K. S. VENKATARAMAN & CO. versus STATE OF MADRAS

Citation: [1966] 2 S.C.R. 229 · Decided: 18-10-1965 · Supreme Court of India · Bench: K. SUBBA RAO · Disposal: Appeal(s) allowed
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Judgment (excerpt)

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K. S. VENKATARAMAN & CO. 
v. 
STATE OF MADRAS 
October 18, 1965 
[K. SUBBA R.Ao, K. N. WANCHOO, J. C. SHAH, S. M. SIKRI AND 
V. R.AMASWAMI, JJ.] 
Madra;· General Sales Tax Act (9 of 19'39), s. !SA-Tax levied under 
ultra vires part of sectlon~Sui1t for refund-Maintainability-Litnitation. 
The appellant-company was carrying on the business of building con-
tractors. During the years 1948-49 to 1952-53, the appellant was assessed 
to sales-t1x on the basis that the contracts executed by them were '\vorks 
contracts". 
On 5th April 1954, the High Court held that the relevant 
provision of the Madras General Sales Tax Act, 1939, empowering the 
State to assess jndivisible building contracts was ultra vires the powers 
of the State Legislature. 
On 23rd March 1955, the appellant filed a 
suit for the recovery of the amount of taxes illegally levied and collected 
from it. 
The trial court and the High Court following the decision in 
Raleigh Investment Co. Ltd. v. The Governor General in Council, [1947] 
L.R. 74 I.A. 50, held that the suit was not maintainable because of 
s. 1 SA of the Act, and that the remedy of the appellant was only to 
pursue the machinery provided under the Act. 
In appeal to this Court, it was contended by the appellants that: (i) 
The provisions of the Act and Rules relevant to indivisib1e \\'Orks contracts 
were held by this Court also to be without legislative competence an<l void, 
and therefore, s. 1 SA did not bar a suit for the recovery of tax assessed 
under ultra vires ]_;'lrovisions; and (ii) the suit was within time. 
HELD: (i) (per Subba Rao, Wanchoo and Sikri, JJ.) Tne aS!essments 
in the present case \.Vere made in respect of indivisible works contracts. 
This Court in the appeal from the judgment of the High Court agreed 
with the High Court and held that the provisions which enabled the levy 
of sales·tax in respect of such contracts were ultra vires the po\vers of 
the Provincial Legislature, in the 
State of Madras v. Gannon Dunkerley, 
[1959] S.C.R. 379. 
Therefore. 
the sales-tax authorities have acted 
outside the Act and not under it in making an assessment on the bnsis 
of the relevant part of the charging section which \Vas declared to be ultra 
vires by this Court, and hence s. 18A was not a bar to the n1aintainahility 
of tho suit. [237 F-G; 252 D-E; 253A] 
If a statute imposes a liability and creates an effective n1achinery for 
·deciding questions o.f lav.; or fact arising in regard to that liability, it may, 
by nC"cessary implication, bar ·the maintainability of a civil suit in respect 
of the said liability. 
A statute may also confer exclusive jurisdiction on 
the authorities constituting the said machinery to decide finally a jurisdic-
tional fact thereby excluding by necessary implication the jurisdiction of a 
civil court in that regard. 
But an authority created by a statute cannot 
question the vircs of that statute: or any of the provisions thereof, \vhere-
under it functions. It must act under the Act and not outside it. 
If it 
a.cts on the basis of a provision of that statute which is ultra vires, to 
that extent it would be, acting outside the Act. In that event, a sui~ to 
question the validity of such an ord~r ma~e outside the ".'-<;t would c~rtam~y 
fo in a civil court. 
The foundallon laid by the Jud1crnl Committee 1n 
230 
SUPREME COURT REPORTS 
[1966) 2 S.C.R. 
Raleigh Investment Co. case for. construi~g the express~o!1 "under. the 
Act" has no legal basis. 
The enllre reasonmg of the Jud1c1al Committee 
was based upon the assumption that the question of ultra vires can be 
canvassed and finally decided through the machinery provided under the 
Income-tax Act. But the Income-tax Officer, the Appellate Assistant Com-
missioner and the Appellate Tribunal are all creatures of that Act and 
whether the provisions of the Act are good or bad is not their concern. 
As the Tribunal is a creature of the statute it can only decide the dispute 
between the asseS&ee and the Commissioner in terms of the provisions of 
the Act and the question of ultra vires is foreign to the scope of its juris-
diction. 
If an assessee raises such a question, the Tribunal can only 
reject it on the ground that it has no jurisdiction to entertain the objection 
or decide on it. 
As no such question can be raised or can arise on the 
Tribunal's order, the High Court cannot possibly give any decision on 
. the question of ultra vires, 
because its jurisdiction un
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