PETITIONER: MUNSHI RAM AND ORS. Vs. RESPONDENT: MUNICIPAL COMMITTEE, CHHEHARTA DATE OF JUDGMENT06/03/1979 BENCH: CHANDRACHUD, Y.V. ((CJ) BENCH: CHANDRACHUD, <NAME>, D.A. PATHAK, R.S. CITATION: 1979 AIR 1160 1979 SCR (3) 453 1979 SCC (2) 242 CITATOR INFO : R 1981 SC 446 (6) F 1981 SC1754 (9) E&R 1992 SC1952 (8,9,12,15) ACT: Punjab Municipal Act, 1911, Sections 84,86-Jurisdiction of <ORG>, of levy of profession tax on the firm and also its partners- Punjab General Clauses Act Sec. 2(40) and Constitution Art. 276(2). Punjab Municipal Act, 1911, Sections 84-86 -Jurisdiction of <ORG>, whether a bar to hear and determine suit relating to levy of profession tax under the Act. HEADNOTE: Under section 61(1)(b) of the Punjab Municipal Act, 1911 the respondent by its Notification dated May 15, 1946 levied a profession tax of Rs. 15/- per annum on each of the partners of a firm. <ORG> i.e. the appellants in the appeal. By the Notification dated July 4, 1958 the tax was raised to Rs. 200/- per annum. The validity of the demand made by the respondent at the rate of Rs. 200/- from each of the partners of the firm was challenged, pleading that <ORG> in levying the tax on the individual partners had exceeded its statutory powers under section 61(1)(b) of the Municipal Act in as much as the term 'person' occurring in section 61(1)(b) of the Punjab Municipal Act, 1911, construed in the light of the definition given in section 2(40) of the Punjab General Clauses Act included a 'firm' and since the trade carried on by the firm is one, the tax could be levied only on the firm, and not on the partners individually. <ORG> dismissed the suit. First appellate court reversed the decree and <ORG> in Second Appeal confirmed it. A Letters Patent Appeal, preferred by the respondent was allowed and <ORG> decision dismissing the suit was restored. Dismissing the appeal by special leave, the <ORG> ^ HELD: 1. It is clear, from a plain reading of Section 61(1)(b) that a tax leviable under clause (b) is in terms, a tax on 'persons', which expression includes natural persons. Its incidence falls on individuals, who belong to a class practising any profession or art, or carrying on a trade or calling in the municipality. To hold that persons who are collectively carrying on a trade in the municipality cannot be taxed individually, would be to read into the statute words which are not there. There are no words in clause (b) or elsewhere in the statute which expressly or by necessary implication, exclude or exempt persons carrying on a trade collectively in the municipality from being taxed as individuals. To attract liability to a tax under this clause it is sufficient that the person concerned is carrying on a trade in the municipality, irrespective of whether such trade is being carried on by him individually or in partnership with others. [467G, 468H, 469A-B] 2 'Partnership' as defined in Section 4 of the Indian Partnership Act, 1932, is the relation between persons who have agreed to share the profits of a business carried on by all or any of them for the benefit of all. A firm or partnership is not a legal entity separate and distinct from the partners. Firm 464 is only a compendious description of the individuals who compose the firm. The business being carried on by all or any of the partners, all of them are jointly and severally responsible for the liabilities incurred in the course of the business as each one is considered as an agent of the other. Such partners can be taxed as persons, in their individual. [468 D-H] 3. In order to be authorised a tax under clause (b) of Section 61(1) must satisfy two conditions: First, it must be a tax on persons. Second, such persons must be practising any profession or art or carrying on any trade or calling in the municipality. Both the conditions necessary for levying a tax under clause (b) of sub-section (1) of Section 61 of the Municipal Act existed in this case. The appellants are 'persons' and they are carrying on a trade in Chheharata Municipality. [467H, 468A-C] 4(i) Where a Revenue Statute provides for a person aggrieved by an assessment thereunder, a particular remedy to be sought in a particular forum, in a particular way, it must be sought in that forum and in that manner, and all other forums and modes of seeking it are excluded. [470D-E] (ii) From a conjoint reading of sections 84 and 86 , it is plain that the Municipal Act, gives a special and particular remedy for the person aggrieved by an assessment of tax under this Act, irrespective of whether the grievance relates to the rate or quantum of tax or the principle of assessment. The Act further provides a particular forum and a specific mode of having this remedy, which is analogous to that provided in Section 66(2) of the Indian Income-tax Act, 1922 Section 86 forbids in clear terms the person aggrieved by an assessment from seeking his remedy in any other forum or in any other manner than that provided in the Municipal Act. Therefore, Sections 84 and 86 of the Municipal Act bar by inevitable implication, the jurisdiction of <ORG> where the grievance of the party relates to an assessment or the principle of assessment under the Act. [470B-D, E-F] (iii) In the facts and circumstances of the case, it is clear (a) that in assessing the appellants individually, and not collectively to the tax in question, <ORG> did not abuse its powers under the Act, (b) in levying the profession tax it did not travel beyond or act contrary to the provisions of sections 61(1)(b) of the Act, and (c) that the <ORG> acted under the Act. The Civil <ORG>s jurisdiction, therefor, to entertain and decide the suit was barred. [471E-G] Firm Seth Radhakishan v. Administrator, Municipal <ORG>, Ludhiana AIR 1973 SC 1547; followed. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1998 of 1969.

Appeal by Special Leave from the Judgment and Decree dated 3-10-1968 of <ORG> in L.P.A. No. 348/64.

<NAME>, Mrs. <NAME> and Mrs. <NAME> for the Appellants.

<NAME> for the Respondent.

The Judgment of the Court was delivered by SARKARIA, J.-This appeal by special leave is directed against a judgment, dated October 3, 1968, of <ORG>.

The facts leading to this appeal are that the appellants are partners of a firm, <ORG>, <ORG>.

By a Notification, dated May 15, 1946, <ORG> levied a profession tax under Section 61(1)(b) of the Punjab Municipal Act, 1911. Initially, the tax was Rs. 15/- per annum and was levied on all the partners of the said firm.

By a Notification, dated July 4, 1958, the annual tax for trade, profession or calling for the owner of a factory registered under the Indian Factories Act , was raised to Rs. 200/- per annum and each of the six partners of the said firm were assessed to annual tax of Rs. 200/- by <ORG>.

On October 30, 1960, the appellants filed a suit for permanent injunction restraining the defendant-Committee from realising the profession tax demanded by it per letters Nos. 15 to 20, dated May 31, 1960, amounting to Rs. 1,200/-.

The appellants challenged the validity of the assessment contending that construed in the light of the definition given in section 2(40) of the Punjab General Clauses Act, the term "person" occurring in section 6(1)(b) of the Punjab Municipal Act, 1911, includes a 'firm' and since the trade carried on by the 'firm' is one, the tax could be levied only on the firm, and not on the partners individually. On these premises, it was pleaded that <ORG> in levying the tax on the individual partners had exceeded its statutory powers under Section 61(1)(b) of the Municipal Act.

The trial court dismissed the suit. On appeal by the plaintiffs, the Additional District Judge, <NAME>, reversed the judgment of the trial court and decreed the suit.

<ORG> carried a further appeal to <ORG>. The learned Single Judge, who heard the appeal, affirmed the judgment and decree of the first appellate court, on the reasoning which may be summed up as under:

The term "person" in Section 61(1)(b) of the Municipal Act, interpreted in the light of the definition given in Section 2(40) of the Punjab General Clauses Act, includes a 'partnership'. Under clause (b) of Section 61(1) of the Municipal Act, the basis on which the liability to pay tax arises, is the trade, profession or business; and if the trade and business is one carried on by several persons collectively in partnership, then the partnership alone, and not the individual partners, are liable to pay the tax; that the liability on the partners will fall twice which is not contemplated by the scheme and language of the Municipal Act, even though all the partners are jointly and severally liable to any tax for the partnership business.

In support of his conclusion that the tax was on trade and not on persons, the learned Judge by way of analogy, referred to clauses (a), (c), (d), (e) and (f) of sub- Section (1). He also referred to two Madras decisions in <CITATION> (1) and <CITATION> (2): and found himself in entire agreement with the reasoning of the learned Judges in those cases.

