Bharat Kala Bhandar Ltd. Vs. Municipal Committee, Dhamangaon [1965] INSC 81 (26 March 1965)

Citation : 1965 Latest Caselaw 81 SC
Judgement Date : 26 Mar 1965

Bombay Abkari Act, 1878
Code of Civil Procedure, 1908 (CPC)
Government of India Act, 1935
Section 72. Liability of person to whom money is paid, or thing delivered, by mistake or under coercion-

Headnote :
The appellant had been paying a tax of one anna per unit weight of cotton under section 66(1)(b) of the Central Provinces Municipalities Act, 1922, since 1936. In 1941, the tax rate was raised to 4 annas. In 1952, the appellant initiated a lawsuit to recover the excess tax paid within three years of filing the suit. The appellant argued that following the implementation of section 142A of the Government of India Act, 1935, on April 1, 1939, until January 25, 1950, the respondent could not impose a tax exceeding Rs. 50 per year, and after the Constitution came into effect, the maximum tax limit was increased to Rs. 250 per year under Article 276 of the Constitution. Since the appellant was already paying more than this amount annually, even at the one anna rate, the increased rate of 4 annas was deemed illegal.

The trial court ruled in favor of the appellant, allowing recovery of the excess tax paid to the Municipal Committee within the three-year period. However, on appeal, the High Court determined that the suit was invalid due to noncompliance with section 48 of the Act, which stipulates that a suit regarding actions taken under the Act must be filed only after two months of serving a written notice and within six months from the date the cause of action arose.

In its appeal to this Court, the appellant maintained that this was a case of recovering an illegal tax, thus exempting the claim for refund from the provisions of section 48.

The respondent contended that (i) the prohibition was not against the tax rate itself but against the excess collection, meaning that collecting a tax above the constitutional limit was not without jurisdiction but merely illegal or irregular, thus making section 48 applicable, and (ii) based on the case of Raleigh Investment Company Ltd. v. Governor General in Council, (74 I.A. 50), the suit was barred by section 84(3) of the Act, which states that no objections to any assessment can be raised except as provided in the Act.

HELD (Per K. Subba Rao, J., R. Mudholkar, and V. Ramaswami JJ.): (i) The respondent lacked the authority to impose a tax beyond what was allowed by section 142A of the Government of India Act, 1935, or Article 276, rendering the assessment proceedings void for attempting to levy a tax exceeding the permissible limit. Therefore, the assessment order could not defend the suit for recovering the excess amount, making the suit maintainable. The Constitution is the supreme law, and any action taken in violation of it is considered wholly without jurisdiction and not protected by the law under which it was executed. [522G-H] This principle was supported by the case of Poona City Municipal Corporation v. Dattatraya Nagesh Deodhar [1964] 8 S.C.R. 178.

(ii) A tax can only be recovered if it is \"payable,\" which occurs only after an assessment. Thus, it is incorrect to argue that the prohibition established by section 142A of the Government of India Act and Article 276 of the Constitution applies solely to recoveries and not to earlier stages.

[513G] While the respondent had the authority to collect amounts up to the constitutional limit, it cannot be argued that the collection of amounts exceeding that limit was merely irregular or illegal. When there is a prohibition against assessing or recovering amounts above a certain limit, any such action is entirely without jurisdiction, and the statute under which the action was taken cannot provide protection. The court must interpret the statute to avoid rendering it unconstitutional, meaning section 48 should only protect actions that could legally be taken by the respondent but were executed incorrectly, rejecting any interpretation that would invalidate the provision. [515B; 516B-H]

(iii) The appellant\'s suit could not be barred even if section 84(3) of the Act were interpreted similarly to how the Privy Council interpreted section 67 of the Income-tax Act in the Raleigh Investment Co. case. Unlike the Income-tax Act, the Act does not provide a mechanism for claiming a refund or repayment based on the unconstitutionality of the levy, and the civil court\'s jurisdiction in refund cases remains intact. Even under sections 83 and 85 of the Act, which provide the only mechanisms for challenging an assessment, they do not offer a sufficiently effective remedy for an assessee. A reference to the High Court is discretionary for the appellate or revisional authority, and the aggrieved party has no right to approach the High Court. Furthermore, in the Raleigh Investment Co. case, the term \"assessment made under this Act\" was interpreted too broadly, as it is difficult to understand how an assessment based on an ultra vires provision, which is legally non-existent, could be considered an assessment under the Act. [517G; 518B, F, H; 519A-B; 520D-F; 521H] The exclusion of civil court jurisdiction should not be assumed lightly; it must be explicitly stated or clearly implied. One consequence of the Constitution being the fundamental law is that the normal remedy of a suit is available for addressing violations of constitutional provisions. Additionally, Article 265 of the Constitution prohibits the levy or collection of a tax except under valid law, a provision that was absent in the various Acts governing India before the Constitution, and the decision in the Raleigh Investment Co. case was made in that context.

Moreover, Article 226 of the Constitution provides citizens with a remedy to seek redress for taxes levied or collected under invalid laws, and this remedy is unaffected by provisions like section 67 of the Income-tax Act or section 84(3) of the Act. [520G-H; 521C-E] Thus, when the issue is whether the assessment was made according to law, and the respondent had jurisdiction over the subject matter and the assessee, section 84(3) may bar a suit. However, when the question pertains to the respondent\'s jurisdiction to impose a tax on the assessee exceeding the constitutional limit, that matter falls outside the scope of that provision. [522E-G]

Per Raghubar Dayal and Bachawat, JJ. (dissenting): The appellant\'s suit for recovering the tax collected in excess of Rs. 250 per year was rightly dismissed, as the correctness of the tax assessment could not be challenged in a civil court due to section 84(3), and the requirements of section 48, which mandates notice to the respondent and timely filing of the suit, were not met. [534H; 535A-B] The suit essentially sought to modify the assessed amount and then decree the payment of the excess amount as determined by the court. However, the act of assessing the tax or collecting the amount cannot be separated into two acts—one up to the legal limit and the other exceeding it. The assessment and collection were actions taken by the respondent under the Act, albeit incorrectly in assessing the tax at an excessive rate, and thus the suit was fully covered by section 48 and had to be dismissed. [526E-H] According to section 84(3), exclusive jurisdiction to determine the correctness of the assessed amount is granted to the authorities specified in section 83. Consequently, no other authority can address the correctness of the assessment on legal or factual grounds, rendering the appellant\'s suit barred from civil court consideration. [527G] The cases of Raleigh Investment Co. Ltd. v. Governor-General in Council, L.R. 74 I.A. 50, and Firm of Illuri Subbayya Chetty & Sons v. State of Andhra Pradesh, [1964] 1 S.C.R. 752, were referenced.

The case of Poona City Municipal Corporation v. Dattatraya Nagesh Deodhar, [1964] 8 S.C.R. 178, was distinguished.
 

Bharat Kala Bhandar Ltd. Vs. Municipal Committee, Dhamangaon [1965] INSC 81 (26 March 1965)

26/03/1965 MUDHOLKAR, J.R.

MUDHOLKAR, J.R.

SUBBARAO, K.

DAYAL, RAGHUBAR BACHAWAT, R.S.

RAMASWAMI, V.

