Andhra HC (Pre-Telangana)
Public Prosecutor (Andhra) vs Bhavigadda Thimmaiah And Ors. on 11 November, 1958
JUDGMENT 1. These appeals against the acquittal of the respondent raise a question of considerable importance to the trial of a large class of cases by Magistrates in this State. That question is as to the jurisdiction of criminal courts to adjudicate on the correctness and the validity of assessments made under the Madras General Sales Tax Act, 1939, in prosecutions under section 15(b) of the Act, after the repeal of section 16-A of the Act by the Andhra Amendment Act (XIII of 1954). 2. The facts, which have given rise to these appeals, are briefly as follows : The respondent, who is a master weaver at Kosigi, was prosecuted by the Deputy Commercial Tax Officer II, Adoni, under section 15(b) of the Act in two cases before the Sub-Divisional Magistrate, Adoni. C.C. No. 186 of 1954 related to the sales tax assessed on the respondent for the year 1950-51 in respect of which the respondent paid only Rs. 341-4-9 and failed to pay the balance of Rs. 401-13-0 C.C. No. 187 of 1954 related to a similar failure of the respondent to pay a balance of Rs. 1, 080 out of the tax of Rs. 1, 350 assessed on him for 1949-50. For both the years, the assessing authority assessed the respondent under "the best of his judgment" provisions, as the respondent submitted no return. The amounts of tax demanded were those upheld by the Sales Tax Appellate Tribunal on appeals preferred by the respondent. The tax for the year 1950-51 was based on the average per month of the number of sarees received by the respondent from November, 1950, to March, 1951, for which period alone he maintained accounts. The turnover for all the 12 months was calculated at this average and each saree was valued at Rs. 12 which was the value given by the respondent in his letter dated 23rd August, 1951 (Exhibit P-12 in C.C. 186 of 1954). The tax for the year 1949-50 was calculated on the basis of the information furnished by one Shaik Ahmad, another master weaver at Kosigi, who had been the President of the Yarn Advisory Committee at Kosigi between 1950 and 1952. The number of looms under the respondent was fixed as 180 and the turnover of sarees from these looms was calculated by adopting the figures given by the respondent in his letter dated 23rd August, 1951 (Exhibit P-10 in C.C. No. 187 of 1954).The gist of the respondent's defence at the trial was that he commenced his business in sarees only in November, 1950. He accordingly contended in C.C. No. 197 of 1954 and he was not liable to be assessed at all for the year 1949-50 and adduced evidence proving that the information furnished by P.W. 3, Shaik Ahmad, could not be relied upon. In C.C. No. 186 of 1954, he alleged that out of 1792 sarees shown as received by him in his account from November, 1950, to March, 1951, he sold only 792 sarees and had a balance of 1000 sarees. The Sub-Divisional Magistrate construed section 15(b) as requiring the prosecution to make out (1) that the accused was assessed to pay any tax or fee under the Madras General Sales Tax Act; (2) that the tax is due; and (3) that he failed to pay the same within the time allowed. As P.W. 3, Shaik Ahmad, in C.C. No. 187 of 1954 was proved to be unworthy of credit, the evidence on the side of the prosecution in both the cases consisted only of officials of the Commercial Taxes Department who had no personal knowledge of the respondent's dealings either in 1949-50 or in 1950-51. The learned Magistrate, therefore, held that the prosecution had failed to establish beyond reasonable doubt that the respondent was liable to pay the taxes demanded from him and accordingly acquitted the respondent in both the cases. 3. The main contention of the learned Public Prosecutor is that in prosecutions under section 15(b) of the Act, the Criminal Courts have no jurisdiction to inquire into and adjudicate on the correctness of the amounts of taxes assessed under the Act. According to him, a person charged under section 15(b) can question only the legality of the assessment and show that the turnover in dispute is not taxable at all under the provisions of the Act, but cannot otherwise question the quantum of the assessment in the Criminal Court. In view of the course I propose to take, it is not necessary to deal now with the other contentions raised, namely, whether the amounts of the assessments are justified on the evidence and whether there were proper enquiries as prescribed before the assessments were made. Prior to the amendments by Madras Act XXV of 1947 which came into force on 1st January, 1948, the offence made punishable under section 15(b) was failure "to pay the tax due from him within the time allowed". By Madras XXV of 1947, the words "to pay within the time allowed, any tax assessed on him, or any fee due from him, under this Act" were substituted in section 15(b) and a new section 16-A was inserted, precluding the validity of assessments under the Act and the liability to pay the amounts assessed from being questioned in Criminal Courts. Section 16-A held the field until it was declared to be void by a Division Bench of the Madras High Court in In re Guruviah Naidu & Co. . Decisions rendered after Madras Act XXV of 1947 came into force proceeded on the footing that neither the legality nor the quantum of assessments made under the Act could be questioned in Criminal Courts. However, section 16-A has been since repealed in the State of Andhra by section 11 of Act XIII of 1954. 4. In construing the present position under section 15(b) and the effect of the decisions under the Act, one point which arises for consideration is whether the amendment of the terms of section 15(b) by Act XXV of 1947 makes any difference. Both before and after the amendment, the gist of the offence under section 15(b) is the failure to pay the tax. This is the actus reus, and the duty to pay the tax is created by section 10 of the Act which has remained the same throughout and reads : "The tax assessed under this Act shall be paid in such manner and in such instalments, if any, and within such time, as may be specified in the notice of assessment, not being less than fifteen days from the date of service of the notice. In default of such payment, the whole of the amount then remaining due may be recovered as if it were an arrear of land revenue." 5. The offence consists in the breach of an absolute statutory duty imposed by section 10 to pay the tax assessed under the Act. The expression "tax due" in the old section 15(b) evidently referred to the tax assessed under the Act mentioned in section 10. By the Amending Act of 1947, the words "assessed under the Act" in section 10 were reiterated in section 15(b). It appears, therefore, that so far as taxes are concerned, the amendment did not alter in any way the ingredients of the offence under section 15(b). These ingredients are : (1) that the tax should have been assessed under the Act, (2) that time should have been allowed for its payment as prescribed in section 10, and (3) that the accused should have failed to pay it within that time. On the language of the Act, an offence under section 15(b) is made out as soon as these three ingredients are proved by the prosecution. 