Aggrieved, <ORG> preferred a Letters Patent Appeal. The Appellate Bench of <ORG> held that to import the definition of the term "person" occuring in Section 2(40) of the Punjab General Clauses Act into Section 61(1) (b) of the Municipal Act, will be repugnant to the subject. In the opinion of the Bench, under the scheme of the statute in question, the tax cannot be levied on a firm or factory as such, but only on the individual owners of the factory or of the firm. On this reasoning, the Bench reached the conclusion "that under Section 61(1) (b) of the Act, it is the individual who is to be assessed and is liable to pay the tax mentioned therein and so the assessment as well as the demand of the tax from each of the plaintiffs does not suffer from any legal infirmity." The Bench further held that since the <ORG> in imposing the tax on the appellants herein, has not acted outside the provisions of the statute, "it would, on the basis of the judgment of <ORG> in Firm <NAME> (Deceased) represented by <CITATION> ,(3) which also dealt with the provisions of the Municipal Act, follow that the impugned assessment could only be questioned under the provisions of Sections 84 and 86 of the Act, and the jurisdiction of <ORG> in respect of tax levied or the assessment made is excluded". In the result, the appeal was allowed and the trial court's decision dismissing the suit was restored.

Before us, Mr. <NAME>, learned counsel for the plaintiffs-appellants, has adopted the reasons given by the learned Single Judge of <ORG>. In support of his contentions, he has relied upon the aforesaid Madras decisions. His argument is that if the interpretation placed by <ORG> of <ORG> is allowed to stand, it will lead to anamolous and unconstitutional results. Mr. <NAME> concedes that the individual partners are also 'persons' within the meaning of clause (b) of Section 61(1) . He, however, maintains that the firm, also, is a 'person' within the contemplation of this provision and as such, liable to be taxed; that if in respect of the one trade, which is being carried on by the firm, apart from each of the individual partners, the firm, also is separately assessed to Rs. 200/- per annum, not only the incidence of the tax will fall twice, the total liability therefor will far exceed the ceiling of Rs. 250/- per annum fixed by Article 276(2) of the Constitution. In these premises, it is contended that an interpretation of Section 61(1) (b), which may lead to unconstitutional on irrational results should be eschewed.

With regard to the question of jurisdiction it is contended that since <ORG> had in the exercise of its powers clearly acted beyond its jurisdiction, the suit was maintainable in <ORG>.

Section 61(1)(b) of the Municipal Act, so far as material for this case, reads as under:

"Subject to any general or special orders which the State Government may make in this behalf, and the rules, any committee may, from time to time for the purposes of this Act, and in the manner directed by this Act, impose in the whole or any part of the municipality any of the following taxes, namely:- (1) (a).....................

(i) to (iii) .....................

(b) a tax on persons practising any profession or art or carrying on any trade or calling in the municipality.

Explanation.-A person in the service or person holding an office under <ORG> or <ORG> or a local or other public authority shall be deemed to be practising a profession within the meaning of this sub-section."

From a plain reading of the extracted provision, it is clear that a tax leviable under clause (b) is, in terms, a tax on "persons". The expression "persons" undoubtedly includes natural persons. The class of such taxable persons has been indicated by the <ORG> with reference to their occupational activity. Thus, in order to be authorised, a tax under clause (b) of Section 61(1) must satisfy two conditions:

First, it must be a tax on "persons". Second such persons must be practising any profession or art or carrying on any trade or calling in the municipality.

There can be no dispute that the appellants are "persons" and, as such, satisfy the first condition. Even the learned counsel for the appellants has candidly conceded that the individual partners are also "persons" within the meaning of the said clause (b). Controversy thus becomes narrowed down into the issue; Whether persons collectively doing business in partnership, in the municipality, fulfil the second condition ? That is to say, do such persons "carry of any trade or calling in the municipality" within the contemplation of clause (b) ?

In our opinion, for reasons that follow, the answer to this question must be in the affimative.

'Partnership' as defined in Section 4 of the Indian Partnership Act, 1932, is the relation between persons who have agreed to share the profits of a business carried on by all or any of them for the benefit of all. The Section further makes it clear that a firm or partnership is not a legal entity separate and distinct from the partners. Firm is only a compendious description of the individuals who compose the firm. The crucial words in the definition of 'partnership' are those that have been underlined. They hold the key to the question posed above. They show that the business is carried on by all or any of the partners. In the instant case, admittedly, all the plaintiff-appellants are carrying on the business in partnership. All the six partners are sharing the profits and losses. All the partners are jointly and severally responsible for the liabilities incurred or obligations incurred in the course of the business. Each partner is considered an agent of the other. This being the position, it is not possible to hold that each of the six partners is not carrying on a trade or calling within the purview of clause (b) of Section 61(1) of the Municipal Act. At the most, it can be said that each of these six persons is severally as well as collectively carrying on a trade in the Municipality. There is nothing in the language of Section 61 or the scheme of the Municipal Act which warrants the construction that persons who are carrying on a trade in association or partnership with each other cannot be individually taxed under clause (b) of Section 61(1) . On the contrary, definite indication is available in the language and the scheme of this statute that such partners can be taxed as persons in their individual capacity. As noticed already, clause (b) makes it clear in no uncertain terms that this is a tax on 'persons.' Its incidence falls on individuals, who belong to a class practising any profession or art; or carrying on a trade or calling in the municipality.

To hold that persons who are collectively carrying on a trade in the municipality cannot be taxed individually, would be to read into the statute words which are not there. There are no words in clause (b) or elsewhere in the statute which, expressly or by necessary implication, exclude or exempt persons carrying on a trade collectively in the municipality from being taxed as individuals. To attract liability to a tax under this clause, it is sufficient that the person concerned is carrying on a trade in the municipality, irrespective of whether such trade is being carried on by him individually or in partnership with others. Thus, both the conditions necessary for levying a tax under clause (b) of subsection (1) of Section 61 of the Municipal Act existed in this case. The appellants are "persons" and they are carrying on a trade in Chheharata Municipality.

In the view we take, we do not think it necessary to go further into the question, whether the definition of 'person' given in Section 2(40) of the Punjab General Clauses Act, can be imported into the statute under consideration, so as to include a contractual firm, also, within the purview of the expression 'persons' used in clause (b) of Section 61(1) . Indeed, the entire effort to import the definition of 'person' given in the General Clauses Act , into Section 61(1)(b) of the Municipal Act, is directed to find a foundation for the argument, that the construction adopted by <ORG> could lead to double taxation and even unconstitutional results. But in the instant case, nothing of this kind has happened. The firm has not been assessed. No question of double taxation or exceeding the Constitutional ceiling of Rs. 250/- fixed by Article 276(2) of the Constitution, arises on the facts of the present case. The arguments advanced on behalf of the appellants on this aspect of the matter are merely hypothetical, and speculative.

This takes us to the second question, whether <ORG> had jurisdiction to hear and determine the suit.

Section 84(1) of the Punjab Municipal Act provides that "an appeal against the assessment or levy of any.... tax under this Act, shall lie to the Deputy Commissioner or to such other officer as may be empowered by <ORG> in this behalf". Then, there is a proviso to this sub-section which says that when the Deputy Commissioner or such other officer, as aforesaid, is or was, when the tax was imposed, a member of the <ORG>, the appeal shall lie to the Commissioner of the <ORG>. Sub-section (2) is important. It provides:

"84(2). If, on the hearing of an appeal under the section, any question as to the liability to, or the principle of assessment of, a tax arises, on which the officer hearing the appeal entertains reasonable dobut, he may, either of his own motion or on the application of any person interested, draw up a statement of the facts of the case and the point on which doubt is entertained, and refer the statement with his own opinion on the point for the decision of <ORG>."

Section 86 mandates that "no objection shall be taken to any valuation or assessment, nor shall the liability of any person to be assessed or taxed be questioned, in any other manner or by any other authority than is provided in this Act."

From a conjoint reading of sections 84 and 86 , it is plain that the Municipal Act, gives a special and particular remedy for the person aggrieved by an assessment of tax under this Act, irrespective of whether the grievance relates to the rate or quantum of tax or the principle of assessment. The Act further provides a particular forum and a specific mode of having this remedy which analogous to that provided in Section 66 (2) of the Indian Income-tax Act , 1922. Section 86 forbids in clear terms the person aggrieved by an assessment from seeking his remedy in any other forum or in any other manner than that provided in the Municipal Act.

It is well recognised that where a Revenue Statute provides for a person aggrieved by an assessment thereunder, a particular remedy to be sought in a particular forum, in a particular way, it must be sought in that forum and in that manner, and all other forums and modes of seeking it are excluded. Construed in the light of this principle, it is clear that sections 84 and 86 of the Municipal Act bar, by inevitable implication" the jurisdiction of <ORG> where the grievance of the party relates to an assessment or the principle of assessment under this Act.