CITATION: 1966 AIR 249 1965 SCR (3) 499

CITATOR INFO:

RF 1966 SC1089 (17,18,37) RF 1967 SC 887 (22) RF 1968 SC 271 (11) RF 1969 SC 78 (19,20) F 1970 SC1002 (2) R 1971 SC 97 (12) RF 1975 SC2238 (21) RF 1976 SC1207 (102) E 1977 SC 955 (12,13,14,15,20) RF 1986 SC1556 (27)

ACT:

Central Provinces and Berar Municipalities Act (2 of 1922), ss. 48 and 84(3)-Scope of-Suit for refund of excess tax paid-If barred.

HEADNOTE:

The appellant was paying a tax at the rate of one anna per--unit weight of cotton, under s. 66(1)(b) of the Central Provinces Municipalities Act. 1922, from 1936. In all 1941 the rate of tax was increased to 4 as. In 1952, the appellant filed a suit for recovery of the excess,tax paid within 3 years of the date of suit. It was contended that after the coming into force of s. 142A of the Government of India Act, 1935, on 1st April 1939, till 25th January 1950, a tax in excess of Rs. 50 per annum could not be imposed by the respondent, and, after the coming into force of the Constitution the upper limit of the tax was raised to Rs.

250 per annum under Art. 276 of the Constitution; and that as the appellant was already paying more than this amount per year even at the rate of one anna, the enhanced rate of 4 annas was illegal. The trial court decreed the suit for recovery from the Municipal Committee of excess tax paid by the appellant within 3 years of the date of suit but on appeal, the High Court held that the suit was bad for noncompliance with the requirements of s. 48 of the Act, according to which a suit for anything done or purported to be done under the Act shill be instituted only after the expiration of 2 months after serving a written notice and within six months from the date of the accrual of the alleged cause of action.

In its appeal to this Court, the appellant contended that it was a case of recovery of an illegal tax and therefore, a, claim for its refund fell outside the provisions of s. 48.

The respondent contended that (i) since the ban was not upon the rate of tax but upon the excess collection thereof, the collection of a tax above the constitutional limit was not without jurisdiction but only illegal or irregular and therefore, the suit would be in respect of a matter "Purported to be done under the Act" and the provision of s. 48 would apply, and (ii) on the basis of Raleigh Investment Company Ltd. v. Governor. General in Council, (74 I.A. 50) the suit was barred by s. 84(3) of the Act, which enacts that no objection shall be taken to any assessment in any other manner than is provided in the Act.

HELD (Per K. Subba Rao, J. R. Mudholkar and V. Ramaswami JJ.): (i) Since the respondent had no authority to levy a tax beyond what s. 142A of the Government of India Act, 1935, or what Art. 276 permitted, the assessment proceedings were void in so far as they purported to levy a tax in excess of the permissible limit and authorise. Its collection, and the assessment order would be no answer to the suit for the recovery of the excess amount, and therefore, the suit was maintainable. [522G-H] The Constitution is the fundamental law of the land and it is unnecessary to provide in any law that anything done in disregard of the Constitution is prohibited, Such a prohibition has to be read into 500 every enactment, and where such prohibition exists or can be implied, anything done or purported to be done by an authority must be regarded as wholly without jurisdiction, and is not entitled to a protection of the law under colour of which that act was done. [512A-B; 516B-C] Poona City Municipal Corporation v. Dattatraya Nagesh Deodhar.[1964] 8 S.C.R. 178, followed.

(ii)A tax can be recovered only if it is "payable" and it would be payable only after it is assessed. It is therefore futile to contend that the ban placed by s. 142A of the Government of India Act and Art. 276 of the Constitution, extends only to recoveries and not to an earlier stage.

[513G] It is true that the respondent had jurisdiction to recover an amount up to the constitutional limit. But it cannot be contended that merely because of this, the recovery by the respondent of an amount in excess of the constitutional limit was only irregular or at the worst illegal. Where power exists to assess and recover a tax up to a particular limit and the assessment or recovery of anything above that amount is prohibited, the assessment or recovery of an amount in excess is wholly without jurisdiction. To such a case, the statute under which action was purported to be taken can afford no protection. Indeed, to the extent that it affords protection it would be bad. But it is the duty of the court to so construe it as to avoid rendering the provision unconstitutional, that is, to construe s. 48 as affording protection only if what was done was something which could legally have been done by the respondent but was wrongly done by it, and reject a construction which will invalidate the provision. [515B; 516B-H] (iii)The appellant's suit could not be barred even if s. 84(3) of the Act is interpreted in the same way as the Privy Council interpreted s. 67 of the Income-tax Act, in the Raleigh Investment Co.'s case. Unlike the Income-tax Act the Act does not provide a machinery for making a claim for refund or repayment on the ground of the unconstitutionality of the levy, and the jurisdiction of the civil court in cases of refund is not taken away. Even in the class of cases to which the provisions of ss. 83 and 85 of the Act, which are the only provisions providing a machinery under the Act for challenging an assessment, apply, they cannot be said to provide a sufficiently effective remedy to an assessee. A reference to the High Court is only at the discretion of the appellate or revisional authority and the person aggrieved has no right to move the High Court. Besides, in the Raleigh Investment Co.'s case, the expression "assessment made under this Act was given too wide a construction, because, it is difficult to appreciate how taking into account an ultra vires provision, which in law must be regarded as not being a part of the Act at all, will make the assessment as one under the Act. [517G; 518B, F, H; 519A-B; 520D-F; 521H] The exclusion of the jurisdiction of the civil court is not to be readily inferred but such exclusion must either be -explicitly expressed or clearly implied. One of the corollaries flowing from the principle that the Constitution is the fundamental law is that the normal remedy of a suit will be available for obtaining redress against the violation of a constitutional provision. Moreover the provisions of Art. 265 of the Constitution preclude the levy or collection of a tax except by authority of law, which means only a valid law. There was no corresponding provision in the various Acts for the governance of India which preceded the Constitution and the decision in the Raleigh Investment Co.'s case was given in that context.

Further under Art.

501 226, the Constitution has provided a remedy to a citizen to obtain redress in respect of a tax levied or collected under an invalid law, and this remedy will not be affected by any provision like s. 67 of the Income-tax Act, or s. 84(3) of the Act. [520G-H; 521C-E] Thus, when the question merely is whether the assessment had been made according to law, the respondent having jurisdiction over the subject matter and the assessee, the provisions of s. 84(3) may be a bar to a suit. But, where the question raised is as to the jurisdiction of the respondent to proceed against the assessee, and levy on or collect from him an amount in excess of that permitted by the Constitution, the matter would be entirely out of the bar of that provision. [522E-G] Per Raghubar Dayal and Bachawat, JJ. (dissenting): The appellant's suit for the recovery of the tax realized in excess of Rs. 250 a year was rightly dismissed, as the correctness of the assessment of the tax could not be challenged by a suit in a civil court in view of s. 84(3) and as the provisions of s. 48, requiring the giving of notice to the respondent and the institution of the suit within a certain period, had not been complied with. [534H;

535A-B] The suit was in essence a suit for, first, modifying the amount assessed and then to decree the payment of the amount held to have been paid in excess of the tax as modified by the court. But the act of assessing the tax or the consequential act of collecting the amount cannot be broken up into two acts, one, upto the legal limit and the other in excess of it. The act of assessment or of collection therefore was an act done by the respondent under the provisions of the Act, though it acted wrongly in assessing the tax at an excessive figure, and consequently in collecting an amount in excess of that which could have been legally collected. The suit was therefore fully covered by s. 48 and had to be dismissed. [526E-H] In view of s. 84(3), exclusive jurisdiction to determine the correctness of the amount assessed is given to the authorities mentioned in s. 83. The result is that no other authority can enter into the question of the correctness of the assessment on grounds of law or fact, and therefore the appellant's suit was barred from the cognizance of the civil court. [527G] Raleigh Investment Co. Ltd. v. Governor-General in Council, L.R. 74 I.A. 50 and Firm of Illuri Subbayya Chetty & Sons v. State of Andhra Pradesh, [1964] 1 S.C.R. 752, followed.