6. That the legality of the assessment can be questioned by the accused in a prosecution under section 15(b) is clear from two decisions of the Supreme Court. In Poppatlal Shah v. State of Madras (1953 4 S.T.C. 188; 66 L.W. 573; 1953 1 M.L.J. 739), an accused who was charged under section 15(b) prior to the amendments introduced by Act XXV of 1947 was acquitted by the Supreme Court on the ground that his sale did not come within the meaning of that term in section 2(h) and that the assessment of tax therefore was not warranted by the provisions of the Act. In State of Madras v. Guruviah Naidu & Co. (1955 6 S.T.C. 717 at 721), the Supreme Court convicted the accused under section 15(b) on the ground that their claim to be exempted under Article 286(1)(b) of the Constitution corresponding to section 22(a)(ii) of the Act was not proved by the evidence. His Lordship Das, Acting C.J., who delivered the judgment observed :"Even if, therefore, we concede, without deciding it, that section 16-A did not prevent the respondents from questioning the validity of the assessment, it was quite impossible for the respondents, on the evidence by them, to contend ................................... that the purchases were exempt from sales tax by virtue of Article 286(1)(b), that the assessments were illegal and that consequently the non-payment thereof was not an offence." 7. As the assessment is required to be under the Act, it is open to the accused to contend that the provisions of the Act have not been complied with. 8. However, it has been held in a series of decisions of single Judges of the Madras High Court that prior to the insertion of section 16-A, an accused could question not only the legality but also the quantum of assessment. In Public Prosecutor v. D. Khader Khan (1946 1 S.T.C. 142; 1946 M.W.N. 762), the defence of the accused was that his turnover was very poor, that he did not have so much sales as it was though he had and that therefore he was not liable to pay the sales tax. Kuppuswami Ayyar, J., held that in a prosecution for failure to pay the sales tax, the burden is upon the prosecution, where the accused disputes his liability to pay it, to establish affirmatively that the accused was liable to pay the tax. In Appa Rao, In re (1948 1 S.T.C. 211; 1948 2 M.L.J. 572), Rajagopalan, J., construed the expression "due" in the old section 15(b) as meaning "lawfully due" and held that it was fully open to the accused to prove that the tax was not lawfully due and that no offence was therefore committed. In Gigina Basha Saheb, In re (1950 1 S.T.C. 240), Panchapakesa Ayyar, J., held that both the legality as well as the quantum of the assessment could be challenged by a person prosecuted under section 15(b). In In re Narasingamuthu (1948 1 S.T.C. 180; A.I.R. 1949 Mad. 116), Govinda Menon, J., dealt with the burden of proof in such cases which he classes as quasi criminal and held that where the prosecution adduced prima facie proof that the net turnover of the assessee is more than Rs. 10, 000, the burden of rebutting that prima facie evidence is shifted on to the assessee. In Thiruvengadasami v. Municipal Health Officer (1949 A.I.R. 1949 Mad. 547 at 556; 1949 1 M.L.J. 488) which dealt with a prosecution under section 249 read with section 313 of the District Municipalities Act, a Full Bench of the Madras High Court observed :"A distinction has to be drawn regarding the powers of a Criminal Court when its machinery is sought by the statutory body for recovering a licence fee, a tax or tithe, and cases where a citizen is prosecuted for carrying on a business or industry without a licence where the statutory body, rightly or wrongly, but bona fide, refused the licence. In the former case it is open to the Court to weigh the evidence and find out whether the statutory body was justified in levying an unreasonable fee." 9. Although the second sentence quoted mentions only fees, it is clear from the immediately preceding sentence that the observations were also intended to apply to taxes. 10. The learned Public Prosecutor has not been able to cite any direct authority in support of his contention that the accused is not entitled to question the quantum of assessment in such prosecutions. He has only referred to cases like Jagadish Prosad v. Member, Board of Revenue , which deal with the jurisdiction of Civil Courts, under the specific provisions of similar fiscal statutes to interfere with the assessment. These decisions have no bearing on the question of the scope of the defence available to an accused in prosecutions under the penal provisions of such Acts. 11. Nevertheless, it appears to me that the point taken by the learned Public Prosecutor is well-founded. The nature of an offence created by a special law has to be considered on the language and the object of the statute in question. The language of section 15(b) does not require anything more to be proved with reference to the assessment than that the assessment should have been made under the Act. The object of section 15(b) is evidently to enforce payment and deter non-payment of taxes assessed under the Act through the agency of the Criminal Courts. The section provides for the imposition of a fine by a Criminal Court for default in the statutory duty created by section 10, and also provides that in the event of a conviction the tax which the accused has failed to pay shall be recoverable as a fine. This provisions for the recovery of the tax cannot be regarded as much more drastic than the provision in section 10, for section 10 says in effect that the tax may be recovered under the provisions of the Madras Revenue Recovery Act, 1864. It cannot have been the intention of the Act that the amount of the tax should be reassessed by a Magistrate. Section 11 of the Act says that the decision of the Appellate Authority under the Act shall be final subject to the provisions of sections 12 to 12-C, which provide for appeals and revisions up to the High Court and for similar finality of the decisions of the ultimate appellate or revisional authority. In Secretary of State v. Mask & Co. (1940 67 I.A. 222 at 237), the Judicial Committee laid down the principle that where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it, the party must adopt the form of remedy given by the statute. In Raliegh Investment Co. Ltd. v. Governor-General in Council (A.I.R. 1947 P.C. 78; 1947 2 M.L.J. 16), construing the expression "assessment made under the Act" in section 67 of the Income-tax Act barring suits in Civil Courts, the Judicial Committee held that the phrase describes the provenance of the assessment and does not relate to its accuracy in point of law. The Madras General Sales Tax Act contains section 18-A in the same terms as section 67 of the Income-tax Act, barring suits to set aside or modify any assessment made under the Act. It appears unreasonable to hold that the Magistrate is approached under the Act, he is empowered to set aside or modify the assessment for the purpose of enforcing the remedies made available through him. This would not mean that he is precluded from taking into account the injustice of an assessment, because where it is pleaded and established, he can modulate the punishment to meet the justice of the case and impose a nominal penalty if the assessment is unjust. The proper approach in determining the criminal liability in respect of an offence consisting of the breach of an absolute statutory duty would seem to be to consider whether the accused comes within one of the exceptions under the general law, such as section 79, Indian Penal Code. It is not permissible in interpretation to add to the words of the statute, as for instance by the addition of the word "lawfully" before the word "assessed" in section 15(b), especially when the statute itself contains clear indications to the contrary. Having regard to the great importance of the question and to the trend of decisions of the Madras High Court mentioned above, I think that it is necessary that the scope of the defence available to an accused in prosecutions under section 15(b) of the Madras General Sales Tax Act, 1939, should be settled by a Division Bench of this Court. I therefore direct that the appeals be posted before a Bench. 12. In pursuance of the abovesaid order of reference, Appeals Nos. 118 and 119 of 1955 came on for hearing before Subba Rao, C.J., and Basi Reddy, J., and the following order was made by the Court on November 9, 1957. 13. Order of reference to the Full Bench. Subba Rao, C.J.