In the view we take, we are fortified by the decision of this Court in <CITATION> , (supra) wherein sections 84 and 86 of this very Punjab Municipal Act, 1911 came up for consideration. Therein, <ORG>, Ludhiana, imposed a terminal tax on Sambhar salt and assessed the appellant, therein, to a sum of Rs. 5,893/- towards that tax at the rate of Rs. 10/- per maund under item 69 of the Government Notification by which the terminal tax was imposed. The assessee filed a suit against <ORG> in <ORG>, contending that Sambhar salt ought to have been assessed at the rate of 3 pies per maund under item 68, that he had been illegally assessed under item 69 at the higher rate, and claimed refund of the amount paid by him, with interest. The <ORG>, inter alia, contended that Sambhar salt was not common salt, and <ORG> had no jurisdiction to entertain the suit. The trial court held that Sambhar salt was common salt within the meaning of item 68 of the Schedule, that the imposition of tax on it under item 69 of the Schedule was illegal, and, therefore, <ORG> had jurisdiction to hear and determine the suit by virtue of section 9 of the Code of Civil Procedure.

On appeal, <ORG> held that <ORG> had no jurisdiction, and dismissed the suit.

The assessee came in appeal to this <ORG> by certificate granted by the High <ORG>, and contended that since the impugned levy was not made under the Municipal Act but in derogation thereof, the Civil <ORG> had jurisdiction to entertain and determine the suit.

Delivering the judgment of the <ORG>, <NAME> <NAME> (as he then was) repelled this contention, observing that the rate of the tax to be levied depended upon the character of the salt, and it was not possible to say that in ascertaining this fact the authorities concerned travelled outside the provisions of the Municipal Act, even if they wrongly applied item 69 of the schedule; that the mistake in applying the wrong item of the Schedule to the tax could be corrected only in the manner prescribed by the Act, and the aggrieved person cannot file a suit in the Civil <ORG> in that regard, the Civil <ORG>'s jurisdiction having been excluded by the provisions of Sections 84 and 86 of the Act.

The Court distinguished that class of cases where <ORG> in levying a tax or committing an Act, clearly acts outside or in abuse of its powers under the Municipal Act, and explained that it is only in such cases, the bar to the jurisdiction of <ORG> would not apply. Can the case before us be said to belong to that class of cases where <ORG> in levying a Tax acts beyond or in abuse of its powers under the Act ? The answer to this question must be in the negative. By no stretch of imagination, can it be said in the facts and circumstances of the case, that in assessing the appellants, individually, and not collectively, to the tax in question, <ORG> abused its powers under the Act. We have already discussed and held that in levying this tax, <ORG> did not travel beyond or act contrary to the provisions of Section 61(1)(b) of the Act. In short, the present case is one where <ORG> acted "under the Act". It follows, therefore, that <ORG>'s jurisdiction to entertain and decide the suit was barred, even if the dispute raised therein related to the principle of assessment to be followed.

For the foregoing reasons, the appeal fails and is dismissed with costs.

V.D.K. Appeal dismissed.


<NAME>, J.

1. This order shall also govern the disposal of Misc. (F) Appeal No. 162 of 1965 D/- 17-12-1968, Dr. <NAME> v. <ORG> In both the cases a preliminary point has been raised to the effect that the appointment of the Additional District Judge as <ORG> by official designation is invalid and, therefore, the <ORG> below had no jurisdiction to try the case. In support of this, attention is invited to the observations of our brother, <NAME> <ORG>, Raipur v. Smt. <NAME>, Civil Revn. No. 190 of 1966 D/- 27-9-1968 (MP). It may be necessary to examine the reasoning of our learned brother.

2. The following Notification was Issued:

"Notification No. 3307/2/A-2, Bhopal, dated 25 May, 1965/ Motor Vehicles Act , 1939, No. 4 of 1939.

dh /kkjk dh mi/kkjk 2 }kjk iznk 'kfDr;ksa dks iz;ksx esa ykrs gq;s] jkT; 'kklu ,rn~}kjk] - izFke vfrj ftyk ,oa l= U;k;k/kh'k] fcykliqj] 2- vfrfjDr ftyk ,oa l= U;k;k/kh'k] jhok] vkSj - izFke vfrfjDr ftyk ,oa l= U;k;k/kh'k] Xokfy;j dks] e'k% bl foHkkx dh vf/klwpuk ekad 'AnksA, 2A''] fnukad " vxLr '' dsd v/khu foykliqj] jhok rFkk Xokfy;j ds fy;s xfBr ehVj OghdYl DysEl fVC;wuy ds lnL; ds :i esa fu;qDr djrk gS vkSj bl iz;kstu ds fy;s mDr vf/klwpuk dks fuEufyf[kr :i es la'kks/ku djrk gS] vFkkZr%&

2- --------------------------------

- DysEl fVC;quy] jhok ls lacaf/kr izfof"V " ds lkeus dkye ' esa fo|eku 'kCnksa] ds LFkkuij ^^Additional District and Sessions Judge, Rewa** vfrfjDr ftyk ,oa l= U;k;k/kh'k] jhok ^^LFkkfir fd;s tk;**A e/;izns'k ds jkT;iky ds uke ls rFkk vns'kkuqlkj] lgh & milfpo Previously appointment used to be made by name, but that practice was given up and the appointment by official designation came to be made.

3. Our learned brother <NAME> felt that that Notification was in violation of Section 110 of the Act in so far as it permits a person to be a member of the <ORG> who may not fulfil the qualifications enunciated in Sub-section (3) of Section 110 of the Motor Vehicles Act, 1939. It was argued before him that the Second Additional District Judge, Raipur, need not necessarily be a person who fulfils the requirements of Section 110 of the Act, because in the State of Madhya Pradesh an Additional District Judge is neither a District Judge, nor a person who is necessarily qualified for appointment as a Judge of <ORG>. Article 217 of the Constitution of India prescribes the qualifications for appointment of a person as a Judge of <ORG> to the effect that he must have put in 10 years' practice at <ORG> Bar or must have held a judicial office in the territory of India at least for 10 years.

Therefore, <NAME> thought that there might be a conceivable case where a person may be an Additional District Judge who has not fulfilled the qualifications prescribed for appointment as a Judge of a High Court under Article 217 of the Constitution of India. Referring to the definition of a 'District Judge' in Article 236 of the Constitution of India <NAME> observed that although it may include a Judge of <ORG>, Additional District Judge, Joint District Judge. Assistant District Judge, Chief Judge of <ORG>, Chief Presidency Magistrate, Additional Chief Presidency Magistrate. Sessions Judge Additional Sessions Judge and Assistant Sessions Judge, but that definition, as the Article itself shows, is for the purposes of Chapter VI of part VI of the Constitution of India. It can have no relevance for the purpose of interpreting the expression 'District Judge' as occurring in the Motor Vehicles Act . Referring to the definition of a 'District Judge' as provided in Section 3(17) of the General Clauses Act (X of 1897), he observed that it would mean 'the Judge of a principal Civil Court of Original Jurisdiction'.

The question, therefore, would be whether an Additional District Judge is the Judge of a principal <ORG>. The answer would be that he is not, because under Section 3 of the Madhya Pradesh Civil Courts Act, 1958, there would be four classes of Civil Courts -- <ORG>, <ORG>, <ORG> and <ORG>I and under Section 7 of that 'Act, the Principal <ORG> is <ORG>. Therefore. <NAME> thought that the Additional District Judge could never be considered to be the principal <ORG>. We propose to deal with these various reasons presently.

4. Section 15 of the General Clauses Act, 1897, empowers the appointing authority to appoint a functionary either by name or by virtue of office. So far as <ORG> under the Motor Vehicles Act , 1939 are concerned, they were previously appointed by name. For Rewa Region the then Additional District and Sessions Judge, <NAME>, was appointed as one member <ORG>. However, subsequently it was realised that on account of transfers of Judges, fresh notifications would be required to be issued every time, if the appointment was by name. Therefore, in the year 1965 there was a suggestion that appointments of <ORG> might be made by office. In pursuance that suggestion the Notification referred to above was issued.

5. Coming to the first question whether the Notification is in contravention of Section 110 (3) of the Motor Vehicles Act , 1939. Section 110 (3) of the Motor Vehicles Act , 1939, prescribes the qualifications of a member to preside over <ORG> which are as under:--

"A person shall not be qualified for appointment as a member of <ORG> unless he -

(a) -- is, or has been, a Judge of a High Court, or

(b) -- is, or has been, a District Judge, or

(c) -- is qualified for appointment as a Judge of <ORG>."

