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SUPREME COURT OF INDIA
M. HIDAYATULLAH, C.J.I., R.S. BACHAWAT, C.A. VAIDIALINGAM, K.S. HEGDE AND A.N. GROVER, JJ.
Dhulabhai etc., Appellants
Versus
State of M.P. and mother, Respondents (In all the appeals).
Civil Appeals Nos. 260 to 263 of 1967,
D/- 5-4-1968.
Advocates appeared
Mr. M. C. Setalvad, Senior Advocate, (M/s. Rameshwar Nath and Mahinder Narain, Advocates of M/s. Rajinder Narain and Co. with him), for Appellants (In all the Appeals); Mr. B. Sen Senior Advocate, (Mr, I. N. Shroff, Advocate, with him), for Respondents (In all the Appeals).
The jurisdiction of the Civil Courts is all embracing except to the extent it is excluded by an express provision of law. This is the purport of section 9 of the Code of Civil Procedure. [Para 7
The result of the enquiry into the diverse views expressed by the Supreme Court may be stated as follows:--
(i) Where the statute gives a finality to the orders of the special tribunals the civil Court's jurisdiction must be held to be excluded if there is adequate remedy to do what the Civil Courts would normally do in a suit. Such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure.
(ii) Where there is an express bar of the jurisdiction of the Court, an examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the Civil Court,
Where there is no express exclusion the examination of the remedies and the scheme of the particular Act to find out, the intendment becomes necessary and the result of the inquiry may be decisive. In the latter case it is necessary to see if the statute creates a special right or a liability and provides for the determination of the right or liability and further lays down that all questions about the said right and liability shall be determined by the tribunals so constituted, and whether remedies normally associated with actions in civil Courts are prescribed by the said statute or not.
(iii) Challenge to the provisions of the particular Act as ultra vires cannot be brought before tribunals constituted under that Act. Even the High Court cannot go into that question on a revision or reference from the decision of the tribunals.
(iv) When a provision is already declared unconstitutional or the constitutionality of any provision is to be challenged, a suit is open. A writ of certiorari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit.
(v) Where the particular Act contains no machinery for refund of tax collected in excess of constitutional limits or illegally collected a suit lies.
(vi) Questions of the correctness of the assessment apart from its constitutionality are for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there is an express prohibition in the particular Act. In either case the scheme of the particular Act must be examined because it is a relevant enquiry.
(vii) An exclusion of the jurisdiction of the Civil Court is not readily to be inferred unless the conditions above set down apply. Case law discussed. [Para 35
(2) Sales Tax Act, 1950 (M. B.) - Ss. 17, 3 & 5 - sales tax realised in violation of Article 301 of the Constitution - civil suit for refund of the tax realised not barred.
Where the notification charging sales tax on tobacco was declared as offending Article 301 of the Constitution and also it was held that the tax was not saved by Art. 304 (a) of the Constitution, the tax was levied without any valid charging section. This affected the jurisdiction of the assessing authorities because they could not even proceed to assess the party. A Civil suit for the refund of sales tax realised under the notification is maintainable. (1966) 2 SCR 229, (1967) 19 STC 66 & (1968) 67 ITR 102 relied on. 1964 JLJ 115= 1964 RN 217 referred to. F.A. Nos. 68, 69, 70 and 71 of the M.P. High Court reversed. (See pages 312-321 of the Twelve Years' Digest). [Para 37
Parties and Court: Tobacco dealers (appellants) challenged the State of Madhya Pradesh (respondent) in Civil Appeals Nos. 260-263 of 1967 before a five-judge bench of the Supreme Court of India (M. Hidayatullah, C.J.I., R.S. Bachawat, C.A. Vaidialingam, K.S. Hegde, and A.N. Grover, JJ.), decided on 5 April 1968. (!) (!)
Facts: Appellants, dealers in tobacco for eating, smoking, and bidi preparation, paid sales tax under the Madhya Bharat Sales Tax Act, 1950 (later applicable in Madhya Pradesh post-1956 reorganization), levied at the import point via government notifications issued under Sections 3 and 5. These notifications were later declared void for violating Article 301 of the Constitution (freedom of trade) without being saved by Article 304(a) (no compensatory tax on local goods). Appellants filed suits under Section 80, CPC, for refund, claiming illegal collection without a valid charging provision. District Judge decreed the suits; Madhya Pradesh High Court (Indore Bench) reversed, holding them barred by Section 17 of the Act, which made assessments and orders final, subject only to intra-statutory appeals/revisions. (!) (!) (!) (!) (!) (!) (!) (!) (!)
Core Issue: Whether civil courts retain jurisdiction for suits seeking refund of tax collected under ultra vires notifications (lacking valid authority), despite statutory finality clauses like Section 17 barring challenges to assessments/orders.[judgement_act_referred] (!) (!)
Decision: Supreme Court allowed the appeals, set aside the High Court judgment, and decreed the suits with costs (trial court costs as decreed; High Court costs as incurred). Civil suits held maintainable, as tax authorities lacked jurisdiction without a valid charging section. (!) (!) (!)
