Case: Bharat Kala Bhandar Ltd Vs. Municipal Committee, Dhamangaon

2. 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 and 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 Boja of ginned cotton and one anna per bale of pressed cotton as from December 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:-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 annaBy order of the Government,(Ministry of Local Self-Government)Sd/- R. N. Banerjee,Secretary to Government, Central Provinces."3. 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:-For the figure and the word 1 anna occurring in clauses (a) and (b) of the rule, the figure and word 4 annas shall be substitutedSd/- B. S. Mundhada,President, Municipal Committee4. Certain rules were framed by the Government for the assessment and collection of tax which were also published on December 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 appellant 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 bale5. It may be mentioned that in December 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 Rupees 12,511.66 on the ground that it was recovered from it illegally 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 29th March, 1949 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 totalling to Rs. 11,215-13-0. To this they added Rs. 1,295-9-6 as interest by way of damages on the aforesaid 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 ofthe Government of India Act, 1935 (which came into effect from 1st April, 1939) till January 25, 1950 a tax on trade, profession or calling in excess of Rs. 50 per 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. 50 per 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.

Reasoning:
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, S. 48 does not apply18. 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 four annas per bojha and four 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 up 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 if it is assumed that any of 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 rejectedSection 85 empowers the State Govt. to make rules for regulating the refund of taxes, and such rules may impose limitations on such refunds. Sub-section (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 provided 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 thereunder, does it contemplate cases where refund or repayment on the ground of the constitutionality of the levy? It will be noticed that sub-s. (1) of this section, empowers the State Govt. 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 a 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 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 Govt. to make rules for refund whereunder 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 casesIn the circumstances it must be held that even in the class of cases to which the provisions of Ss. 83 and 85 of the Municipalities Act apply they cannot be said to provide a sufficiently effective remedy to an assessee to challenge the assessment made against him or to a person who is aggrieved by the action of the Committee levying or refusing to refund a tax. It is true that Sub-s. (2) of S. 83 provides for a reference to the High Court but even that provision cannot be said to be a sufficiently efficacious remedy for challenging the assessment made on an assessee. For whether to make a reference or not is at the discretion of the appellate or revisional authority and the Act does not confer upon the person aggrieved a right to move the High Court, as does the Income-tax Act, to require a reference to be made in an appropriate case. We may again point out that there is a complete absence of a provision corresponding to S. 67 of the Indian Income Tax Act barring the institution of a suit in so far as refusal of refund of a tax is concernedThe Court must, therefore, lean in favour of construing a law in such a way as not to take away this right and render illusory the protection afforded by the Constitution. So, whatever be the position with respect to S. 67 of the Indian Income-tax Act, so far as S. 83 (3) of the Act is concerned, we find it reasonably possible to construe it as not depriving a person of his right to obtain redress from a civil court in respect of an amount recovered from him as a tax in violation of Art. 276 of the ConstitutionThe appellant has not sought to modify or set aside any order made by an authority acting or purporting to act under the Act. No doubt, the relief of repayment is claimed on the ground that the enhancement of the rate is unconstitutional. No doubt also that the appellant had sought a further relief of injunction. As regards the first, the position is that the High Court of Nagpur has held, in the petition under Art. 226 preferred by the appellant, the enhancement to be unlawful. This decision was rendered by the Court during the pendency of the suit and was binding on the civil Court in which the suit was pending and has been in fact followed by it. As regards the relief of injunction, that relief became unnecessary because of the order made by the High Court in the Writ petition. It is apparently for this reason that the civil Court did not award that relief to the appellant. In view of the High Courts decision it was not at all necessary for the trial Court to consider in the suit before it the question of the validity of the assessment by or collection of the tax but only to ascertain the amount which was payable to the appellant and whether the suit was barred under S. 48 or S. 85 (2) as contended by the respondent. In these circumstances, we are of opinion that the appellants suit cannot be said to be barred even if we interpret S. 84 (3) of the Municipalities Act in the same way as the Privy Council interpreted S. 67 of the Indian Income-tax ActThere is a real distinction between those cases where a suit was held to be incompetent and the kind of cases which we have before us. Thus where the question merely is, whether the assessment had been made according to law, the Assessing Officer of the Municipality having jurisdiction on the subject-matter and over the assessee the provisions of S. 84 (3) may be a bar to a suit. Where, however, the question raised is as to the jurisdiction of the Assessing Officer 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. Here since the Assessing Officer had no authority to levy a tax beyond what S. 142-A ofthe Government of India Act, 1935 permitted or what Art. 276 permits his proceedings are void in so far as they purport to levy a tax in excess of the permissible amount and authorise its collection and the assessment order is no answer to the suit for the recovery of the excess amount. To this extent, even the order of assessment cannot obtain the protection of S. 84 (3) of the Act and, therefore, the appellants suit is maintainable.