If an appointment is made by name, it is likely that an unqualified person might not come to be appointed. But if an appointment is made by official designation, there may be a remote probability of a person holding the office of the Additional District Judge <NAME>, who is not qualified to be appointed a Judge of <ORG>, as per Article 217(2) of the Constitution of India. Therefore, the question is whether the appointment by official designation renders the appointment altogether invalid. Although, it may be valid in about 99 per cent cases, while it might be rendered invalid in a stray case where a person not qualified to be appointed a Judge of a High Court comes to hold the office of the Additional District Judge. We feel that our learned brother, <NAME> has taken an extreme view in holding that an appointment by official designation would be rendered invalid in all types of cases, even though the Additional District Judge concerned may be a person qualified to be appointed a Judge of <ORG>. Section 15 of the General Clauses Act, 1897 permits appointment either by name or by office and if the view propounded by our learned brother were to be accepted, it would imply that there can be no appointment by official designation where certain qualifications are prescribed for such appointments. In that event Section 15 of the General Clauses Act, 1897, would be otiose and could never be resorted to. But, we might mention that appointments by official designation have been upheld under different enactments by <ORG>s.

6. It is true that as indicated by our learned brother <NAME>, the person presiding over <ORG> functions as a persona designata and not as a <ORG>. We might advert to the observations of <NAME> (as he then was) in <CITATION> (1966) 2 Punj 212 wherein the learned Judge expressed the opinion that a <ORG> appointed under Section 110 of the Motor Vehicles Act, 1939, would be a persona designate and not a <ORG>, although it may be invested with certain powers of a Civil <ORG> for limited purposes.

7. In <ORG> v. Sm. <NAME>, AIR 3959 Tripura 16 the learned Judicial Commissioner had to consider whether an authority under the Minimum Wages Act , 1948, could be appointed by office and whether such an appointment would be rendered invalid. Under the said Act the authority to be appointed should be 'other officer with experience as a Judge of <ORG>'. The learned Judicial Commissioner interpreted the phrase to mean that the authority either be working or should have worked as a Presiding Judge of <ORG> and if the appointment be of a Presiding Officer of <ORG> of official designation, the appointment would not be rendered invalid on that account alone. We may further observe that appointments of Sanitary Inspectors as Food Inspectors under the Prevention of Food Adulteration Act , 1954, by official designation were upheld by <NAME> in Public Prosecutor v. <NAME>, AIR 1960 Andh Pra 282 and by a Division Bench of <ORG> in <CITATION> , AIR 1963 Mys 157. Similarly, a Division Bench of <ORG> in In re, <NAME> AIR 1957 Mad 351, upheld the appointment of a District Magistrate as an Assistant Sessions Judge under the Code of Criminal Procedure.

8. It is true that in <ORG>, AIR 1952 Hyd 144 where the question was about the appointment of <ORG>, <ORG> thought that an appointment by official designation would be invalid and in its opinion the appointment should be by name. Merely because an appointment is by official designation, it cannot be asserted that the necessary qualifications for appointment have not been considered by the appointing authority.

9. The precise question came to be considered by <NAME> in <CITATION> (1965) 2 Punj 751. In that case the Notification under the Motor Vehicles Act , 1939, appointing the Judge of <ORG>, Delhi as a <ORG> under the Act came for consideration. <NAME> expressed the opinion that such a Notification by official designation could not be said to be invalid merely because the order appointing the <ORG> did not indicate whether the appointing authority had considered the qualifications of the person proposed to be appointed as a <ORG>.

We may observe that it is common knowledge that only senior Additional District Judges are appointed as First or Second Additional District Judges at important centres in the State and ordinarily a person who is not qualified would rarely have the chance of being appointed as Second Additional District Judge, Raipur, or for the matter of that the Additional District Judge, <NAME>. We can conceive of a situation where a person directly recruited as an Additional District Judge, for which the qualification may be 7 years practice at the <ORG>, comes to hold the post of an Additional District Judge, <NAME>. Of course in that event he cannot claim to function as a <ORG> by virtue of the Notification referred to above, as he would not be qualified to be appointed as a Judge of <ORG>. But, we feel that in every case it would be necessary to examine whether the person functioning as a <ORG> is qualified or not. It is for a party to raise the question of jurisdiction, if a person not qualified comes to hold the post. To that extent we might agree that the Notification might be rendered invalid. Otherwise the Notification does not suffer from any infirmities and it cannot be said to be in contravention of Section 110 (3) of the Motor Vehicles Act , 1939.

10. We may deal with another facet of the question. We fully agree with our learned brother <NAME>, that <ORG> would be functioning as a persona designala and not as a <ORG>. But, there is no bar to the appointment of a persona designata by official designation, as per Section 15 of the General Clauses Act, 1897. For the matter of that some of the Corporations Act s or the Municipalities Act s provide for appointment of a <ORG> for election purposes by official designation, such as a District Judge. Similarly, some of the <ORG> Acts in different Stales provide for a re visional authority against the decisions of the <ORG> and appointments by official designation are made, such as Civil Judge Class I of a particular place.

The appointment itself is not rendered invalid merely because it is by official designation. But the question in each case to be decided on facts and circumstances would be whether the appointment by official designation has actually resulted in the appointment of an unqualified person for a particular office or <ORG>. If it results that way, the appointment would certainly be invalid. But if it does not, we would like to propound that the Notification, would be perfectly valid and the same cannot be challenged on the ground that in a remote case it might result in the appointment of a person who is not qualified.

Therefore, we feel that it is necessary to modify the observations made by our learned brother, <NAME> to this extent by stating that the appointment by official designation would be invalid only if it results in appointment of a person not qualified to hold the post. But, in all other cases appointment by official designation would be perfectly valid. For this reason, we are unable to agree with the observations of our learned brother, <NAME> in Civil Revn. No. 190 of 1966 D/- 27-9-1968 (M. P.) (supra).

11. Another difficulty that our learned brother <NAME> felt was that under the Madhya Pradesh Civil Courts Act, 1958, <ORG> being a separate category, the same cannot be equated with <ORG>, and as such, an Additional District Judge cannot function as a Principal Civil Court of Original Jurisdiction. We may observe that it is for the purpose of overcoming that difficulty that the legislature has enacted Section 7(2) of the M. P. Civil Courts Act, 1958, which is as follows:--

"7. <ORG> of original jurisdiction-

(1) -- <ORG> shall be the Principal Court of original jurisdiction in the Civil district.

(2) -- An Additional District Judge shall discharge any of the functions of a District Judge including the functions of <ORG> of original jurisdiction, which the District Judge may by general or special order assign to him and in discharge of such functions he shall exercise the same powers as the District Judge."

Therefore, an Additional District Judge can be empowered by the State Government or by a general or a special order to be passed by the District Judge and if so empowered, he can perform the functions of <ORG> of original jurisdiction. In this connection, we might refer to the observations of <ORG> of this Court in <NAME> v. <NAME>, Misc. Civil Appeal No. 30 of 1962 D/-30-3 1965 (SB) and the difficulty, in our opinion, as was imagined by our -learned brother, <NAME>, would not be real. Therefore, it cannot be said that in no case can an Additional District Judge function as <ORG> of original jurisdiction.

12. Our learned brother <NAME> thought that the entire Notification would be rendered invalid as it permitted the appointment of a person who may not be qualified. For that purpose he quashed the Notification holding that <ORG> appointed under the Notification had no jurisdiction to entertain the claim. We are unable to agree with that view. In a Civil Revision the Notification could only be declared invalid and could not be quashed, which might properly be done in exercise of prerogative rights under Article 226 of the Constitution of India. In actual fact it would make no difference whether the Notification is quashed or declared invalid. But that, in our opinion, should have been the proper phraseology. However, we are unable to agree with the view expressed by our learned brother, <NAME> and expressing our dissent with due respect to the learned Judge, we hold that the Notification is valid and that it does not contravene the provisions of Section 110 (3) of the Motor Vehicles Act , 1939.

Morever, on a reference to the Civil List published by <ORG>, we find that the Member of the Tribunal <NAME>, Additional District Judge, has put in much more than 10 years service as a judicial officer and as such he was qualified to be appointed a Judge of <ORG> under Article 217(2) of the Constitution of India.

13. As a result, we overrule the preliminary objection raised on behalf of the appellant and proceed to decide the case on merits. As the question is one of first impression, we direct that there shall be no order as to costs of the preliminary objection.

<NAME>, J.

14. This is an appeal under Section 110 (D) of the Motor Vehicles Act, 1939, against the award passed by <ORG>, Rewa. in Motor Claims Case No. 12 of 1964, dated 30-9-1966, awarding a sum of Rs. 10,000/- as compensation for the death of one, <NAME>, a peon in <ORG>, who was the husband of the first respondent, Smt. <NAME>.