Poona City MuniciPal Corporation v. Dattatraya Nagesh Deodhar, [1964] 8 S.C.R. 178, distinguished.

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 600 and 679 of 1964.

Appeals from the judgment and decree dated February 20, 1962 of the Bombay High Court (Nagpur Bench) at Nagpur in Appeals Nos. 196 and 195 of 1956 from original decree.

S.G. Patwardhan, S. Murthy and B. P. Maheshwari, for the appellant (in C.A. No. 600/64).

S.N. Kherdekar and A. G. Ratnaparkhi, for the appellant (in, C.A. No. 679/64).

A.V. Viswanatha Sastri and M. S. Gupta, for the respondent (in C.A. No. 600/64).

A.V. Viswanatha Sastri and M. S. Gupta for U. P. Singh, for the respondent (in C.A. No. 679/64).

502 The Judgment of Subba Rao, Mudholkar and Ramaswami, JJ. was delivered by Mudholkar J. The dissenting Opinion of Raghubar Dayal and Bachawat, JJ. was delivered by Dayal, J.

Mudholkar, J. This judgment will also govern Civil Appeal No. 679 of 1964 since common questions of law arise in both the 'appeals. For illustrating the points which arise for consideration in ,these appeals we will set out briefly the facts pertaining to C.A. 600 of 1964.

The appellant (hereinafter referred to as the Company) is a private limited company having its registered office at Calcutta and a branch office at Dhamangaon which was formerly in the Province ,of Central Provinces & Berar but is now in the State of Maharashtra. The company owns a ginning factory at Dhamangaon. The Notified Area Committee of that place imposed, under s. 66(1)(b) of the Central Provinces Municipalities Act, 1922 (hereinafter referred to as the Act) as applied to Berar, a tax at the rate of one anna per bojha of ginned cotton and one anna per bale of pressed cotton as from Dec. 22, 1936 on which date a notification sanctioning the imposition under s. 241(1) of the Act was published in the official Gazette by order of the Government of the Province. The Notification in question runs as follows: "No. 7911-3242-M-VII:-In exercise of the powers conferred by clause (a) of sub-sec. (1) of sec. 241 of the Central Provinces Municipalities Act, 1922 (C.P. Act 11 of 1922) as applied to Berar, the Local Government is pleased to confirm the following rule made by the Notified Area Committee, Dhamangaon, in the Amravati district, under clause (b) of sub-s. (1) of sec. 6(1) of the said Act, for imposing a tax on persons carrying on the trade of ginning and pressing cotton by means of steam or mechanical process within its limits:Rule The committee shall levy from all persons carrying on within its limits the trade of ginning or pressing cotton into bales by means of steam or mechanical process a tax at the following rates from the date of the publication of this notifiCation in the Central Provinces Gazette:(a) For each bojha of 392 lbs. ginned-1 anna.

(b) For each bale of 392 lbs. pressed-1 anna.

By order of the Government, (Ministry of Local Self-Government), Sd/R. N. Bannerjee, Secretary to Government, Central Provinces.

503 The Notified Area Committee of Dhamangaon decided to raise the rate from 1 anna per bojha and 1 anna per bale to four annas per bojha and four annas per bale. Soon after this decision it caused the following notification to be published in the official Gazette on April 10, 1941. The Notification runs thus:"The following amendment to the rule for imposition of the tax' by the o Municipal Committee, Dhamangaon, in the Amraoti district, under cl. (b) of sub-sec. (1) of sec. 66 of the Central Provinces Municipalities Act, 1922 (11 of 1922) as applied to Berar, on persons carrying on the trade of ginning and pressing cotton by means of steam or mechanical process within its limits, published in the Central Provinces and Berar Gazette Notification No. 7911-3242M/Vlll, dated the 22nd Dec. 1936, is published for the information of the public, the same having been previously published as required by subsection (3) of sec. 68 of that Act, and in exercise of the powers conferred by subsec. (7) of sec. 68 of that Act, the municipal committee directs that the said amendments shall come into operation on the 1st August, 1941:

Amendment For the figure and the word 'anna' occurring in clauses (a) and (b) of the rule, the figure and word '4 annas' shall be substituted.

Sd/B. S. Mundhada, President, Municipal Committee No. 2418-M-XIII" Certain rules were framed by the Government for the assessment and collection of tax which were also published on Dec.

22, 1936. These rules were, however, amended by the Local Government and the amended rules were published in the Gazette on July 30, 1941. It is these latter rules which are now in force. Consequent upon the amendment of the rules the appellants in the two appeals and the proprietors of the ginning factory in Dhamangaon have been paying these taxes at the new rate of 4 annas per bojha and 4 annas per bale.

It may be mentioned that in Dec. 1951 the Municipal Committee. Dhamangaon, which by then had replaced the Notified Area Committee proposed to raise the tax from four annas to one rupee per bojha and per bale but eventually dropped the proposal. Apparently being alarmed at the abortive attempt of the Municipal committee to raise the tax further, the appellant and other factory owners in Dhamangaon instituted suits for recovery from the Municipal Committee of excess tax paid by them within 3 years of the dates of the respective suits. The Company claimed refund of Rs. 12,5116-6 on the ground that it was recovered from it illegally 504 by the Municipal Committee and paid by it under a mistake.

The amount has been computed by them thus: Rs. 6,905-14-6 recovered from them in respect of ginned cotton between 29-3-49 and some date in the year 1952 plus Rs. 8,048-8-0 in respect of pressed cotton recovered from them during the same period less Rs. 3,738-9-6 which was legally due from them thus totaling to Rs. 11,215-13-0. To this they added Rs. 1,295-9-6 as interest by way of damages on the aforesaid said amount at the rate of 9 per cent. p.a. In the plaint it was contended by the Company that after the coming into force of s. 142A of the Government of India Act, 1935 (which came into effect from 1-4-1939) till January 25, 1950 a tax on trade, profession or calling in excess of Rs. 501per annum could not be imposed either by a Provincial Government or by a Local Body. Nor again, could an existing tax on trade, profession or calling be raised further so as to exceed Rs. 501per annum. The Company further pointed out that after the coming into force of the Constitution the upper limit of the tax was raised to Rs. 250/per annum and that as the Company was already paying more than this amount per year even at the rate of one anna per bojha and one anna per bale recovery from them at the enhanced rate of 4 annas was illegal with effect from April 1, 1939. The Municipal Committee contended in its written statement that the provision of s. 142A of the Government of India Act and Art. 276 of the Constitution which limit the tax on professions, trades or callings or employments to Rs. 50 and Rs. 250 per annum respectively do not apply to a case such as the present where there is no imposition of a new tax but only an enhancement of the rate of an existing tax. It further contended that the tax in question at the rate of 4 annas per bojha and 4 annas per bale was in existence when Art.

