STATE OF ANDHRA PRADESH Vs. KRISHNA COCOANUT CO

JUDGEMENT

(1.) This appeal is by the State of Andhra and is directed against a decree granted by the Subordinate Judge, Amalapuram, in favour of the plaintiff-res ondent which is a firm catrying on business at Ambajipet in the East G davari district. In the suit, the plaintiff sought to recover from the appellant a sum of Rs. 14,101-13-9 made up of a sum of Rs. 13,948-6-9 stated to have been illegally collected from the plaintiff-firm by way of sales-tax under the Madras General Sales Tax Act and a sum claimed by way of interest thereon. The learned Subordinate Judge decreed the first but not the second of these sums. In this appeal, although the State questioned in its memorandum of grounds the entirety of the decree thus made, it is stated at the hearing before us by counsel on its behalf that, in the light of binding authority, it concedes that a part of the amount was rightly decreed. The controversy before us has thus been confined to the question as to whether the decree of the Court below should be set aside to the extent to which it is objected to by the appellant.

(2.) In order to understand the scope of that controversy it is necessary to bear the following facts in mind. At the material point of time, the plaintiff firm carried on the business of exporting cocoanuts and copra outside the territory of the Madras State within which the East Godavari district was then comprised. The transactions now in question relate to the period from 1st April, 1949, to 31st March, 1950 and it is common ground between the parties that all of them are what may be called inter-State sales. On the basis of the periodical returns submitted by the plaintiff, the Deputy Commercial Tax Officer, Amalapuram, determined the net actual turnover of the plaintiff's business for the aforesaid period at Rs. 8,92,699-2-3 by his order, dated 16th October, 1950. In that order, he has stated : "Sales are almost (sic.) to dealers outside the province but no exemptions are claimed as they (sic.) considered perhaps, inadmissible." His order discloses that the plaintiff was making periodical payments pursuant to provisional assessments made during the year and that out of the total sum of Rs. 13,948-6-9 held payable by it for the year in question only a sum of Rs. 4,264-6-9 remained to be realised. At the end of his order, the officer directed the issue to the plaintiff of what is known as ' B ' notice for the recovery of the sum. That notice was received by the latter on 8th November, 1950 and payment in compliance with it was made on 28th November, 1950. On 10th August, 1953, however, acting presumably on legal advice based on certain decisions of the High Court of Madras, the plaintiff-firm issued a notice to the Collector of East Godavari district in which it stated that the whole of the sum imposed as tax upon it by the Deputy Commercial Tax Officer by his order, dated 16th October, 1950, was illegally levied and collected and was liable to be refunded. In default of such refund, the State was threatened with a suit. As the demand made in the notice was not complied with, the plaintiff instituted the present suit on 19th October, 1953, the three days preceding that date being public holidays. The plaint averred that Explanation (2) to section 2 (h) of the Madras General Sales Tax Act which was inserted by the Amending Madras Act XXV of 1947, whereby even outside sales were made liable to tax was ultra vires of the Madras Provincial Legislature (as it then was) and that after 26th January, 1950, when the Constitution of India came into force the levy of the tax offended Article 286 (1) (a) and the Explanation thereunder. On these grounds, the plaintiff asked for a decree against the defendant directing it to refund the sum unlawfully collected by it. The State Government disputed both these propositions in their written statement. But its contentions were overruled by the trial Judge.

(3.) It is not now disputed for the respondent that the validity of Explanation (2) to section 2 (h) of the Madras General Sales Tax Act cannot be impeached in view of the decision of the Supreme Court in Tata Iron & Steel Co., Ltd. v. State of Bihar, (1958) S.C.J. 818 : A.I.R. 1958 S.C. 452. while it is conceded on behalf of the appellant that the Explanation could not be effective for the period from 26th January, 1950, to 31st March, 1950. The result of these concessions on both sides is that the levy of the tax upon that part of the plaintiff's turnover which comprises transactions upto 26th January, 1950, would be valid while its levy upon the rest of the turnover would be illegal. One would have thought therefore that the plaintiff would be entitled to a decree for a refund of the sum which was levied upon the latter item. But it has been strenuously maintained by the counsel for the respondent that he is nevertheless entitled to have the decree of the trial Court maintained in its integrity. He has argued that the order of assessment, dated 16th October, 1950, is a composite order; that it cannot be split up into two parts consisting of what is good and what is bad ; and that the Court is bound to set it aside in its entirety. He adds, however, that this course would not affect the right of the taxing authorities, to make a proper and valid assessment afresh. The proposition so submitted seemed to us even at the outset altogether unacceptable and despite the able and elaborate arguments of the learned counsel we remain unconvinced that it is right.