15. The accident took place on 17-3-1964 when truck No. M.P.A./3134, owned by the second respondent, <NAME> and driven by the third respondent, <NAME> which was proceeding from Satna to Amarpatan, dashed against the cycle of the deceased <NAME>, who was returning from <ORG> at Amarpatan to village Gadauli.

16. The first respondent in her claim petition alleged that the deceased was going on a cycle on the extreme left side of the road. The truck coming from the opposite side was being driven with speed and suddenly the truck took a turn towards its right side, thereby crushing <NAME> and his cycle under the wheels. As a result, <NAME> died on the spot. A report of the accident, Ex. P/2, was immediately made by Headconstable <NAME> (P. W. 4).

17. The first respondent in her claim petition claimed a compensation of Rs. 30,000/- on the allegation that the deceased at the time of his death was getting a salary of Rs. 77 per month, inclusive of clearness allowance and Rs. 300/- annually from the private agriculture. According to her, the deceased used to earn about Rs. 1,224/- per year. At the time of his death, the deceased was aged about 39 years. The deceased had left the first respondent, his widow, and a daughter aged about 3 years, who would be without a bread earner of the family. The deceased had put in 15 years of service in <ORG>.

18. The defence of the second and the third respondents was that there was no rash and negligent driving on the part of the truck-driver, but the deceased himself, who used to drink sometimes, was under the influence of liquor and the accident took place because of that fact. It was also admitted by the said respondents that the third respondent driver had been fined for the rash and negligent driving in connection with this accident by <ORG>.

19. <ORG> held that the truck was driven rashly and negligently and the accident was a result of such rash and negligent driving. It was found as a fact that the deceased was towards the extreme left side of the road. The truck coming from the opposite side without blowing any horn took a sudden turn towards its extreme right side thereby crushing the deceased and his cycle under the wheels. The learned Member of the Tribunal, therefore held the second and the third respondents as also the appellant <ORG> liable for the claim amount.

20. As regards the quantum of the claim amount, we may observe that the learned Member of the Tribunal has disposed of the question very summarily by observing that an amount of Rs. 10,000 as compensation would be reasonable. He did not care to discuss the various tests as laid down by their Lordships of <ORG> in <CITATION> , AIR 1962 SC 1. However, in our view the quantum of compensation is correct and <ORG> at least cannot be allowed to challenge it except when it exceeds the statutory limit, as laid down by Section 95 (2) (a) of the Motor Vehicles Act , 1939, as laid down by a Division Bench of this Court in Smt. Manjula Devi Bhuta v. Smt. Manjusri Baha, (1967) 1967 MPLJ 972 = 1968 Jab LJ 189.

21. It is pertinent to note that the truck owner has not cared to file an appeal. His application for being permitted to be transposed as appellant was, however rejected by an order dated 20-4-1967. The said application was filed on 14-3-1967, i.e., much beyond the period of limitation. Similarly, the question whether relief could be given to the second respondent, the truck owner, by exercising power under Order 41, Rule 33, C. P. C. was kept open by the said order. Therefore, we propose to consider this question.

22. Section 96 (2) of the Motor Vehicles Act , 1939, permits the insurer to challenge the award of compensation on grounds mentioned in the sub-section and Sub-section (6) of the said section lays down that no insurer to whom the notice referred to in Sub-section (2) or Subsection (2-A) has been given shall be entitled to avoid his liability to any person entitled to the benefit of any such judgment as is referred to in Sub-section (1) or Sub-section (2-A) otherwise than in the manner provided for in Sub-section (2) or in the corresponding law of the State of Jammu and Kashmir or of the reciprocating country, as the case may be. It is relevant to reproduce Sub-section (2), which is as follows:--

"No sum shall be payable by an Insurer umder Sub-section (1) in respect of any judgment unless before or after the commencement of the proceedings in which the judgment is given the insurer had notice through the Court of the bringing of the proceedings, or in respect of any judgment so long as execution is stayed thereon pending an appeal; and an insurer to whom notice of the bringing of any such proceedings is so given shall be entitled to be made a party thereto and to defend the action on any of the following grounds, namely:--

(a) -- that the policy was cancelled by mutual consent or by virtue of any provision contained therein before the accident giving rise to the liability, and that either the certificate of insurance was surrendered to the insurer or that the person to whom the certificate was issued has made an affidavit stating that the certificate has been lost or destroyed or that either before or not later than fourteen days after the happening of the accident the insurer has commenced proceedings for cancellation of the certificate after compliance with the provisions of Section 105 ; or

(b) -- that there has been a breach of a specified condition of the policy, being one of the following conditions, namely:

(i) -- a condition excluding the use of the vehicle-

(a) -- for hire or reward, where the vehicle is on the date of the contract of insurance a vehicle not covered by a permit to ply for hire or reward, or

(b) -- for organized racing and speed testing, or

(c) -- for a purpose not allowed by the permit under which the vehicle is used where the vehicle is a public service vehicle or a goods vehicle, or

(d) -- without side-car being attached, where the vehicle is a motor cycle; or

(ii) -- a condition excluding driving by a named person or persons or by any person who is not duly licensed, or by any person who has been disqualified for holding or obtaining a driving licence during the period of disqualification; or

(iii) -- a condtion excluding liability for injury caused or contributed to by conditions of war, riot or civil war,/ civil commotion; or

(c) -- that the policy is void on the ground that it was obtained by the nondisclosure of a material fact or by a representation of fact which was false in some material particular."

23. It is to be noted that the grounds of appeal raised are not covered by the provisions of Section 96 (2) of the Motor Vehicles Act , 1939. Ground No, 1, merely states that <ORG> acted Illegally and in disregard of the provisions of law in awarding Rs. 10,000/- to the claimant by way of compensation and that in the state of circumstances as brought out on record the appellant Insurance Company stood exonerated of any liability. We may observe that no illegality has been specified, nor was it clarified during arguments. It has not been explained as to how <ORG> stood exonerated of the liability and in view of what circumstances brought out on record.

Ground No. 2, states that the accident was as a result of the deceased being under the influence of liquor and not on account of any rash and negligent driving on the part of the truck driver. This ground is not open to the insurer. The third ground relates to the alleged contributory negligence on the part of the deceased. We may observe that this ground is also not available to the insurer. The fourth ground relates to the proper construction of the first information report (Ex P/2). That ground also cannot be raised by the appellant.

It concerns the question of rash and negligent driving which the insurer only can raise. The fifth ground merely alleges that the award of compensation at Rs. 10,000 is highly arbitrary, illegal and without any rational foundation. The ground is absolutely vague and it is not permissible for the insurer to challenge the award on any ground except the one mentioned in Section 96 (2) of the Article The sixth ground challenges the quantum of compensation complaining that the correct tests were not applied by the <ORG>. We may observe that this ground also is not open to the insurer. The seventh ground is an omnibus ground stating that the award is erroneous on facts and in law.

This ground cannot be allowed to be raised by the insurer, as it is not covered by Section 96 (2) of the Act and in this view of the matter no questions would ordinarily be needed to bo considered in this appeal. It was rightly observed by <ORG> passing the order, dated 20-4-1967 that this appeal raises grounds which are not permitted by Section 96 (2) of the Act. That consideration persuaded our learned brothers not to allow the truck owner (respondent No. 2) to be transposed as an appellant. We may observe that the insurer has only certain limited grounds on which it can avoid its liability as permitted by Section 96 (2) of the Act and Sub-section (6) of the said section clearly lays down that the liability cannot be avoided in any other manner except to the extent permitted by Sub-section (2). The order of <ORG>, dated 20-4-1967 refusing to transpose the second respondent as an appellant having become final, the said question is not required to be considered any further. But <ORG> left open, the question whether Order 41 Rule 33, C. P. C. could be invoked in favour of the second respondent. Therefore, we are called upon to consider that question only.

24. It is true that Order 1 Rule 10 (2) of the Code of Civil Procedure permits transposition of parties in the interests of justice. But as has been observed by <ORG> in its order, dated 20-4-1967, permitting transposition in a case of this type would be permitting to enlarge the scope of the appeal. We may further observe that if the power under Order 41, Rule 33, C. P. C. were allowed to be invoked by the insurer or even the insured (respondent No. 2), that would set at naught the provisions of Sections 96 (2) and 96 (6) of the Motor Vehicles Act , 1939.