14. These appeals raise the question of the true construction of section 15(b) of the Madras General Sales Tax Act, 1939.
15. The Deputy Commercial Tax Officer, Adoni, assessed the respondent, who is a master weaver at Kosigi to sales tax for the two years 1949-50 and 1950-51. The assessments were confirmed by the Sales Tax Appellate Tribunal. The department launched prosecutions against the respondent under section 15(b) of the Act before the Sub-Divisional Magistrate, Adoni. C.C. No. 186 of 1954 relates to the assessment for the year 1950-51. C.C. No. 187 of 1954 was filed in respect of the assessment for the year 1949-50. The respondent's defence in C.C. No. 187 of 1954 was that he was not liable to be assessed at all for the year 1949-50 on the ground that he commenced his business in sarees only in November, 1950. His plea in C.C. No. 186 of 1954 was that out of 1792 sarees shown as received by him in his accounts from November, 1950, to March, 1951, he sold only 792 sarees and had a balance of 1000 sarees. In short, his defence in both the cases was that the assessment made by the Deputy Commercial Tax Officer was not correct. The Sub-divisional Magistrate held that the prosecution had failed to establish beyond any reasonable doubt that the respondent was liable to pay the tax demanded from him and accordingly acquitted the respondent in both the cases. The State Government has filed the aforesaid two appeals against the orders of acquittal. The question that arises for consideration is whether, in a prosecution under section 15(b) of the Madras General Sales Tax Act, the Criminal Court has jurisdiction to enquire into and adjudicate on the correctness of the amount amount of tax assessed under the Act. Section 15(b) of the Act reads :
"Any person who
(b) fails to pay within the time allowed any tax assessed on him or any fee due from him under this Act shall on conviction by a Presidency Magistrate or a Magistrate of the first class be liable to a fine which may extend to one thousand rupees and in the case of a conviction under clause (b), ........ the Magistrate shall specify in the order the tax, fee or other amount which the person convicted has failed or evaded to pay or has wrongfully collected and the tax, fee or amount so specified shall be recoverable as if it were a fine."
16. The object of this section is to provide a deterrent against recalcitrant taxpayers evading payment of sales tax and to enable the State to recover the tax from them. If a person fails to pay the tax assessed on him under the Act, he is liable to be prosecuted under this section. The construction of the section is not free from doubt and it can reasonably bear the following conflicting views :-
(1) The validity and the correctness of an assessment is exclusively decided by a hierarchy of tribunals provided by the Genera Sales Tax Act and, therefore, the assessment is binding on the Criminal Court whose jurisdiction is only confined to ascertain whether the tax was assessed on the accused under the Act.
(2) The Criminal Court cannot question the assessment if it is made under the Act but can do so if the assessment is made outside the Act, i.e., the assessment is made in contravention of the provisions of the Act, or, in pursuance of the Act or the provisions thereof which are ultra vires of the Legislature.(3) The validity and the correctness of the assessment are open to the scrutiny of a Magistrate. The third view enables a Magistrate to question the correctness of the decisions of the tribunals constituted under the Act, and compels the prosecution to sustain the assessment by producing the entire material which has already been sifted and considered by statutory tribunals. The question is whether duplication of this procedure and the possibility of conflicting decisions was contemplated by the Legislature or whether section 15 was enacted simply as a convenient and expeditious device to collect the tax.
The decisions taking the contrary view lay emphasis on the fact that when the Legislature makes the non-payment of tax an offence without circumscribing the scope of the enquiry, the fundamental principles of Criminal Jurisprudence demand that the prosecution should conclusively establish all the ingredients of the offence. The first view has the merit of demarcating the jurisdictions of the tribunal and of the Criminal Courts and of preventing the overlapping of the two, apparently achieving the object underlying the Act. The second view, which reconciles the two extreme views, can be sustained by giving full effect to the words "assessed under this Act" in section 15(b) as distinguished from one outside the Act.