Key Reasoning and Principles: - Civil court jurisdiction under Section 9, CPC, is plenary unless expressly excluded or clearly implied by statute; exclusion not readily inferred.[judgement_act_referred] (!) (!) - Where statutes confer finality on special tribunals' orders, civil jurisdiction is excluded only if adequate remedies mirror civil court relief; exceptions persist for non-compliance with Act provisions or breaches of fundamental judicial procedure.[judgement_act_referred] (!) (!) - Express bars (e.g., Section 17) require scheme analysis for remedy adequacy/sufficiency, but this is non-decisive; no express bar mandates probing statutory intendment via remedies, special rights/liabilities, and tribunal exclusivity.[judgement_act_referred] (!) (!) - Tribunals under an Act cannot adjudicate its own provisions' ultra vires challenge; such issues fall outside their purview, even on High Court revision/reference.[judgement_act_referred] (!) - Suits lie to challenge unconstitutional provisions; writs (e.g., certiorari with refund) are optional, not replacing suits, especially if time-barred under Limitation Act.[judgement_act_referred] (!) - Absent statutory machinery for refunding excess/illegal tax (e.g., beyond constitutional limits), suits are maintainable.[judgement_act_referred] (!) - Assessment correctness (sans constitutionality) vests in authorities if finality/express prohibition exists; scheme examination remains relevant.[judgement_act_referred] (!) - Applied here: Notifications invalidated Article 301 violations sans Article 304(a) safeguard, voiding charging basis (Sections 3/5); authorities' actions fell outside Act, enabling suits (not mere assessment error). (!) (!) (!) (!) (!) (!)
Judgement
HIDAYATULLAH, C.J.I. : These are four appeals by certificate against the common judgment of the High Court of Madhya Pradesh (Indore Bench), 16 December, 1964/5 January, 1965 dismissing the suits filed by the appellants to recover sales-tax alleged to be realized illegally from them by the State of Madhya Pradesh, the respondent in these appeals. The suits were earlier decreed y the District Judge, Ujjain. The facts in the suits are common and were as follows:
2. The appellants are dealers in tobacco and have their places of business at Ujjain. They purchase and sell tobacco used for eating, smoking and for preparing bidis. They get their tobacco locally or import it from extra-State places. The former Madhya Bharat State enacted in 1950 the Madhya Bharat Sales Tax Act (Act 30 of 1950) which came into force on May 1, 1950. Under S. 3 of the Act every dealer whose business in the previous year in respect of sales or supplies of goods exceeded in the case of an importer and manufacturer Rupees 5,000 and in other cases Rs. 12,000, had to pay tax in respect of sales or supplies of goods effected in Madhya Bharat from 1st May 1950. Under Section 5, the tax was a single point tax and it was provided that the Government might by a notification specify the point of the sales at which the tax was payable. The section also fixed the minimum and maximum rates of tax leaving it to Government to notify the actual rate.
3. Government in pursuance of this power issued a number of notifications on April 30, 1950, May 22, 1950, October 24, 1953 and January 21, 1954. All these notifications imposed tax at different rates on tobacco above described on the importer, that is to say at the point of import. The tax was not levied on sale or purchase of tobacco of similar kind in Madhya Bharat. The tax was collected by the authorities in varying amounts from the appellants for different quarters. We are not concerned with the amounts. The appellants served notices under Section 80 of the Code of Civil Procedure and filed the present suits for refund of the tax on the ground that it was illegally collected from them being against the constitutional prohibition in Article 301 and not saved under Article 304 (a) of the Constitution.
4. The State of Madhya Pradesh was formed on November 1, 1956. In Bhailal v. State of M. P., 1960 MPLJ 601 the High Court of Madhya Pradesh declared the notifications to be offensive to Article 301 of the Constitution on the ground that it was illegal to levy a tax on the importer when an equal tax was not levied on similar goods produced in the State. The decision was later confirmed on this point in State of M. P. v. Bhailal Bhai, 1964-6 SCR 261. The appellants did not take recourse to the provisions of Article 226 of the Constitution but filed their suits on December 21, 1957.
5. The suits were opposed by the State on the main ground that such a suit was barred by the provisions of Section 17 of the Act which provides:
"17. Bar to certain proceedings.
Save as is provided in Section 17, no assessment made and no order passed under this Act or the rules made thereunder by the assessing authority, appellate authority or the Commissioner shall he called into question in any Court, and save as is provided in Sections 11 and 12 no appeal or application for revision shall lie against any such assessment or order."
The State also pleaded that as appeals against the assessment were pending before the Sales Tax Appeal Judge the plaintiffs were not entited to file the suits. By his judgment the District Judge following State of Tripura v. Province of East Bengal, AIR 1951 SC 23 and 1960 MPLJ 601 held that such a suit lay when a declaration was sought that the provisions of law relating to an assessment were ultra vires and demand was made for refund of amounts illegally collected under it. On the second point the District Judge held that Section 21 of the Act, which allows the Commissioner or the appellate authority to order refu
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