The application for transposition was made much beyond the period of 60 days which was beyond limitation. The insurer in its appeal can raise only certain set grounds and other grounds are not open. In the present case the insured did not care to file an appeal. Therefore, if Order 41, Rule 33 C. P. C., were allowed to be invoked, it would give an undue advantage to the insurer despite the fact that the insured has remained satisfied with the award of <ORG>. In this view of the matter in a case of the present type invoking Order 41, Rule 33, would amount to an abuse of the processes of <ORG> so as to set at naught the specific provisions as contained in Sections 95 and 96 of the Motor Vehicles Act, 1929. Therefore, we reject the contention of the learned counsel for the appellant that power under Order 41, Rule 33, C. P. C. should be invoked so as to give relief to a non-appealing respondent.

25. Thus, there can be no doubt that the present appeal is wholly without substance and the same deserves to be dismissed. Accordingly, it is dismissed with costs. Counsel's fee in this <ORG> shall be Rs. 200, if certified. The costs of the <ORG> shall be borne as directed by the Addl. District Judge.


PETITIONER: COMMISSIONER OF INCOME TAX, <NAME> Vs. RESPONDENT: K. SRINIVASAN DATE OF JUDGMENT05/11/1971 BENCH: <NAME>, A.N. BENCH: <NAME>, A.N. HEGDE, K.S. KHANNA, HANS RAJ CITATION: 1972 AIR 491 1972 SCR (2) 309 CITATOR INFO : RF 1975 SC2016 (18) R 1992 SC1264 (12) ACT: Finance Act , 1964, s. 2- -Income-tax if includes 'surcharge' HEADNOTE: According to s. 2(2) of the Finance Act, 1964, where the total income of an assessee includes. any income chargeable under the head 'salaries' income-tax and super-tax payable by the assessee on the salary portion shall be the proportionate amount payable according to the rates provided in the Finance Act , 1963. Under s. 2 of the Finance Act, 1963, income-tax was to be charged at the rates specified in Part I of the First Schedule and super-tax at the rates specified in Part 11 of that Schedule. The income-tax was to be increased, in certain cases mentioned, by a surcharge and additional surcharge for the purpose of the <ORG> and a special surcharge. The assessee's main source of income was salary. For the previous year 1963-64 the Income-tax Officer levied surcharge and additional surcharge in accordance with the rates prescribed by the Finance Act , 1963. The assessee contended that under s. 2(2) of the Finance Act, 1964 there was no mention of surcharge and hence only income-tax, which was to, be worked out at the rates applicable under the Finance Act , 1963, was payable. The <ORG> and the <ORG> held that 'income-tax' included ,surcharge. On reference, <ORG> held that the words 'income-tax' in s. 2(2) of the Finance Act, 1964, would not include 'surcharge" and 'additional surcharge' and held in favour of the assessee. Allowing the appeal to this Court, HELD : (1) Surcharge was levied for the first time by the Indian Finance Act , 1940. It was omitted in some later Finance Act s but was reintroduced in the Finance Act of 1951 and continued thereafter. The phraseology employed in the various Finance Act s showed that the word ,surcharge' has been used to either increase the rates of income-tax and super-tax or to increase those taxes. Under s. 2 of the Finance Act, 1971, the provisions of s. 2 and of the First Schedule to the Act, 1970, shall apply in relation to income-tax for the assessment year commencing on the first day of April 1971. Section 2 of the Finance, Act 1971, speaks only of income-tax and not of any surcharge and, it is only in the modifications made in the Schedule to the Finance Act , 1970, that there is pro-vision for a surcharge. Thus, the legislative history of the Finance Act s, as also the practice, indicates that the term 'income-tax' as employed in s. 2 of the Finance Act, 1964, includes 'surcharge' as also 'the special and the additional surcharge' whenever provided. [312G-H; 313A-H; 314 A-B] (2) One of the meanings of surcharge is to charge in addition or to subject to an additional or extra charge. If that meaning is applied to s. 2 of the Finance Act, 1963, it would lead to the result that income-tax and super-tax were to be charged. in four different ways or at 4 different rates which may be described as, (a) the basic charge or rate, (b) surcharge, (c) special surcharge, and (d) additional surcharge calculated in the manner provided in the Schedule. Rest in that way the additional charges formed a part of the income-tax and super-tax. According to Art 271 notwithstanding anything in Arts. 269 and 270 <ORG> may at any time increase any of the duties or taxes referred to in those 310 Articles by a surcharge for the purpose of the <ORG> and the whole proceeds of any such surcharge shall form part of <ORG>. The word 'surcharge' has been used in this Article only for the purposeof separating it from the basic charge of tax or duty, for the purpose of distributing the proceeds of the same between the <ORG> and the States. [315 A-E] (3) Obiter. The legislative power of <ORG> to levy taxes and duties is contained in Arts. 245 and 246(1), read with the relevant countries in List I of the Seventh Schedule. Entry 82 in List relates to taxes on income other than agricultural income. Income-tax, super-tax and sur- charge would all fall under this entry. It is in exercise of this legislative power that <ORG> enacts the provisions relating to them in the Finance Act of each year. Sections 4 and 95 of the Income-tax Act, 1961, only provide that where any Central Act enacts that income-tax and super -tax shall be charged for any assessment year at any rate or rates income-tax and super-tax at those rates shall be charged in accordance thereto and subject to the provisions of the Act. The therefore, the distinction made by <ORG> that surcharges are levied only under the Finance Act and income-tax under the Income-tax Act may not hold good. [314 DH] JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1111, of 1969 and 1415 of 1971.

Appeals by certificate/special leave from the judgment and order dated September 19, 1968 of <ORG> in Income-tax Referred Case No. 32 of 1967.

<NAME>, <NAME>, <NAME> and <NAME>, for the appellant (in both the appeals).

<NAME> and <NAME>, for the respondent (in both the appeals).

The Judgment of the Court was delivered by <NAME>, J. This is an appeal by special leave front a judgment of <ORG> in an Income tax Reference. Originally A. 11 1 1/69 had been brought by certificate but the same has been found to be defective for want of reasons and has, therefore, to be revoked. Special leave was sought and has been granted.

The facts may be succinctly stated. The assessee's main source of income was salary from a limited company, (<ORG>). In the previous year ending on 30th March 1964 his total income from salary amounted to Rs. 42,900/. In making the assessment the Income tax Officer levied surcharge and additional surcharge in accordance with the rates prescribed by the Finance Act 1963. The assessee preferred an appeal to the Appellate Assistant Commissioner. It was contended before him. on behalf of the assesses that ,he provisions of the Finance Act 1964 did not permit the Income tax Officer to levy surcharge and additional surcharge in accordance with the provisions. of Finance Act  of 1963. In other words it was contended that under sub-s. (2) of s. 2 of the Finance Act of 1964 only income tax was payable in the proportion in which the salary stood to the total income, the income tax being worked out at the rates applicable under The Finance Act 1963. There being no mention of any surcharge in the sub-section income tax alone was leviable which did not include surcharge. The Appellate Assistant Commissioner did not accede to these contentions. He was of the view that surcharge was only another form of income tax. The matter was taken to <ORG> which upheld the levy of the surcharge and the additional surcharge. On a reference being sought the follow-in,- question of law was referred to <ORG> :-

"Whether the words "income tax" in the Finance Act of 1964 in sub-s. (2) (a) and sub-s. (2)

(b) of s. 2 would include surcharge and additional surcharge".

<ORG> answered the question in the negative and in, favour of the assessee.

Section 2 of the Finance Act 1964 which is headed as "income tax and super tax" provides in sub-s. (1) that income tax and super tax shall be charged at the rates specified in Parts I and II of the First Schedule respectively and that in cases to which certain paragraphs of those parts apply these taxes shall be increased by a surcharge for the purpose of the <ORG>. According to sub-s. (2) where the total income of an assessee not being a company includes any income chargeable under the head "salaries" income tax and super tax payable by the assessee on the salary portion of the total income shall be the proportionate amount payable according to the rates provided in the Finance, Act 1963. Under s. 2 of the Finance Act 1963 income" tax was to be charged at the rates specified in Part 1 of the First Schedule and super tax at he rates specified in Part 11 of that Schedule. The income tax was to be increased in cases mentioned by a surcharge and additional surcharge for the purpose of the <ORG> and a special surcharge. The super tax was, however, to be increased by a surcharge for the purpose of the <ORG> and a special surcharge. It will be noticed that s. 2(2) of the Finance Act 1964 did not contain mention of any of the surcharges. This led to the controversy which resulted in the reference.