There is a strong current of judicial opinion in Madras accepting the third view. A Division Bench of the Madras High Court in Ramaswami Iyengar v. Sivakasi Municipality (1936 M.W.N. 1337) held that, in a prosecution under rule 30(2) of Schedule IV of the District Municipalities Act, it is incumbent upon the prosecution to establish affirmatively that the profession tax was legally leviable from the accused and that it is also open to the accused to plead and prove that he is not liable to be prosecuted. Venkataramana Rao, J., who delivered the decision on behalf of the Bench, observes at page 1337 :"Ordinarily where a person is prosecuted for any criminal offence, it is incumbent upon the prosecution to affirmatively prove that an offence has been committed and if prima facie proof has been let in by the prosecution, it is open to the accused to plead and prove that he has not committed any offence. The fact that the prosecution has been launched under the provisions of a Special Act would not displace this elementary rule unless there are provisions in the said Act to the contrary."
17. The learned Judge proceeds to state :
"We do not see why a different principle should apply in the case of a criminal prosecution and how a person can be convicted of a criminal offence for non-payment of a sum which he is not legally liable to pay."
18. The same view was accepted and followed by single Judges of the Madras High Court in cases arising under section 15(b) of the Madras General Sales Tax Act. See The Public Prosecutor v. Khader Khan (1946 1 S.T.C. 142; 1946 M.W.N. 762), Appa Rao, In re (1948 1 S.T.C. 211; 1948 2 M.L.J. 572), Gigina Basha Saheb, In re (1950 1 S.T.C. 240; 1950 1 M.L.J. 231), and In re Narasingamuthu (1948 1 S.T.C. 180; 1948 M.L.J. 93). The following observations of the Full Bench of the Madras High Court in Thiruvengadasami v. Municipal Health Officer (1949 1 M.L.J. 488) also assumed the correctness of the aforesaid decisions :
"A distinction has to be drawn regarding the powers of a criminal court when its machinery is sought by the statutory body for recovering a licence fee, a tax or tithe, and cases where a citizen is prosecuted for carrying on a business or industry without a licence where the statutory body, rightly or wrongly but bona fide, refused the licence. In the former case it is open to the court to weigh the evidence and find out whether the statutory body was justified in levying an unreasonable fee."
19. A Division Bench of the Madras High Court in Guruviah Naidu and Co., In re (1954 5 S.T.C. 129; I.L.R. 1955 Mad. 184), though in a different context accepted and followed the aforesaid rulings. But the Supreme Court in Poppatlal Shah v. The State of Madras (1953 4 S.T.C. 188; 1953 1 M.L.J. 739), acquitted the accused, who was prosecuted under section 15(b) of the Act, on the ground that his sale did not come within the meaning of that term in section 2(h) and that the assessment of tax, therefore, was not warranted by the provisions of the Act.
20. The Supreme Court again in State of Madras v. Guruviah Naidu & Co. (1955 6 S.T.C. 717), convicted the accused under section 15(b) on the ground that their claim to be exempted under Article 286(1)(b) of the Constitution was not proved by the evidence. The aforesaid two decisions indicate that it is open to the accused in a prosecution under section 15(b) of the Act to prove that the assessment was illegal. These decisions seem to support the second view.
21. It is not necessary to consider all the decisions cited at the Bar or to notice the conflicting views expressed by courts on analogous provisions of different statutes, for we think this is a fit case for referring to a Full Bench. The point raised is important both from the standpoint of the taxpayers as well as the State and, therefore, should be decided authoritatively by a Full Bench of this Court. We, therefore, refer the following questions to the Full Bench :
(1) Whether, in a prosecution under section 15(b) of the Madras General Sales Tax Act, it is open to question the validity of the assessment made under the Act ?
(2) Whether, in a prosecution under section 15(b) of the Madras General Sales Tax Act, the Criminal Court has jurisdiction to adjudicate upon the correctness of the amount of tax assessed under the Act ?In pursuance of the abovesaid order of reference Appeals Nos. 118 and 119 of 1955 and Appeal No. 167 of 1956 which was directed to be posted along with them by Basi Reddi, J., on 22nd November, 1957, came on for final hearing before the Full Bench and the following judgment was delivered by the Full Bench :-
Chandra Reddy, C.J.
1. These appeals are filed by the State against the acquittal of the respondent and involve the construction of section 15(b) of the Madras General Sales Tax Act of 1939. The respondent who is a master weaver of Kosigi (Kurnool District) was assessed to sales tax for the years 1949-50 and 1950-51. The assessment were confirmed by the Sales Tax Appellate Tribunal on appeal. The respondent paid only a portion of the tax and defaulter in payment of the balance. This led the assessing authority to prosecute him before the S.D.M., Adoni. By way of defence, the respondent pleaded that the assessment made by the Deputy Commercial Tax Officer was not correct. The S.D.M. upheld the objections of the respondent and acquitted him. Originally this came on for hearing before a single Judge who referred it to a Bench having regard to the importance of the matter and the Bench in its turn has placed it before the Full Bench for the same reason.
2. The question that are referred to the Full Bench are :
(1) Whether, in a prosecution under section 15(b) of the Madras General Sales Tax Act, it is open to question the validity of the assessment made under the Act?
(2) Whether, in a prosecution under section 15(b) of the Madras General Sales Tax Act, the Criminal Court has jurisdiction to adjudicate upon the correctness of the amount of tax assessed under the Act?
3 As the controversy centres round the interpretation of section 15(b), it is useful to extract the terms thereof, omitting the unnecessary portion :-"Any person who -
(b) fails to pay within the time allowed, any tax assessed on him or any penalty levied or any fee due from him under this Act, shall, on conviction by a Magistrate of the first class, be liable to be punished with simple imprisonment which may extend to six months or with a fine which may extend to one thousand rupees, or with both and in the case of a conviction under clause (b) or (d), the Magistrate shall specify in the order the tax, penalty, fee or other amount, which the person convicted has failed or evaded to pay, and the tax, penalty, fee or amount so specified shall be recoverable as if it were a fine."
