of taxes illegally levied and collected from them for the years 1948-49 to 1952-53 and for incidental reliefs. The main basis of the claim was that the relevant provisions of the Madras General Sales Tax Act empowering the sales-tax authorities to impose sales-tax on indivisible building contracts were unconstitutional and void, that the sales-tax authorities had no jurisdiction to assess the said tax in respect of the said transactions and that the appellants, having paid the amounts under a mistake of law, would be entitled to have a refund of the same. The State of Madras raised various defences. It pleaded, inter alia, that S. 18-A of the Sales Tax Act was a bar to the maintainability of the suit, that the suit was barred by limitation and that a suit to recover money on the ground of mistake of law was not maintainable. The learned City Civil Judge held, following the principle laid down by the Judicial Committee in Raleigh Investment Co. Ltd. v. The Governor General in Council 74 Ind App 50, that the suit was not maintainable under S. 18-A of the Madras General Sales Tax Act. The learned City Civil Judge further held that a suit for a refund of money paid under a mistake of law was not maintainable and that it was also barred by limitation. On appeal, a Division Bench of the High Court of Madras held that a suit for a refund on the basis of mistake of law would lie but dismissed the appeal on the ground that the said decision of the Judicial Committee directly covered the point raised; that is to say, it held that the remedy of the appellants was only to pursue the machinery provided under the Act and that the suit was not maintainable in view of S. 18-A of the said Act. It did not express any opinion on the question of limitation. Hence the appeal.

3. Mr. Desai, learned counsel for the appellants, raises before us the following points: (1) The provisions of Ss. 2(h) and 2(i) Explanation (1)(i) of the Madras General Sales Tax Act, 1939, hereinafter called the Act read with R. 4 (3) of the Turnover and Assessment Rules, so far relevant to indivisible works contracts, were held by this Court to be without legislative competence and, therefore, wholly void; that S. 18-A of the Act does not bar a suit for the recovery of tax assessed under the said ultra vires provisions. (2) Section 18-A of the Act was introduced by the Amending Act of 1951 (Mad. Act 6 of 1951), which came into force on April 20, 1951, and, therefore, in any event the suit would be maintainable in respect of refund of amounts paid towards sales-tax for a period before the said date. And (3) the suit is not barred by limitation, as Art. 96 of the Limitation Act governs the said suit and in terms of the sa