Before <ORG> the assessee relied on ss. 4 and 95 of the Income tax Act 1961, hereinafter called the 'Act'.These sections provide for charge of income tax and super tax.It was pointed out that surcharge was treated in the Finance Act sas a tax different from the income tax and super tax and that surcharge was levied by the Finance Act while the income and super taxes were levied by the Act. Reference was made in this connection to the First Schedule to the Finance Act 1963. Part I of that Schedule dealt with "income tax and surcharge on income tax". Under that heading were given the rates of income tax as also the rates of surcharge. Similarly Part 11 of the Schedule dealt with super tax and surcharge on super tax and under that heading the rates of super tax and the rates of surcharge on super tax were given. Among the surcharges in case, of income tax were mentioned; (a) a surcharge for the purpose of the <ORG> .......... (b) a special surcharge and (c) an additional surcharge. As regards the surcharge on super tax there was mention of (a) a surcharge for the purpose of the <ORG> and (b) a special surcharge. <ORG> examined the aforesaid provisions of the Finance Act s of 1963 and 1964 and Arts. 270 and 271 of the Constitution apart from the legislative entry 82 in List I of the Seventh Schedule. It came to the conclusion that .income tax and super tax did not include surcharge and that these were called by different nomenclature in all the statutory provisions.

In order to determine the point before us, which is of considerable complexity, it is necessary to trace the concept of surcharge in taxation laws in our country. The power to increase federal tax by surcharge by the federal legislature was recommended for the first time in the report of <ORG>, Vol. I Part 1. From para 141 of the proposals it appears that the word "surcharge" was used compendiously for the special addition to taxes on income imposed in September 1931. The Government of India Act 1935, Part VII, contained provisions relating to finance, property, contracts and suits. Sections 137 and 138 in Chapter I headed "finance" provided for levy and collection of certain succession duties, stamp ,duties, terminal tax, taxes on fares and freights, and taxes on income respectively. In the proviso to S. 137 the federal legislature was empowered to increase at any time any of the duties ,or taxes leviable under that section by a surcharge for federal purposes and the whole proceeds of any such surcharge were to form part of the revenues of the federation. Sub-section (3) of s. 138 which dealt with taxes on income related to imposition of a surcharge. Under the Government of India Act 1935 the sur-charge was levied for the first time by the Indian Finance Act 1940. Section 3(1) of that Act read "Subject to the provisions of this section the rates of income tax and rates of super tax imposed by sub-s. (1) of s. 7 of the Indian Finance Act 1940 shall, in respect of the year beginning on the first day of April 1940 be increased by a surcharge for the purpose of the Central Government Similar phraseology was employed in respect of surcharge on super tax. The provisions relating to surcharge were omitted in the Finance Act s of 1946 to 1950. It was reintroduced in the Finance Act of 1951 and the same has been continued in the Finance Act s of subsequent years. Special surcharge came to be levied in the Finance Act s of 1958 to 1964 and 1966 to 1971 and the additional surcharge was levied only by the Finance Act of 1963.

In the Finance Act of 1951, s. 2 relating to income tax and super tax provided that these taxes would be levied at the rates specified in Parts I and II of the First Schedule increased in each case by a surcharge for the purpose of the Union. The Finance Act of 1952 was a short document and s. 2 thereof simply provided :

"the provisions of s. 2 of and the First Schedule to, the Finance Act 1951, shall apply in relation to income tax and super tax for the financial year 1952-53 as they apply in relation to income tax and super tax for the financial year 1951-52........"

There was no specific mention whatsoever of surcharge in s. 2 nor was there any modification of the First Schedule to the Finance Act of 1951 which contained the rates etc. relating to the surcharge. Similar state of affairs existed with regard to Finance Act sof 1953, 1954, 1957. Section 2 of the Finance Act 1971 is tothe effect that the provisions of s. 2 and of the First Schedule to the Finance Act 1970 shall apply in relation to income tax for the assessment year or as the case may be the financial year commencing on the first day of April 1971 as they apply in relation to income tax for the assessment year commencing on first day of April 1970 with certain modifications set out in the section. The First Schedule to the Finance Act of 1970 was modified and the Schedule so modified contains pro- visions for a surcharge on income tax. It is significant that s. 2 of the Finance Act of 1971 speaks only of income tax and not of any surcharge. It is only in the modifications made in the Schedule to the Finance Act of 1970 that there is provision for a surcharge. The above legislative history of the finance Acts as also the practice, would appear to indicate that the term "income tax" as employed in s. 2 includes surcharge as also the special and the additional surcharge whenever provided which are also surcharges within the meaning of Art. 271 of the Constitution. The phraseology employed in the Finance Act s of 1940 and 1941 showed that only the rates of income tax and super tax were to be increased by a surcharge for the purpose of the Central Government. In the Finance Act of 1958 the language used showed that income tax which was to be charged was to be increased by a surcharge for the purpose of the <ORG>. The word "surcharge" has thus been used to either increase the rates of income tax and super tax or to increase these taxes. The scheme of the Finance Act of 1971 appears to leave no room for doubt that the term "income tax" as used in s. 2 includes surcharge. According 'Lo Article 271 notwithstanding anything in Arts. 269 and 270 <ORG> may at any time increase any of the duties or taxes referred to in those Articles by a surcharge for the purpose of the <ORG> and the whole proceeds of any such surcharge shall form part of <ORG>. Article 270 provides for taxes levied and collected by the <ORG> and distributed between the <ORG> and the States. Clause (1) says that tax on income other than agricultural income shall be levied and collected by the Government of India and distributed between the <ORG> and the States in the manner provided in clause (2). Article 269 deals with taxes levied and collected by the <ORG> but assigned to the States. The provisions of Article 268 which is the first one under the heading "distribution of revenue between the <ORG> and the States" relate to duties levied by the <ORG> but collected and appropriated by the States. Thus these Articles deal with the levy, collection and distribution of the proceeds of the taxes and duties mentioned therein between the <ORG> and the States. The legislative power of <ORG> to levy taxes and duties is contained in Arts. 245 and 246(1) read with the relevant entries in List I of the Seventh Schedule.

As mentioned before the legislative entry 82 in List I relates to taxes on income other than agricultural income. Income tax, super lax and surcharge would all fall under this entry. It is in exercise of the legislative power conferred by that entry that <ORG> enacts the provision in the Finance Act each year relating 'Lo them. It is that Act which authorises these taxes to be charged and prescribes the rates at which they can be charged. Section 4 of the Act simply provides that where any Central Act enacts that income tax shall be charged for any assessment year at any rate or rates income tax at that rate or those rates shall be charged in accordance thereto and subject to the provisions of the Act. Section 95 which was omitted by the Finance Act of 1965 contained similar provision with regard 'to super tax. Although under the Act s. 4 is the charging section income taxcan be charged only where the Central Act which, in the presentcase. will be the Finance Act enacts that income shall be charged for any assessment year at the rate or rates specified therein. The distinction made by <ORG> that the surcharges are levied only under the Finance Act and income tax under the Act may not hold good if the above view which has been pressed on behalf of the <ORG> were to be accepted. In our judgment it is unnecessary to express any opinion in the matter because the essential point for determination is whether surcharge is an additional mode or rate for charging income tax The meaning of the word "surcharge" as given in the Webster's New International Dictionary includes among others "to charge (one) too much or in addition. . . . . ." also "additional tax". Thus the meaning of surcharge is to charge in addition or to subject to an additional or extra charge. If that meaning is applied to s. 2 of the Finance Act 1963 it would lead to the result that income tax and super tax were to be charged in four different ways or at four different rates which may be described as (i) the basic charge or rate (In part I of the First Schedule); (ii) Sur- charge; (iii) special surcharge and (iv) additional surcharge calculated in the manner provided in the Schedule. Read in this way the additional charges form a part of the income tax and super tax. It is possible to argue and that argument has been commended on behalf of the <ORG> that the word "surcharge"' has been used in Art. 271 for the purpose of separating it from the basic charge of a tax or duty for the purpose of distributing the proceeds of the same between the <ORG> and the States. The proceeds of the surcharge are exclusively assigned to the <ORG>. Even in the Finance Act itself it is expressly stated that the sur- charge is meant for the purpose of the <ORG>. It would appear that since the Finance Act 1943 upto the Finance Act 1967 a provision was made for taxing the income under the head "salaries' 'according to the provisions of the Finance Act of the preceding year rather than of the current year if the assessee had any income in addition to his income by way of salary. According to the <ORG> this was done because if the income under the "salaries" was to be assessed at the rates fixed by the Finance Act enacted for the current year it would entail considerable administrative work in the form of refund or collection in the final assessment. Since by the Finance Act of 1967 this method or procedure was dropped we do not consider that much significance can be attached to this aspect. In the result we are unable to sustain the view of <ORG>. The question that was referred must be answered in the affirmative and in favour of the <ORG>. In view of the nature of the point involved the parties are left to bear their own costs in this Court. The appeal by certificate is dismissed.