4. We will here notice section 15(b) as it stood prior to its amendment and the legislative changes that occurred in the year 1948. Section 15 prior to its amendment read as "fails to pay the tax due from him within the time allowed". It is not necessary for us to refer to other changes in that section. The words "any tax assessed on him" were substituted for the words "tax due from him" by section 11(1) of the Madras General Sales Tax (Amendment) Act, 1947 (XXV of 1947). By the same Act, section 16-A was added. It is in these words :-
"The validity of the assessment of any tax, or of the levy of any fee or other amount, made under this Act, or the liability of any person to pay any tax, fee or other amount so assessed or levied shall not be questioned in any Criminal Court in any prosecution or other proceeding, whether under this Act or otherwise."
5. It may be mentioned here that the Andhra Legislature deleted section 16-A on 24th June, 1954, and the Andhra Pradesh Legislature re-enacted it in the shape of section 36 in the Andhra Pradesh General Sales Tax Act, 1957, in a different form. Section 36 recites :
"Save as otherwise expressly provided in this Act, no Court shall entertain any suit, or other proceeding to set aside or modify, or question the validity of any assessment, order or decision made or passed by any officer or authority under this Act or any rules made thereunder, or in respect of any other matter falling within its or his scope." Section 15(b) is recast in this enactment and finds place in section 30(1)(a). The punishment provided in this section is also slightly different from that in section 15.
6. Before we discuss the terms of section 15, it is convenient to refer to a judgment of the Madras High Court, which is adverted to in the order of reference, in Ramaswami Iyengar v. Sivakasi Municipality (1936 M.W.N. 1337), which formed the basis of some decisions of single Judges. The facts there were as follows. The manager of the estate of a lunatic who was also his guardian was required to submit a return of the income of that estate by the Municipal Council, Sivakasi, for the purpose of levying the profession tax. The return sent by him stated that the estate was not leviable to profession tax. This objection was overruled and profession tax was levied. As the tax was not paid, he was prosecuted. The accused raised a plea that he was not liable to pay the tax. This defence was not accepted with the result that he was convicted and this was confirmed in appeal. The matter was brought up to the High Court in revision. In quashing the conviction, Venkataramana Rao, J., who delivered the opinion of the Bench remarked :
"We are therefore clearly of the opinion that it is incumbent upon the prosecution to establish affirmatively that the profession tax was legally leviable from the accused and it is also open to the accused to plead and prove that he is not liable to pay the tax and therefore he is not liable to be prosecuted under rule 30, clause 2, of Schedule 4 of the District Municipalities Act."
Discussing the applicability of rule 28 of schedule 4 of the District Municipalities Act, which stated that the assessment or demand of any tax where no appeal is made as thereinbefore provided, and when such appeal was made the adjudication of the Council thereon shall be final, the learned Judge observed that the finality was only for the purpose of the Act and did not prevent the accused from questioning the legality or validity of the assessment in a Civil Court. We may here point out that the language of rule 30 of schedule 4 of that Act is analogous to that of section 15(b) as it stood before its amendment, in that it says "if the amount due on account of any tax etc., " and cannot therefore furnish any parallel here. That apart, as pointed out by the Madras High Court in Public Prosecutor v. Ramalingam Pillai (1958 9 S.T.C. 510; 1958 2 M.L.J. 243), the earlier decisions of that Court were not brought to the notice of the learned Judges.
The earliest reported case in that regard is Kamayya v. Leman (1879 I.L.R. 2 Mad. 37), in which it was ruled that a Civil Court has no jurisdiction to adjudicate upon the legality of a profession tax imposed by a Municipality. In that case, the correctness of a profession tax imposed by the Municipality of Guntur was brought in issue in a suit on the file of the District Munsif, Guntur. On a reference by the Munsif, it was ruled by the High Court that the Civil Court had no jurisdiction to adjudicate on the question whether the tax was lawfully imposed by the Municipal Commissioner.
A judgment of another Bench of that Court in Veeraraghavalu v. President, Corporation of Madras (1911 I.L.R. 34 Mad. 130), is more illuminating. That dealt with the provisions of the Madras City Municipal Act of 1904. The question that arose for consideration there was whether it was open to the Presidency Magistrate to consider whether the accused exercised any profession in the city for 60 days during the particular half year making him liable for payment of profession tax. The defence of the accused did not find favour with the Magistrate and it enacted in conviction. On appeal, a Bench consisting of Wallis and Krishnaswamy, JJ., confirmed the conviction with these remarks which are pertinent to this enquiry :-"Was the Magistrate right in declining to enquire into the plea of non-exercise of the profession ? The question thus raised is one of some difficulty but I have come to the conclusion that he was right. Section 172 of Madras Act III of 1904 provides 'that all complaints against and all applications for revision of classification in respect of any tax or toll leviable under Part IV shall be heard and decided by the President and two Commissioners'. Section 175 provides an appeal against the order of the 'President and two Commissioner' to Magistrates. Section 176 authorities a reference by the Magistrates to the High Court. Section 177 declares the finality of the decision of the respective authorities in the following terms : 'The assessment, revision or demand of any tax or toll, when no complaint, application or objection is made as hereinbefore provided, and the adjudication of an appeal by the Magistrates shall be final'. It will be noticed that the declaration of finality is not merely with reference to the decision of Magistrates or of the President and Commissioners, but, in case no complaint or objection is made, with reference also to the original assessment."
7. This statement embodied in that decision has some bearing on this enquiry as the Madras General Sales Tax Act devises a machinery similar to that contained in the Act that fell to be considered by the learned Judges there. There are a number of other cases which fall in line with these two rulings and it is unnecessary to allude to all of them.