276 came into force and is saved by that Article. According to the Committee, the Company is not entitled to claim back the amount paid by it under s. 72 of the Indian Contract Act or the general law. This contention, however, was negatived by the trial court and does not appear to have been reiterated before the High Court. Nor again was it pressed before us by Mr. Viswanatha Sastri who appears for the Municipal Committee. The principal contention which was pressed before the trial court and raised before the High Court was that the Company's suit was bad for non-compliance with the requirements of s. 48 of the Act and that is the point which we have to consider in this appeal.

Sec. 48 of the Act reads thus:

"(1) No suit shall be instituted against any Committee or any member, officer or servant thereof or any person acting under the direction of any such committee, member, officer or servant for anything done or purporting to be done under this Act, until the expiration of two months next after notice in writing stating the cause of action, the name and place of abode of the intending plaintiff and the relief which he claims, 505 has been, in the case of a committee, delivered or left at its office, and, in the case of any such member, officer or servant or person as aforesaid, delivered to him or left at his office or usual place of abode, and the plaint shall contain a statement that such notice has been so delivered or left.

(2)Every such suit shall be dismissed unless it is instituted within six months from the date of the accrual of the alleged cause of action." Mr. Patwardhan for the appellant contends that this was a case of recovery of an Illegal tax and, therefore a claim for its refund fell outside the provisions of s. 48 of the Act. In support of his contention he relied upon a number of decisions and we will proceed to examine them.

The first of these cases is Municipal Committee, Karania v. New, East India Press Co. Ltd., Bombay(1). That was also a case where enhancement of a tax was made by the Municipal Committee of Karanja after March 31, 1939 in excess of Rs. 50 per year payable by one person. There, a Division Bench of the High Court held, that the enhancement was in contravention of s. 142A of the Government of India Act, 1935 and was illegal, that a' suit for refund of the tax is maintainable by the person who has paid the tax and that such a suit is not barred by the provisions of ss. 48, 83 or 84 of the Act. The relevant 'observations of Bose A.C.J.

(as he then was) who delivered the judgment are as follows:

"It was then argued that the Civil Courts have no jurisdiction because of sections 83 and 84 of the Central Provinces Municipalities Act as applied to Berar. It was said that Act provides for remedies in cases of wrongful recovery of taxes. Therefore, the jurisdiction of the civil courts is barred.

A large number of cases have dealt with this question but we need consider only two of the latest decisions. In District Council, Bhandara v. Kishorilal (Civil Revision No. 220 of 1946 decided on the 25th June, 1948) one of us (Bose, J.) held that provisions corresponding to sections 83 and 84 come into play only when the Municipal Committee acts within the scope of its authority, that is to say, when it is acting or purporting to act under the Municipalities Act. It is pointed out there in respect of this very section of the Government of India Act, sec. 142-A, that when a Municipality is prohibited by law from imposing a tax in excess of a certain amount then it cannot be said to be acting either under the Act or purporting to act under the Act if it exceeds that amount, and in such a case the jurisdiction of the Civil Courts is not barred. Here again we may refer to the fact that in the Privy Council case Radha Kishan Jaikishan (Firm) v. Municipal Committee, Khandwa(2), this objection does not appear to have (1) I.L.R. [1948] Nag. 971. (2) [1939] 30 Nag. T.R. 121 (P.C.) 506 been taken. It is hardly likely that it would have-been omitted had there been any force in the contention.

In the present case, as in District Council, Bhandara v. Kishorilal the Municipality is seeking to recover sums which the law has prohibited it from taking, in the shape of taxes. Accordingly, as it is acting wholly without jurisdiction, the claims lie and are not barred by reason of sections 83 and 84.

Then it was stated that the claims are barred by sec. 48 of the Municipalities Act. There again the same considerations apply. Sec. 48 comes into play only when the act is done or is purported to be done under the Municipalities Act.

As we have said, that is not the case here because its action is something which is prohibited by law, and so wholly beyond its jurisdiction, and therefore section 48 does not apply. The distinction between a case where section 48 applies and a case where it does not is clearly shown in The Amraoti Town Municipal Committee v. Shaikh Bhikan(1)".

Kishorilal's case to which reference is made in the above quotation is a decision of a Division Bench upon a reference made by Bose J. and which, though rendered earlier, has been reported in I.L R. 1949 Nag. 87. In that case a tax imposed by the District Council, Bhandara under a similar provision of the Local Self Government Act, 1920 at the rate of three pies per khandi on persons carrying on trade of husking, milling or grinding of grains was raised by it to one anna as from April 1, 1942 with the sanction of the Provincial Government. It was contended on behalf of the respondent that the recovery was illegal. Since the matter involved the interpretation of s. 142A of the Government of India Act 1935 Bose J, acting under one of the rules of the High Court referred it to a Division Bench. This is what the Division Bench held:

" We are clear that the tax in question is a tax which can be so termed. This was in fact conceded in the Court below and the contention raised before us that the persons who gave grain to Kishorilal for grinding and not he were the traders concerned was plainly devoid of force. He had a mill and with it carried on the trade of milling grain. The tax in question was recovered from him because of this and it was one of the taxes hit by section 142-A of the Government of India Act, 1935, and the Professions Tax Limitation Act, 1941 (XX of 1941)." When the matter went back before Bose J., it was contended on behalf of the District Council that the suit was barred altogether by the provisions of s. 71 and that the provisions of s. 73 make the issue of a notice by the Distt.

Council a precondition for the institution of a suit of the kind before him. Reliance was placed on a (1)I.L.R. [1939] Nag. 216, 219, 220.

507 certain rule framed under s. 79(1) (xxix) of the Central Provinces local Self-Government Act, 1920 After quoting s. 71 and the rule relied on the learned Judge observed:

"It will be observed that both section 79 and the rule Fire confined to orders and decisions given under the Act. It is impossible to say that an order which contravenes the law or is made in the face of an express statutory prohibition can be said to be under the Act.

The words "purporting to be given" or "made under the Act" are not present in this section and so the difficulty which arises regarding the other point is not present here. I hold that the suit is not incompetent on this score." Pointing out that the other question urged before him was more difficult the learned Judge said that his conclusion was that what was done in the case was not "under the Act" and, therefore, what remained for consideration was whether it was "purported to be done" Under the Act. He came to the conclusion that what was done was not "purported to be done under the Act" and expressed himself thus:

"Now this expression has recently been interpreted by their Lordships of the Privy Council in H.H.B. Gill v. The King(2) also in Hori Ram Singh v. The Crown(2) of which their Lordships approved. The question is a difficult one and as Varadachariar J. observed in the Federal Court decision at p. 187, it is neither possible nor desirable to lay down any hard and fast rule. The question is substantially one of fact and "must be determined with reference to the act complained of and the attendant circumstances." I think, however, that the following test which their Lordships of the Privy Council laid down concludes the matter so far as this Act is concerned. Their Lordships say: "A public servant can only be said to act or to purport to act in the discharge of his official duty, if his act is such as to lie within the scope of his official duty." Now I can understand it being said that an act which is within the scope of an official duty cannot be taken out of that category simply because it is carelessly or negligently performed, but I cannot see how an act which is expressly prohibited by law can be said to lie there. If a magistrate directed to supervise a sentence of whipping duly imposed by a competent Court has the wrong man whipped by mistake or imposes more lashes than warranted, I can understand him being protected.

