Case: The Provincial Government Of Madras Vs. J. S. Basappa

least where the action of the authorities is wholly outside the law and is not a mere error in the exercise of jurisdiction. Mr. Sastri says that we must interpret the Act in the same way as if S. 18-A was implicit in it and that S. 18-A was added to make explicit what was already implied. We cannot agree. The finality that statute conferred upon orders of assessment, subject, however, to appeal and revision, was a finality for the purposes of the Act. It did not make valid an action which was not warranted by the Act, as for example, the levy of tax on a commodity which was not taxed at all or was exempt. In the present case, the taxing of sales which did not take place within the State was a matter wholly outside the jurisdiction of the taxing authorities and in respect of such illegal action the jurisdiction of the civil court continued to subsist. In our judgment the suits were competent.11. The last question is whether the assessment as a whole must fail or only in respect of the part which was outside the jurisdiction of the sales-tax authorities. We have already reproduced the four categories into which all the transactions of sale were classified. The High Court and the Court below found that categories 1 and 4 represented transaction of sale which could not be taxed at all by the authorities as those transactions took place outside the State. It may be mentioned that the Sales-tax Act did not then contain any provision which established a nexus between the sales and the Province. That provision came later. The High Court relying upon Ram Narains case, (1955) 2 SCR 483 : ((S) AIR 1955 SC 765 ) held that the assessments as a whole must fail. In Ram Narains case, (1955) 2 SCR 483 : (S) AIR 1955 SC 765 ) a portion of the assessment was invalid under Art. 286 of the Constitution and the question was whether the total assessment must fail. This Court observed:"The necessity for doing so is, however obviated by reason of the fact that the assessment is one composite whole relating to the pre-Constitution as well as the post-Constitution periods and is invalid in toto. There is authority for the proposition that when an assessment consists of a single undivided sum in respect of the totality of the property treated as assessable, the wrongful inclusion in it of certain items of property which by virtue of a provision of law were expressly exempted from taxation renders the assessment invalid in toto.This Court cited with approval a passage from Bennett and White (Calgary) Ltd. v. Municipal District of Sugar City No. 5, 1951 AC 786 at p. 816 where the Judicial Committee observed:"When an assessment is not for an entire sum, but for separate sums, dissected and earmarked each of them to a separate assessable item, a court can sever the items and cut out one or more along with the sum attributed to it, while affirming the residue. But where the assessment consists of a single undivided sum in respect of the totality of property treated as assessable when one component (not dismissible as de minimis) as on any view not assessable and wrongly included, it would seem clear that such a procedure is barred and the assessment is bad wholly. That matter is covered by authority. In Montreal Light Heat and Power Consolidated v. City of Westmount, 1926 SCR (Can.) 515 the court (see especially per Anglin, C. J.) in these conditions held that an assessment which was bad in part was infected throughout and treated it as invalid. Here their Lordships are of opinion, by parity of reasoning, that the assessment was invalid in toto.It is urged by Mr. Sastri that the tax here is at the uniform rate of 1% and as all the returns and documents necessary to separate the bad part from the good are available, there is no need to cancel the whole assessment.He contends that these cases are rather governed by the other rule that where the assessment is for separate sums, only that portion need be declared illegal which is void. It is necessary to explain the distinction between the two classes of cases and how they are to be distinguished. A difference in approach arises only in those cases where the assessment of many matters results in amounts of tax which though parts of the whole assessment, stand completely separate. There the court can declare the "separate dissected and earmarked" Item illegal and excise them from the levy. In doing so, the court does not arrogate to itself the functions of the taxing authorities; but where the tax is a composite one and to separate the good part from the bad, proceedings in the nature of assessment have to be undertaken, the civil court lacks the jurisdiction. Here, the amount of tax is a percentage of the turnover and the turnover is a mixed one and it is thus not merely a question of cutting off some items which are separate but of entering upon the function of assessment which only the authorities under the Sales-tax Act can undertake. Cases of assessment based upon gross valuation such as the case from Canda referred to by the Judicial Committee afford a parallel to a case of assessment of a composite turnover such as we have here, just as in the Canadian case it was not possible to separate the valuation of moveable properties from that of immovable properties, embraced in a gross valuation roll, so also here, it is not possible to separate from the composite turnover transactions which are validly taxed, from those which are not for that must pertain to the domain of tax officers and the courts have no power within that domain. In our opinion, the High Court was right in declaring the total assessment to be effected by the portion which was illegal and void.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]10. Applying these tests, it is clear that without a provision like S. 18-A in the Act, the jurisdiction of the civil court would not be taken away at least where the action of the authorities is wholly outside the law and is not a mere error in the exercise of jurisdiction. Mr. Sastri says that we must interpret the Act in the same way as if S. 18-A was implicit in it and that S. 18-A was added to make explicit what was already implied. We cannot agree. The finality that statute conferred upon orders of assessment, subject, however, to appeal and revision, was a finality for the purposes of the Act. It did not make valid an action which was not warranted by the Act, as for example, the levy of tax on a commodity which was not taxed at all or was exempt. In the present case, the taxing of sales which did not take place within the State was a matter wholly outside the jurisdiction of the taxing authorities and in respect of such illegal action the jurisdiction of the civil court continued to subsist. In our judgment the suits werecontends that these cases are rather governed by the other rule that where the assessment is for separate sums, only that portion need be declared illegal which is void. It is necessary to explain the distinction between the two classes of cases and how they are to be distinguished. A difference in approach arises only in those cases where the assessment of many matters results in amounts of tax which though parts of the whole assessment, stand completely separate. There the court can declare the "separate dissected and earmarked" Item illegal and excise them from the levy. In doing so, the court does not arrogate to itself the functions of the taxing authorities; but where the tax is a composite one and to separate the good part from the bad, proceedings in the nature of assessment have to be undertaken, the civil court lacks the jurisdiction. Here, the amount of tax is a percentage of the turnover and the turnover is a mixed one and it is thus not merely a question of cutting off some items which are separate but of entering upon the function of assessment which only the authorities under the Sales-tax Act can undertake. Cases of assessment based upon gross valuation such as the case from Canda referred to by the Judicial Committee afford a parallel to a case of assessment of a composite turnover such as we have here, just as in the Canadian case it was not possible to separate the valuation of moveable properties from that of immovable properties, embraced in a gross valuation roll, so also here, it is not possible to separate from the composite turnover transactions which are validly taxed, from those which are not for that must pertain to the domain of tax officers and the courts have no power within that domain. In our opinion, the High Court was right in declaring the total assessment to be effected by the portion which was illegal and void.