8. Following Ramaswami Iyengar v. Sivakasi Municipality (1936 M.W.N. 1337), Kuppuswamy Ayyar, J., in Public Prosecutor v. Khader Khan (1946 1 S.T.C. 142; 1946 M.W.N. 762), decided that in a prosecution under section 15(b) it has to be affirmatively established that the accused was liable to pay the tax. We may turn to the judgment of the Supreme Court in Poppatlal Shah v. The State of Madras (1953 4 S.T.C. 188; 1953 1 M.L.J. 739). In that case, the accused was charged under section 15(b) for failure to pay the tax for the period from 1st April, 1947, to 31st December, 1947. The accused took the plea that the sale transactions in question were not liable to be taxed under the Madras General Sales Tax Act as there was no sale within the ambit of section 2(h) as it stood then. Effect was not given to this plea both by the Magistrate and the High Court on appeal. But when the matter eventually went up to the Supreme Court they reversed the judgment of the High Court on the ground that the mere fact that the contract for sale was entered into within the Province of Madras did not make the transaction, which was completed admittedly within another Province, where the property in the goods passed, a sale within the Province of Madras according to the provisions of the Madras General Sales Tax Act, and consequently no tax could be levied upon such a transaction under the provisions of the Act. It should be noted that these transactions took place prior to the amendment introduced by Act XXV of 1947, i.e., when section 15(b) read as "tax as due" from him. The wording of the present section is different. Further, the question whether an alternative jurisdiction could be utilised to canvass the validity and correctness of an assessment was not raised there.
9. In Appa Rao, In re (1948 1 S.T.C. 211; 1948 2 M.L.J. 572), Rajagopalan, J., who expressed the opinion that a Criminal Court could investigate into the liability of the accused prosecuted under section 15(b) of the Madras General Sales Tax Act pointed out the difference between the old section and the one as amended in 1947. The learned Judge stated that the words "tax due" would only mean lawfully due. Therefore, the doctrine of these cases would not govern the language of the present section. Section 15(b) as amended and section 16-A were construed by a Bench of the Madras High Court in Guruviah Naidu, In re (1954 5 S.T.C. 129; I.L.R. 1955 Mad. 184). There, sales tax was levied on some dealers in hides and skins. As they failed to comply with the demand for payment of the impost they were prosecuted. The defence was that the assessment levied on them was invalid and therefore they were not liable to pay tax. It was argued on behalf of the prosecution that it was not open to the accused to put forward such a plea in view of section 16-A of the Act. The contention of the prosecution prevailed resulting in the conviction of the accused. On appeal, a Bench of the Madras High Court took the view that section 16-A was ultra vires the Constitution of India and repugnant to the provisions of the Criminal Procedure Code as it deprived the accused of the benefit of the ordinary rules of Criminal Jurisprudence. It was this decision perhaps that was responsible for the acquittal under appeal now.
10. This case is in conflict with Syed Mohammad & Co. v. State of Madras (1952 3 S.T.C. 367; 1952 2 M.L.J. 598). There, some tanners were assessed under the Madras General Sales Tax Act and no appeal having been filed against it, it became final. However, the assessees did not pay the tax and consequently they were prosecuted under section 15(b) of the Act by the Department. While proceedings were pending before the Magistrate the assessee took out a writ petition to quash the proceedings contesting the validity inter-alia of section 16-A of the Act, Rajamannar, C.J., and Venkatarama Ayyar, J., who heard the petition negatived the contention that section 16-A was void for the reason that it was opposed to principles of natural justice in that it prevented the accused from showing that they were not liable to be taxed under the Act. The ratio of the ruling is contained in the following remarks :"There would have been substance in this objection, if the petitioners had been denied an opportunity of contesting the claim before an order of assessment was made. But where, as here, the tax is determined after notice to the assessees, it is not repugnant to rules of natural justice to provide that the validity of assessment shall not be questioned at the stage of realisation of the tax. The provision is analogous to the rule which precludes judgment-debtors from putting forward at the stage of execution of a decree defences that were open to them in the suit itself."
11. The law as contained in Rottschaefer's Constitutional Law was extracted in that judgment :-
"The general rule is that due process requires that the taxpayer be accorded an opportunity to be heard at some stage in the proceedings before his liability is irrevocable fixed with respect to all matters the ascertainment of which involves the exercise of such administrative or quasi-judicial functions, so far as those matters affect the existence or extent of his liability."
12. The learned Judges were also influenced by the thought that the determination of the amount of tax was made after notice to the assessee and it was open to appeal and even to revision.
13. In our opinion, this represents the correct law. We are unable to agree with the line of thought pursued in Guruviah Naidu, In re (1954 5 S.T.C. 129; I.L.R. 1955 Mad. 184). It may be mentioned here that the latter case was reversed by the Supreme Court in State of Madras v. Guruviah Naidu (1955 6 S.T.C. 717; A.I.R. 1956 S.C. 58). There was no occasion for the Supreme Court to express any opinion on the constitutionality of section 16-A of the Act as it set aside the judgment on the ground that the assessee had not made out his case of exemption under Article 286 of the Constitution.We may here mention that a Full Bench of the Madras High Court in Public Prosecutor v. Ramalingam Pillai (1958 9 S.T.C. 510; 1958 2 M.L.J. 243) overruled Guruviah Naidu, In re (1954 5 S.T.C. 129; I.L.R. 1955 Mad. 184) and approved of Syed Mohammad & Co. v. State of Madras (1952 3 S.T.C. 367; 1952 2 M.L.J. 598). The learned Judges enunciated the principle that when a person was prosecuted under section section 15(b) of the Madras Sales Tax Act it was not open to him to raise any objection which could have been raised before the authorities set up under the General Sales Tax Act, the only objections which may be raised being those which the authorities were precluded from entertaining, such as that the Act or any particular provision was ultra vires. He could also show that he was not the person who could be assessed or that the tax levied had been paid. The Full Bench reviewed exhaustively the case law on the topic. It was stated that the Act had set up a hierarchy of tribunals and courts before which persons sought to be assessed could place their objections and the assessees had ample opportunities of contesting the correctness and legality of the assessment before the various authorities mentioned therein. It also pointed out the anomalies resulting from the assessee being permitted to question the correctness of the assessment in the following words :
"The assessee may have gone up with his objections to the Board of Revenue or the Appellate Tribunal and finally come to this Court. In fact, he might have gone to the Supreme Court. After the amount payable has been ascertained at so high a level and when thereafter the amount is sought to be recovered from him by prosecuting him before a Magistrate to say that he can be allowed to plead that he is not liable or that he is liable only in a different amount, is tantamount to calling upon the Magistrate to adjudicate on questions which have been settled by the higher Courts in the land. That would be a very anamalous state of things indeed. And that will not be the end of the matter. For should the Magistrate overrule him and convict him, he can go up in appeal and again in revision. In other words, the matter which one would have supposed to have been adjudicated upon and settled is reopened and set at large."