He is there acting within the scope of his duty. But if, instead of having the man whipped. he has him branded with a hot iron he would not, in my opinion, be able to claim the protection. In the same way I cannot see bow a Municipal Committee can (1)A.I.R. [1948] P.C. 128.

(2)[1939] F.C.R. 159.

508 be said to be acting 'under the Act' when it does that which is expressly prohibited by the Legislature. Say it purported to tax salt.

Its action would not be covered by sec. 73 because the Constitution Act makes that an exclusively Central subject. Say also a municipality attempted to tax marriages or births, that would be completely beyond its province and it could not be heard to say that because it has been given certain limited powers of taxation, therefore it 'purports to act' under the Act whatever the nature of the tax it attempts to impose. In the same way, if the Legislature limits the authority of the Committee to a maximum of Rs. 50 1 do not think it can be said to purport to act within the scope of the Act if it travels beyond its limited provisions." A reference may be made to the decision in The Amraoti Town Municipal Committee v. Shaikh Bhikan(1) which apparently takes a contrary view. There Niyogi J., sitting singly has held that a suit against a municipal committee for the recovery of a tax illegally collected is governed by s. 48 of the Central Provinces Municipalities Act, and, is, therefore, barred by limitation if not filed within six months of the. date of the collection of the tax. That case is, however, distinguishable in that there was no prohibition to the levy of the tax and all that had happened was that proper procedure had not been followed in imposing the tax. This was thus a case of something purporting to be done under the Act but not done strictly in accordance with the provisions. That such a case would squarely fall within the ambit of s. 48 cannot be questioned. But the point is whether what was done by a local body under the colour of an Act can be regarded as something purported to be done under the Act even though neither the local body nor even the State Legislature has the power to-do what was in fact done.

The next case referred to was Gajadhar Hiratal v. Municipal Committee, Washim(2). That was also a case in which a tax on bojhas and bales of ginned cotton was raised from Re.

0-2-3 per bale to Re. 0-4-0 per bale and the learned Judges held, following the decision in the New East India Press Co.'s case(1) that the enhancement was ultra vires of Art.

276 of the Constitution. The other question did not arise for consideration in this case. This decision is, therefore, of little assistance to us, because it is not contended before us that the enhancement of the tax is valid.

There is, however, another decision in the same volume at p. 483 (The Municipality of Chopda v. Motilal Manekchand) which is relevant for consideration in this appeal. In that case a Division Bench, while pointing out that the particular tax which was levied by the Municipality was in substance a tax on trade within the meaning of Art. 276 of the Constitution and being in (1) I.L.R. [1939] Nag. 216. (3) T.L.R.. [1948) 971. (2) I.L.R. [1958] Bom. 625.

509 excess of Rs. 250 p.a. was beyond the competence of the Municipality, held that a suit for its refund beyond the time prescribed by rules was barred by limitation.

According to the learned Judges the levy of the tax though beyond the authority of a Municipality was " an act done in pursuance or execution or intended execution of the Bombay District Municipal Act" and was merely a wrongful act as distinguished from an ultra vires or illegal act. In coming to this conclusion they followed a previous decision of the High Court in Jalgaon Borough Municipality v. The Khandesh Spinning and Weaving Mills Co. Ltd.(1). Incidentally we may mention that an appeal was brought before this Court from that part of the decision in The Municipality of Chonda, East Khandesh v. Motilal Manekchand Press Factory, Chonda(2) which held that the levy was unconstitutional. Ayyangar J.

who spoke for the Court has stated towards the end of the Judgment as follows:"In the circumstances the correctness of the decision of the High Court in holding the impugned levy to be a tax on " callings or employments' and therefore subject to a pecuniary limit of Rs. 250 per year does not really arise for consideration. The respondent-, had in their plaint, no doubt, challenged the entirety of the levy and sought relief on that basis, but they had however pleaded in the alternative that the tax might be held to be one on 'a trade etc.' and therefore within Art. 276(2) and claimed relief on this footing in the alternative.

The learned Civil Judge had accepted this alternative contention and had granted them a decree on that basis and the respondents had not challenged the correctness of that decision by preferring an appeal and the learned Judges of the High Court had accepted this view of the nature of the levy. We however consider it proper to add that there is considerable force in the opinion expressed by the High Court that the tax in question, at the date when the same was challenged, being a levy imposed on persons carrying on the business of pressing cotton, was a tax on 'professions, trades, callings, or employments' and that the learned Judges of the High Court came to a correct conclusion that the respondents were entitled to the declaration which was granted as regards the maximum amount of the tax that could be levied from the respondents," In Jalgaon Borough Municipality's case(3) on which the High Court relied in Motilal Manekchand's case, what had happened was this: The Municipality acting under s. 73(iv) of the Bombay Municipal Boroughs Act, 1925 levied octroi duty on fuel oil or furnace oil under certain rules and by-laws framed by it with the sanction of the Government which provided for the levy 'of an octroi duty on various articles including 'oils used for machinery'.

(1) 55 Bom. L.R. 65.

(2) C.A. No. 168 of 1961 decided on March 11, 1962, (3) 55 Rom. L.R. 65.

(N) 4SCI--5 510 it was found that the Municipality was not entitled to levy any octroi duty on fuel oil or furnace oil which was not comprised within the items enumerated in the octroi rules and by-laws. The respondent who had paid the tax instituted a suit for its recovery. One 'of the questions which arose for consideration was whether the provisions of s. 206 of the Bombay Municipal Boroughs Act, 1925 corresponding to those of s. 48 of the Central Provinces and Berar Municipalities Act, 1922 applied to the case. The learned Judges of the High Court held that what the municipality (lid was not an act done in pursuance of the Act, but it was an act which it purported to do in pursuance of the Act and that therefore its action was well within the terms of s.

206. In the course of the judgment Bhagwati J., observed that the acts which fell within the category of those "done or purporting to have been done in pursuance of this Act" could only be those which were done under a vestige or semblance of authority or of a shadow of right. If an act was outrageous and extraordinary or could not be supported at all, not having been done with a vestige or semblance 'of authority, or a shadow of right invested in the party doing that act, it would not be an act which is done or purported to have been done in pursuance of the Act. The distinction is really between ultra vires and illegal acts, on the one hand, and wrongful acts, on the other-wrongful in the sense that they purport to have been done in pursuance of the Act;

they are intended to have been done in pursuance of the Act if they are done with a vestige or semblance of authority, or a sort of a right invested in the party doing those acts.

The learned Judge then referred to certain decisions and said that under s. 73(iv) of the Act power was given to the Municipality to impose octroi duty on articles and goods imported within its jurisdiction. What had happened there was that the defendants, on the interpretation which they gave to the words "oils used for machinery", did something which ultimately, on an adjudication in that behalf, the court found to be wrong. By acting in that way what the Municipality purported to do could not be said to be illegal or outrageous and extraordinary or done without having any vestige or semblance of authority or without even a shadow of a right.