14. The conclusion that could be derived from this judgment is that it is not competent for the Criminal Court to entertain pleas regarding the validity and correctness of an assessment. Before we proceed to refer to a few of the pronouncements of the Privy Council which afford us considerable guidance in the decision of this question, it is advantageous to notice the main features of the Act in so far as it is relevant to this enquiry.
15. Section 9 prescribes the procedure to be followed by the officers entrusted with the duty of making the impost on dealers. Section 11 gives a right of appeal to an assessee objecting to the assessment. Section 12 authorities the Commercial Tax Officers, Deputy Commissioners and the Board of Revenue to exercise certain powers of revision. Section 12-A confers on the assessee right of further appeal to the Appellate Tribunal. Under section 12-B, revisional jurisdiction is vested in the High Court while section 12-C enables an assessee to appeal to the High Court in certain circumstances. Thus, there is a comprehensive set of provisions in the Act enabling the assessee to question the tax levied on him and to establish that there is no liability on his part to pay any tax or that his business warrants payment of a smaller amount of tax. When once the tax is finally determined, there is an obligation on his part to pay it. Section 10(1) says that the tax assessed under this Act shall be paid in such manner and within such time, not being less than fifteen days from the date of service of the notice of assessment or of the levy of penalty, and in default of such payment the whole of the amount then remaining due may be recovered from him as if it were an arrear of land revenue.
16. It is plain that by reason of section 10(1) there arises a duty to pay the tax demanded on the basis of the assessment. If the demand is not complied with, different courses are open to the Revenue : one is to collect it as if it were an arrear of land revenue as contemplated by section 10 itself; and the other is to prosecute him under section 15(b). Such being the situation, the question for consideration is whether the assessee could be permitted to call in question the assessment either with regard to its legality or correctness. When the latter course is pursued by the Department. We may at this stage turn to the pronouncement of the Privy Council in Raleigh Investment Company Ltd. v. Governor-General in Council (1947 15 I.T.R. 332; A.I.R. 1947 P.C. 78). What happened there was this. Raleigh Investment Company Ltd. laid an action on the original side of the High Court of Calcutta claiming repayment of a large sum of money paid under an assessment to income-tax made upon it, alleging that in computing the assessable income, effect was given to the provision of the Income-tax Act which was ultra vires the Indian Legislature and therefore the assessment was illegal and wrongful etc. The suit was decreed by the High Court, but this was reversed by the Federal Court on appeal. The decision of the Federal Court was confirmed by the Privy Council. The conclusion of their Lordships is founded mainly on section 67 of the Indian Income-tax Act, 1922, which runs as follows :
"No suit shall be brought in any Civil Court to set aside or modify any assessment made under this Act, and no prosecution, suit or other proceeding shall lie against any officer of the Government for anything in goods faith done or intended to be done under this Act."
17.The reason of the rule is contained in the following passage :-
"In construing the section it is pertinent, in their Lordships' opinion, to ascertain whether the Act contains machinery which enables an assessee effectively to raise in the courts the question whether a particular provision of the Income-tax Act bearing on the assessment made is or is not ultra vires. The presence of such machinery, though by no means conclusive, marches with a construction of the section which denies an alternative jurisdiction to enquire into the same subject-matter. The absence of such machinery would greatly assist the appellant on the question of construction and, indeed, it may be added that, if there were no such machinery and if the section effected to preclude the High Court in its ordinary civil jurisdiction from considering a point of ultra vires, there would be a serious question whether the opening part of the section, so far as it debarred the question of ultra vires being debated, fell within the competence of the legislature. In their Lordships' view it is clear that the Income-tax Act, 1922, as it stood at the relevant date, did give the assessee the right effectively to raise in relation to an assessment made upon him the question whether or not a provision in the Act was ultra vires. Under section 30, an assessee whose only ground of complaint was that effect had been given in the assessment to a provision which he contended was ultra vires might appeal against the assessment. If he were dissatisfied with the decision on appeal - the details relating to the procedure are immaterial - the assessee could ask for a case to be stated on any question of law for the opinion of the High Court and, if his request were refused, he might apply to the High Court for an order requiring a case to be stated and to be referred to the High Court (See section 30 and The Secretary of State for India v. V. M. Meyyappa Chettiar (1936 4 I.T.R. 341; I.L.R. 1937 Mad. 211)). It cannot be doubted that included in the questions of law which might be raised by a case stated is any question as to the validity of any taxing provision in the Income-tax Act to which effect has been given in the assessment under review. Any decision of the High Court upon that question of law can be reviewed on appeal. Effective and appropriate machinery is therefore provided by the Act itself for the review on grounds of law of any assessment. It is in that setting that section 67 has to be construed."
18. In the concluding paragraph of the judgment their Lordships added :
"The only doubt, indeed, in their Lordships' mind, is whether an express provision was necessary in order to exclude jurisdiction in a Civil Court to set aside or modify an assessment."