Apart from the fact that much of what was said in this case is opposed to a recent decision of this Court to which we will presently make a reference certain observations made by Bhagwati J., in fact lend support to the argument advanced before us by Mr. Patwardhan. The observations we have in mind are to the effect that where ,a municipality, not having the power to levy a particular tax at all, either wholly or in regard to some classes of goods, had purported to levy the same it would certainly be an act which was "outrageous and extraordinary, or done without having any vestige or semblance of authority or without even a shadow of a right". Here, the over stopping of its authority by the Municipality consists not in the matter of the selection of a class of goods but of that of the rate at 511 which it has levied and collected a tax. It has levied and collected a tax beyond constitutional limits. Therefore, to the extent it has done so the tax could properly be said to have been levied without a vestige or semblance of authority or even of a shadow of right.

We may now refer to the recent decision of this Court in The Poona City Municipal Corporation v. Dattatraya Naresh Deodhar(1). That was a case in which the Municipal Corporation had imposed a tax on the refund of octroi duty collected by it on goods imported within the Municipal limits of the city. Its practice was to deduct the tax from the amount which it was required to refund and pay the person entitled to the refund only the balance. A suit was instituted by the respondents for refund of the amount illegally deducted by the Corporation from the octroi refund made by the Corporation to the respondents. It was contended on behalf of the Corporation that the deduction made by it was valid and that the suit was barred by limitation. This Court upheld the contention of the respondents that the Corporation had no power to impose the tax and that in fact there was a prohibition against the imposition of such a tax by the Corporation. On the plea of limitation, which was founded upon the provisions of s. 487 of the Bombay Act which are almost the same as those of s. 48 of the Act with which we are concerned, this Court observed:

"The benefit of this section would be available to the Corporation only if it was held that this deduction of ten per cent was 'an act done or purported to be done in pursuance or execution or intended execution of this Act.' We have already held that this levy was not in pursuance or execution of the Act. It is equally clear that in view of the provisions of s. 127 (4) (to which we have already referred) the levy could not be said to be 'purported to be done in pursuance or execution or intended execution of the Act.' For, what is plainly prohibited by the Act cannot be claimed to be purported to be done in pursuance or intended execution of the Act." Sub-sec. (4) of s. 127 of the Act to which this Court has referred is in the following terms:

"Nothing in the section shall authorise the imposition of any tax which the State Legislature has no power to impose in the State under the Constitution." It is pertinent to bear in mind that the conclusion of this Court on the question whether the act was "done or purported to be done" under the Act was not based solely on this provision and reliance wag placed upon it as affording additional support to the conclusion already arrived at. It seems to us that this provision was enacted by way of abundant caution. For, the Constitution is the (1)[1964] 8 S.C.R. 178.

512 fundamental law of the land and it is wholly unnecessary to provide in any law made by the Legislature that anything done in disregard of the Constitution is prohibited. Such a prohibition has to be read in every enactment. This decision does appear to conclude the matter.

During the pendency of the suit before the trial court the appellant had preferred a writ petition before the High Court at Nagpur in which it contended that the notification of April 10, 1941 enhancing the tax from one anna per bojha and one anna per bale to four annas per bojha and four annas per bale was illegal and ultra vires and should therefore be quashed. This petition was granted by the High Court on April 12, 1955. There was, therefore, a direct decision before the trial court and the appellate court which though it could not be treated as res judicata was binding on those courts and was treated as such by them and it is perhaps because of this that it was not sought to be urged on behalf of the Municipal Committee when the second appeal was argued before the High Court that the notification is valid and, therefore, the Municipal Committee could recover the tax at the enhanced rate. Though Mr. Viswanatha Sastri did say that the decision of the High Court is not res judicata he did not directly challenge its correctness. What he argued was as follows:

The levy of a tax on professions, trades, callings etc. was within the power of the Provincial Legislature and is now within the power of the State Legislature. It could in the past and can even now levy such a tax at the rate of 4 annas per no ha and 4 annas per bale, that both under s. 142-A of the Government of India Act and Art. 276 of the Constitution the Municipal Committee could collect such a tax to the constitutional limit (which was formerly Rs. 50 p.a. and is after the coming into force of the Constitution Rs. 250 p.a.). The mischief, according to him, is not in the levy but in the realisation of an excess over the limit. To put it differently, the ban is not upon the rate of tax but upon excess collection thereof. Therefore, the collection of a tax above the constitutional limit was not without jurisdiction but only illegal or irregular. A suit by an assessee to recover the amount paid by him in excess of the constitutional limit would therefore be in respect of a matter "purported to be done" under the Act and the provisions of s. 48 of the Act would apply to it. Further according to him every suit against a Committee for anything done or purported to be done under the Act must comply with the conditions laid down in the section. He points out that the assessment of the tax was made by an authority competent to make an assessment, that in making it the authority proceeded in accordance with the provisions of the Act and assessed the tax as authorised by Rules which had been sanctioned by the former Government of Central Provinces and Berar. So, even it is assumed that any of 513 the Rules were ultra vires and therefore the assessment and recovery of the tax was illegal, what the authority had done was something purported to be done under the Act.

Some of these arguments were advanced in cases discussed earlier and rejected.

In support of his contention he placed reliance on the decisions in Richard Spooner and Bomanjee Nowrojee v. Juddow(1) and Dhondu Dagdu Patil v. The Secretary of State for India(2). These cases were not pressed in aid in the decisions so far considered and we would deal with them now.

Before we deal with these cases it is necessary to point out the rationale upon which s. 142-A of the Government of India Act, 1935 was enacted and on which Art. 276 of the Constitution now rests. It is that the legislative spheres of the Provinces and the Centre came to be clearly demarcated in regard to items falling within Lists 1 and 11 of Schedule VII of the Government of India Act and now to those falling within the same lists of Schedule VII of the Constitution. Taxes on professions, trades, callings and employments are taxes on income and are thus outside the provincial/and now State-list and belong exclusively to Parliament and before that to the Central Legislature. Yet under a large number of laws enacted before the Government 'of India Act, 1935 came into force, power was conferred on local governments and local authorities to impose taxes on such activities. This was obviously in conflict with s. 100 of the Government of India Act. When this was realised s. 142-A was enacted by the British Parliament which saved the power conferred by pre-existing laws but limited the amount payable to Rs. 50 after 31st March, 1939. A saving was made, however, of pre-existing laws subject to certain conditions with which we are not concerned. The provisions of this section have been substantially reproduced in Art.

276 of the Constitution with the modification that the upper limit of such tax payable per annum would be Rs. 250 instead of Rs. 50. A tax can be recovered only if it is 'payable' and it would be, payable only after it is assessed. it is, therefore, futile to contend that the ban placed by the aforesaid provisions extends only to recoveries and not to an earlier stage.

Now coming to the cases, the first was one in which the question considered by the Privy Council was whether the Supreme Court at Bombay was competent to entertain a suit for recovery of damages brought by one Harkissondas Hurgovindass against the Collector of Bombay and others in respect of trespass and nuisance committed by certain officers of the Collectorate while purporting to execute a distress warrant issued against one Narrondass for nonpayment of arrears of land revenue. Under the Letters Patent dated Dec. 8, 1823 the jurisdiction of the Supreme Court was barred "in any matter concerning the revenue under the management of the (1) 4 MI.A. 353, 379.

(2) I.L.R. 37 Bom. 101, 106.

514 said Governor and Council of Bombay respectively...... or concerning any act done according to the usage and practice of the country, or the regulations of the Governor and Council of Bombay aforesaid." Similar provisions were contained in s. 8 of Statute 21 Geo. 111, c. 70. The Supreme Court over-ruled the defendant's contention on the ground that what was due from the plaintiff was not revenue but a perpetual ground rent which was incapable of being enhanced and could not be regarded as revenue at all. After holding so Lord Campbell who delivered the opinion of the Judicial Committee observed:

"The point, therefore, is, whether the exception of jurisdiction only arises where the Defendants have acted strictly, according to the usage and practice of the contrary, and the Regulations of the Governor and Council.

But upon this supposition the proviso is wholly nugatory; for if the Supreme Court is to inquire whether the Defendants in this matter concerning the public revenue were right in the demand made, and to decide in their favour only if they acted in entire conformity to the Regulations of the Governor and Council of Bombay, they would equally be entitled to succeed, if the Statutes and the Charters contained no exception or proviso for their protection. Our books actually swarm with decisions putting a contrary construction upon such enactments, and there can be no rule more firmly established, than that if parties bona fide and not absurdly believe that they are acting in pursuance of Statutes, and according to law, they are entitled to the special protection which the Legislature intended for them, although they have done an illegal act. In this case it may well be that the warrant against the goods of Tookaydass did not authorise the taking of the goods of Hurgovindass, or even that Hurgovindass might not be liable for the arrears of 'quit rent' which accrued before he became owner of the house. Still the Collector was evidently of opinion, that a distress might be made for the whole of the arrears due, and that it was sufficient to introduce into the warrant the name of Tookaydass, in whose name the house continued to be registered. The other Defendant never could have doubted the sufficiency of the warrant. If Indian revenue officers have fallen into a mistake, or without bad faith have been guilty of an excess in executing the duties of their office, the object of the Legislature has been, that they should not be liable to be sued in a civil action before the Supreme Courts." Later in his opinion Lord Campbell said:

"If it concerned the revenue, or was a matter concerning an act bona fide believed to be done according to the Regulations of the Governor and Council of Bombay, his (i.e., of the Judge of the Supreme Court) jurisdiction was gone, although prima 515 facie it appeared to be a trespass over which his jurisdiction might be properly exercised." This case would have assisted Mr. Sastri only if what was done was something which could legally have been done by the Municipality but was wrongly done by it as, for instance, the collection of a lawful tax from a person other than the one from whom it was due. But this decision is no authority for the proposition that if the Collector recovered or tried to recover from a person a sum of money as arrears of land revenue even though it did not fall within the definition of revenue or tried to collect a sum of money which he was expressly -prohibited by law from collecting, he would still be said to have purported to act under the revenue law which empowered him to collect land revenue. If an act of trespass was committed in execution of a distress warrant for recovery of such monies. a suit for damages would not.

have been barred.

in the next case what the High Court was dealing with was the claim of the plaintiff against the Government for damages occasioned by the wrongful cancellation of his licence to sell liquor. The suit had been dismissed by the trial judge as barred by the provisions of s. 67 of the Bombay Abkari Act, 1878, firstly because the Collector had acted bona fide in pursuance of the Act and secondly because it was not instituted within four months from the date of the act complained of. The High Court upheld the dismissal of the suit and in the course of its judgment observed:

"It is quite true that the Collector's action is not strictly in conformity with the section which authorises the revocation only on the actual conviction of the licensee. But the circumstances under which the Collector acted are so near the circumstances legally entitling him to act as he did that we feel bound to say the act was done in pursuance of the Statute. The law upon this point may be found stated in many cases, of which we may notice Hermann v. Saneschal(1). In strictness, anything not authorized by a Statute cannot be said to be in pursuance of it, while if it is authorized by the Statute clearly it would need no other protection.

But if effect were given to such a construction it would altogether do away with the protection intended to be given;

accordingly the general principle is that if any public or private body charged with the execution of a Statute honestly intends to put the law in motion and really and not unreasonably believes in the existence of facts. which, if existent, would justify his acting and acts accordingly. his conduct will be in pursuance of the Statute and will be protected." The learned Judges then referred to Spooner's case(2) also.

Mr. Sastri laid particular emphasis on the concluding portion (1) (1862) 32 L.J.C.P. 43.

(2) 4 M.I.A. 353, 379.

516 of the observations quoted above. This again, it may be said, is not a decision which is quite in point. There was no want of jurisdiction in the Collector to do what he did but there was only the absence of facts which, had they existed would have given him power to do what he did. Cases of this type must be distinguished from those like the present in which we must imply a constitutional or statutory prohibition against the act done. Where such prohibition exists or can be implied, anything done or purported to be done by an authority must be regarded as wholly without jurisdiction and is not entitled to a protection of the law under colour of which that act was done.

It is true, as urged by Mr. Sastri, that it was within the competence of the respondent committee to raise the rate of tax from one anna to four annas per bojha and bale even after the coming into force of s. 142-A of the Government of India Act, 1935. The levy of tax at that rate cannot, therefore, be regarded to be beyond the jurisdiction of the respondent so long as the constitutional limit was not exceeded. What is, however, contended on behalf of the appellant is that the action of the Committee in compelling it to pay the tax in excess of the amount which was constitutionally recoverable from it in respect of any one year was ultra vires, that thereby the provisions of section 142-A have been transgressed and, therefore, this was a case of utilization by the Committee of the provisions of the Act and the rules made there under for doing something which was prohibited by the Government of India Act, 1935 and is now, by the Constitution. It is true that the Committee had jurisdiction to recover an amount up to the constitutional limit. But it cannot fairly be contended on its behalf that merely because of this, that the recovery by it of an amount in excess of the constitutional limit was only irregular or at the worst illegal. Where power exists to assess and recover a tax up to a particular limit and the assessment or recovery of anything above that amount is prohibited the assessment or recovery of an amount in excess is wholly without jurisdiction and nothing else. To such a case the Statute under which action was purported to be taken can afford no protection. Indeed, to the extent that it affords protection, it would be bad. But where, as here, the validity of a provision of a statute can be upheld upon a possible construction of that provision it would be the duty of the court to so construe it as to avoid rendering the provision unconstitutional and reject a construction which will invalidate the provision.

The final contention urged by Mr. Sastri is based upon the decision of the Privy Council in Raleigh Investment Company Ltd. v. Governor-General in Council(1). His argument is that the Municipalities Act contains adequate provisions dealing with refund of taxes and that the provisions of s. 85(2) bar a suit for recovery of a (1)74 I.A. 50.

517 tax wrongfully recovered by the Municipal Committee. It may be mentioned that the contention was not raised in the suit or in the grounds of appeal before the High Court and has not therefore been considered by it. It has been raised for the first time in the statement of case. But the scope of an appeal cannot, even at the instance of the respondent who is entitled to support a decree in his favour even upon a ground found against him by the High Court. be permitted to be enlarged beyond that of the appeal before the High Court or the courts below. But as it is a question of considerable importance and might be raised in other similar suits which are said to be pending, we propose to deal with it.