19. This last sentence is very significant in that it makes it plain that it is not competent to courts to take cognisance of proceedings for setting aside or modifying an assessment, even independent of provisions excluding the jurisdiction in that behalf. That result seems to flow from the fact that a duty is cast on an assessee to pay the tax demanded of him. This principle is reiterated by the Privy Council in Commissioner of Income-tax, West Punjab v. Tribune Trust, Lahore (1948 16 I.T.R. 214; 1948 2 M.L.J. 14; 74 I.A. 306). Their Lordships stated in the course of the judgment :
"They have reviewed the Code of Income-tax Law for the purpose of showing that it exhaustively defines the obligations and remedies of the taxpayer. It would be wholly incompatible with this that he should have a collateral right, necessarily vague and till-defined, founded on the principles of equity and good conscience. Their Lordships are of opinion that the only remedies open to the taxpayer, whether in regard to appeal against assessment or to claim for refund, are to be found within the four corners of the Act. This view of his rights harmonises with the provision of section 67 to which reference has already been made, that no suit shall be brought in any Civil Court to set aside or modify any assessment made under the Act. It is the Act which prescribes both the remedy and the manner in which it may be enforced."
20. We may lastly cite another pronouncement of the Judicial Committee in Secretary of State v. Mask & Co. (1940 67 I.A. 272). That lays down that where a liability not existing in law is created by statute and at the same time it gives a special and particular remedy for enforcing it the party must adopt the form of remedy given by the statute.
21. What follows from the above authorities is that when a statute creates an obligation to pay a tax and also provides remedies to the assessees, the aggrieved party must avail himself of those remedies and cannot resort to another jurisdiction to question the assessment.
22. Cases which enunciate the principle that before an accused could be convicted for non-payment of taxes, one of the essential ingredients of the offence, namely, the liability to pay should be made out, turn on the language of the enactments, namely, "taxes due". That expression lends itself to the interpretation taxes lawfully due and payable. The import of the words "tax assessed under the Act" is different. They only connote that an assessment in fact has been made. There is no warrant for importing the words "lawfully or legally assessed" into the section. We are of opinion that the clause "any tax assessed on him ...... under this Act" in section 15(b) cannot have the implication. In this context, we cannot do better than quote the words of Lord Uthwatt in Raleigh Investment Co. v. Governor-General in Council (1947 15 I.T.R. 332; A.I.R. 1947 P.C. 78). Construing a similar expression in the Indian Income-tax Act, this is what his Lordship says :-"The obvious meaning, and in their Lordships' opinion the correct meaning, of the phrase 'assessment made under the Act' is an assessment finding its origin in an activity of the assessing officer acting as such."
23 Thus, it is clear that these words convey only the idea that the assessment was in fact made by an officer of the Department purporting to act under the Act, and not that the impost was warranted by the terms of the Act. That section does not contemplate the whole process relating to the validity and the correctness of the assessment being gone through once again. The very object of that section, namely, the speedy realisation of the taxes would be defeated if the assessment could be impeached before the Magistrate.
24. We have already shown that the levy would be determined only after notice to the dealer and the order of the assessing authority is open to appeal and even revision. The Act contains an exclusive code for the determination of the assessment and for its enforcement. There is a hierarchy of tribunals and courts before which the validity and the correctness of an assessment could be challenged. Every opportunity is afforded to the assessee to question the assessment in all its aspects at every stage. He could raise all questions of law before the High Court in a revision petition under section 12-B of the Act and by invoking Article 227 of the Constitution if need be. When once the impose has been finally determined as laid down in the Act, it is not competent for any tribunal or court to re-open that question in any proceeding. Any mode of questioning the assessment, otherwise than by the use of the machinery set up in the Act appears to be inconsistent with the intention of the legislature. What is sought to be realised by resorting to section 15(b) is the tax that is finally determined. It is the failure to meet the liability created by section 10 that is made an offence. The purpose of section 15(b) is to enforce payment through the agency of Criminal Courts and deter non-payment of tax. Thus, what is entrusted to the Criminal Court is the function of collecting it. The payment of taxes has to be enforced by summary and stringent methods. The legislature evidently thought that it is only by means of this coercive process the proper authority could recover taxes, fees and other legitimate dues as expeditiously as possible. It is well within the competence of the State Legislature to enact laws for levy of taxes on sales and purchase by virtue of entry 54 of the State List. It is equally competent for the Legislature to provide the method of collection which is incidental to the power of imposing taxes. It is only in exercise of this authority that section 15 was inserted, and its constitutionality cannot in any way be attacked. Therefore, it is not permissible for a Criminal Court, or for the matter of that, any other tribunal to travel beyond the scope of that section. All that section 15(b) requires to be proved is that the assessment on the dealer was made under the Act and that it remained unpaid within the time allowed. No other inquiry is warranted by the language of that section. Only the two elements mentioned above need be established to enable the prosecution to succeed. Finally, our answers to the two questions are : (1) In a prosecution under section 15(b) of the Madras General Sales Tax Act, it is not open to question the validity of the assessment made under the Act.
(2) In such a prosecution, the Criminal Court has no jurisdiction to adjudicate upon the correctness of the amount taxes under the Act.
C.A. No. 167 of 1956. - The respondents in this appeal urge that on the date on which default was committed section 16-A was deleted by the Andhra Legislature and it was only much later that a similar provision was introduced in the Act and consequently it was open to the accused to plead that he was not liable to pay any tax. We do not think we can give effect to this contention. We have already pointed out that the absence of section 16-A would not make any difference as to the jurisdiction of the Criminal Court to take cognisance of such a plea. Even without that section, the scheme of the Act is complete and it precludes the tribunals from entertaining these objections except in the manner provided by the Act. Hence this contention fails and is rejected. Our answers set out above govern this case also.
25. As there is nothing further to be done in these cases, no useful purpose will be served by remitting them to the Bench. The respondents have to be convicted since there is no dispute as to the factum of assessments and also admittedly the taxes demanded were not paid within time.
26. The respondents in all the cases are therefore convicted and each of them is sentenced to Rs. 25. In addition the taxes due from them, (viz., Rs. 1080 for the year 1949-50 and Rs. 401-3-0 for the year 1950-51 from the respondent in C.A. Nos. 118 and 119 of 1955; and Rs. 519-6-0 for the year 1953-54 from the respondents in C.A. No. 167 of 1956) will be collected as fine. Appeals allowed.