Before dealing with Raleigh Investment Co.'s case(1) we may refer to the provisions of the Act which Mr. Sastri placed before us. Sec. 83(1) provides for an appeal against the assessment or levy of or refusal to refund any tax under the Act before the Deputy Commissioner and sub-s. (1-A) for a revision before the State Government. Sub-sec. (2) provides that if the authority hearing the appeal or revision entertains a reasonable doubt on any question as to the liability to or the principles of assessment of a tax it shall draw up a statement of the facts of the case and the point on which the doubt is entertained and refer the statement with his own opinion on the point for the decision of the High Court. There is, however, no express provision like that of s. 31(1) or s. 33(4) of the Indian Income-tax Act entitling the assessee to a hearing either in the appeal or revision petition. Section 85 empowers the State Government to make rules for regulating the refund of taxes, and such rules may impose limitations on such refunds. Subsection (2) thereof provides that no refund of any tax shall be claimable by any person otherwise than in accordance with the provisions 'of this Act and the rules made thereunder.

This sub-section can be availed only if the Act or the rules provide for making a claim for refund. The rules relating to refunds, if there are any, were, however, not placed before us. Nor was our attention drawn to any provision of the Act or to any rule which makes it obligatory upon a person to apply to the Municipal Committee for a refund of a tax. Even assuming that the Act contemplates obtaining a refund only upon compliance with rules made there under, does it contemplate cases where refund or repayment on the ground of the unconstitutionality of the levy? It will be noticed that sub-s. (1) of this section empowers the State Government to impose by rules limitations on the refunds presumably including limitation on the amount of refunds-and sub-s. (2) bars a claim for refund otherwise than in accordance with the rules made under sub-s. (1). These provisions cannot possibly apply to case where the right to obtain a refund or repayment is based upon the ground that the action of the Committee was in violation of a constitutional provision. To hold otherwise would lead to the startling result (1)74 I.A. 50.

518 that what was incompetent to the State Legislature to do or authorise a committee to do directly can be permitted to be done indirectly by empowering the State Government to make rules for refund where under the amount 'of refunds could be so limited as to permit retention by the committee of the tax recovered by it in excess of the constitutional limit.

In our view, therefore, s. 85 of the Act cannot, in any event, be said to provide a machinery for obtaining refunds in cases of this kind. Since s. 85 is inapplicable, a fortiori s. 83 cannot apply either. We must therefore proceed on the footing that the Act does not provide a machinery for making a claim for refund or repayment in such cases.

It would be pertinent to advert also to the provisions of s. 84, sub-s. (3) of which deals with "Bar of other proceedings". Sub-s. (1) provides for the period of limitation for an appeal under s. 83(1). Sub-sec. (2) empowers the appellate authority to require the assessee to deposit the tax before the hearing or the decision of the appeal. Sub-sec. (3) is in the following terms:

"No objection shall be taken to any valuation, assessment, or levy, nor shall the liability of any person to be assessed or taxed be questioned, in any other manner or by any other authority than is provided in this Act." It will be seen that there is no express mention of a civil court in this sub-section as there was in s. 67 of the Indian Income-tax Act, 1922. In fact s. 48 of the Municipalities Act contemplates the institution of a suit subject to fulfillment of certain conditions and thus indicates that it was not the intention of the legislature to make the machinery provided by the Act exclusive. But even if a bar to the Jurisdiction of a civil court be assumed or implied, there is an absence of a reference to "refund" in sub-s. (3) of s. 83, In other words, no finality seems to have been given to a decision rendered by an authority under s. 83 refusing to refund a tax improperly or 'File -ally assessed or recovered. In the light of these circumstances we have to consider the applicability of the decision in Raleigh Investment Co.'s case(1). In that case the Privy Council considered the effect of certain provisions of the Indian Income-tax Act, 1922 which prescribed remedies to an assessee who sought to challenge the assessment made against him and also the provisions of s. 67. The relevant portion of s. 67 was that "no suit shall be brought in any civil court to set aside or modify any assessment made under this Act............ After examining all these provisions the Privy Council said that an effective and appropriate machinery was provided by the Act itself for the review of any assessment on grounds of law, including the question whether a provision of the Act was ultra vires and it was in that setting that s. 67 had to be construed. Then it went on to say that the phrase "assessment made under this Act" in s. 67 meant an assessment finding its origin in an activity of the assessing officer acting as such and that the circumstance that (1)74 I.A. 50.

519 he had taken into account an ultra vires provision of the Act was in that view immaterial in determining whether the assessment was " made under this Act." But, with respect, we find it difficult to appreciate how taking into account an ultra vires provision which in law must be regarded as not being a part of the Act at all, will make the assessment as one 'under the Act'. No doubt the power to make an assessment is conferred by the Act and, therefore, making an assessment would be within the jurisdiction of the assessing authority. But the jurisdiction can be exercised only according, as well as with reference, to the valid provisions of the Act. When, however, the authority travels beyond the valid provisions it must be regarded as acting in excess of its jurisdiction. To give too wide a construction to the expression "under the Act" may lead to the serious consequence of attributing to the legislature, which owes its existence itself to the Constitution, the intention of affording protection to unconstitutional activities by limiting challenge to them only by resort to the special machinery provided by it in place of the normal remedies available under the Code of Civil Procedure , that is, to a machinery which cannot be as efficacious as the one provided by the general law. Such a construction might necessitate the consideration of the very constitutionality of the provision which contains this expression. This aspect of the matter does not appear to have been considered in Raleigh Investment Co.'s case(1).

This decision has been briefly referred to by this Court in Firm and Iliuri Subbayya Chetty & Sons v. The State of Andhra Pradesh(2) and what this Court has observed is this:

"In determining the effect of s. 67, the Privy Council considered the scheme of the Act by particular reference to the machinery provided by the Act which enables an assessee affectively to raise in courts the question whether a particular provision of the Incometax Act bearing on the assessment made is or is not ultra vires. The presence of such machinery observed the judgment, though by no means conclusive, marches with a construction of the section which denies an alternative jurisdiction to enquire into the same subject matter. It is true that the judgment shows that the Privy Council took the view that even the constitutional validity of the taxing provision can be challenged by adopting the procedure prescribed by the Income-tax Act;

and this assumption presumably proceeded on the basis that if an assessee wants to challenge the vires of the taxing provision on which an assessment is purported to be made against him, it would be open to him to raise that point before the taxing authority and take it for a decision before the Court under s. 66(1) of the Act. It is not necessary for us to consider whether this assumption is well founded or not. But the presence of the alternative machinery by way of (1) 74 I.A. 50.

(2) (1964) 1 S.C.R. 752 at 764, 520 appeals which a particular statute provides to a party aggrieved by the assessment order on the merits, is a relevant consideration and that consideration is satisfied by the Act with which we are concerned in the present appeal." We have already adverted to the provisions of ss. 83 and 85 of the Act which are the only provisions brought to our notice as providing a machinery under the Act for challenging an assessment and we have pointed out that they do not cover a case like the present. Again the provision for an appeal before a Deputy Commissioner who is an authority who performs numerous functions under different laws, functions which are executive, as well as administrative and judicial, cannot be regarded as on par with one which provides for an appeal before an Appellate Assistant Commissioner under the Income-tax Act, an authority whose duties are confined to matters arising under that Act.

Further, the latter Act contains a safeguard in the shape of

 
About us Contact us Grievance Cell Disclaimer Hyperlinking Policy Privacy Policy Advertise Media Partner Legal FAQs