We wish to acknowledge with thankfulness the valuable assis- tance rendered as amicus curiae at our request by Mr. <NAME>, Sr. Advocate, and Mr. <NAME> as the respondent was unrepresented.

V.P.S. Appeal dismissed 7-L500Sup.Cl/72


JUDGMENT <NAME>, <NAME>, <NAME>

1. This is an appeal from an order of the Judge sitting on the Original Side transferring a suit from <ORG> to <ORG> under Clause 13 of the Letters Patent. As a preliminary point it is argued that no such appeal lies on the ground that the order is not a judgment within the meaning of Clause 15 of the Letters Patent. In the recent case of <NAME> v. <NAME> (1922) 16 L.W. 608, I stated that "I do not propose to attempt to add a further definition to those which have already been given in other cases.* Definition after definition has been attempted of that word. A very narrow meaning was given to it by Sir <NAME> in Justices of the Peace for Calcutta v. <ORG> 8 Beng. L.R. 435. A much wider definition was given by a <ORG> of this <ORG> in <CITATION> (1910) I.L.R. 35 M. 1 : 21 M.L.J. 1 (F.B.), and it is enough for me to say that, in these matters, this <ORG> is bound, by the opinion of its own <ORG> in that case. An attempt was made to give rules in that case which should be exhaustive of any matters that can come before this <ORG>, and, in my judgment, all we have to do now is to say whether the matter in question before us is excluded from or included in the class of judgments referred to there. I find that it was there held that the case of <NAME> which it was held that the granting or refusing of leave to sue in this <ORG> under Clause 12 of the Letters Patent was a judgment in respect of which an appeal lay under Clause 15 was rightly decided. This has also been held in <NAME> v. Comaji I.L.R. 29 Bom. 249. I can see no difference in principle between such an order and the order in this case. The learned Judge in this case by his order puts an end to the case as it now stands in Chingleput and confers a jurisdiction on this <ORG> in respect of that particular case. In my judgment, we are bound by the decision of the <ORG> of this <ORG> referred to above and we hold that this is a matter which is appealable. The contrary view has been taken in <CITATION> (1920) I.L.R. 47 C. 1104 where, on this precise point, a Bench of the Calcutta High <ORG> has held that no appeal lies, but that Bench has applied the reasoning of Sir <NAME> in his judgment in Justices of the Peace for Calcutta v. <ORG> (1872) 8 Beng. L.R. 435 and the passage which they followed in that case is the passage which was expressly dissented from by the <ORG> of this <ORG> in <CITATION> (1910) I.L.R. 35 M. 1 : 21 M.L.J. 1 (F.B.). The Calcutta High <ORG> followed the earlier Calcutta decisions on this point but this <ORG> must follow its own <ORG> decision. It may be that some day this point may somehow get to <ORG> and then perhaps we shall know whether Madras or Calcutta is right. But, for the present, all we can do is to hold that this appeal lies. The preliminary point therefore fails.

2. Both parties state that, by consent, this appeal has been settled on the terms that it should be dismissed without costs, the respondent undertaking to pay Rs. 100 to the appellants in respect of costs already incurred and also undertaking, if further <ORG> fee has to be paid by reason of the case having been transferred from Chingleput to Madras, to provide what may be necessary up to Rs. 100. C.M.P. No. 681 of 1923 for stay will also be dismissed.

Ramesam, J.

3. I agree.

*In my Judgment in 16 L.W. 608 the sentence "and the guiding principal is that a decision is a Judgment which is given in an action" should run "and the guiding principle is that a judgment is a decision which is given in an action." It is my own fault and not the fault of the reporter.


PETITIONER: <NAME> AND CO. Vs. RESPONDENT: SALES TAX OFFICER, HYDERABAD DATE OF JUDGMENT: 21/02/1964 BENCH: <NAME>, K.N. BENCH: <NAME>, K.N. GAJENDRAGADKAR, P.B. GUPTA, K.C. DAS SHAH, J.C. AYYANGAR, N. RAJAGOPALA CITATION: 1964 AIR 922 1964 SCR (6) 867 CITATOR INFO : R 1968 SC 445 (7) R 1971 SC 946 (5,6,7,9) F 1973 SC1333 (1,4) RF 1975 SC 198 (10) F 1975 SC1991 (9) RF 1977 SC2279 (57) D 1985 SC 218 (16,19) RF 1986 SC 178 (2) O 1987 SC 27 (3) ACT: Sales Tax-Tax Collected otherwise than In accordance with the Act-Provision enabling the <ORG> to recover such tax collected-Not within the competence of <ORG> Legislature--Constitution of India, Schedule VII, Entry 26 and 54 of List II-Hyderabad General Sales Tax Act, 1950 (XIV of 1950), s. 11. 868 HEADNOTE: The appellant collected sales tax from the purchasers of betel leaves in connection with the sales made by it. But it did not pay the amount collected to the <ORG>. The <ORG> directed the appellant to pay the amount to the <ORG> and it thereupon filed a writ petition in <ORG> questioning the validity of s. 11(2) of the Hyderabad General Sales Tax Act 1950. The main contention of the appellant before <ORG> was that s. 11(2) of the Act which authorises the <ORG> to recover a tax collected without the authority of law was beyond the competence of <ORG> because a tax collected without the authority of law would not be a tax levied under the law and it would therefore not be open to the <ORG> to collect under the authority of a law enacted under the Entry 54 of List II of the VII Schedule to the Constitution any such amount as it was not a tax on sale or purchase of goods. <ORG> held that a. 11(2) was good-as an ancillary provision with regard to the collection of sales or purchase tax and therefore incidental to the power under Entry 54, List II. <ORG> also held that even if s. 11(2) cannot be justified under that entry it could be justified under Entry 26, List II and in the result the writ petition was dismissed. The present appeal is by way of special leave granted by this Court. Held: (i) It cannot be said that <ORG> was directly legislating for the imposition of sales or purchase tax under Entry 54, list II when it made the provisions of a. 11(2) for on the face of the provisions the amount, though collected by way of tax was not exigible as tax under the law. (ii) It is true that the heads of legislation in the various lists in the Seventh Schedule should be interpreted widely so as to take in all matters which are of a character incidental to the topic mentioned therein. Even so there is a limit to such incidental or ancillary powers These have to be exercised in aid of the than topic of legislation, which in the present case is a tax on sale or purchase of goods. The ambit of ancillary or incidental powers does not so to the extent of permitting the legislature to provide that though the amount collected, may be wrongly, by way of tax is not exigible under the law as made under the relevant taxing entry, it shall still be paid over to the Govern- ment as if it were a tax. Therefore the provision contained in a. 11(2) cannot be made under Entry 54, List II and cannot be justified as incidental or ancillary provisions permitted under that Entry. (iii) Section 11(2) cannot be justified as providing for a for the breach of any provision of the Act. (iv) Entry 26, List II deals with trade and commerce and has nothing to do with taxing or recovering amount realised wrongly as tax. There is no element of regulation of trade and commerce in a provision like s. 11(2) and therefore that section cannot be justified under Entry 26. List II. 869 (v) The provision in s. 20(c) is also invalid as it is merely consequential to s. 11(2). <CITATION> ,  1 S.C.R. 549, distinguished. <CITATION> .,  S.C.R. 1069, referred to. <CITATION> , (1962) XIII Sales Tax Cases 967. held to be wrongly decided. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 760 of 1962. Appeal by special leave from the judgment and order dated July 16, 1959 of <ORG> in Writ Petition No. 1123 of 1956.

<NAME>, for the appellant.

<NAME> and <NAME>, for the respondent.

February 21, 1964. The Judgment of the Court was delivered by <NAME> an appeal by special leave against the order of <ORG>. The appellant filed a writ petition in <ORG> questioning the validity of s. 11 (2) of the Hyderabad General Sales Tax Act, No. XIV of 1950, (hereinafter referred to as the Act). The material facts on which the petition was based were these. The appellant acted as agent in the then State of Hyderabad to both resident and non-resident principals in regard to sale of betel leaves. Under the Act betel leaves were taxable at the purchase point from May 1, 1953, by virtue of a notification in that behalf. We are here concerned with the assessment period from May 1, 1953 to March 31, 1954, covered by the assessment year 1953-54. The appellant collected sales tax from the purchasers in connection with the sales made by it on the basis that the incident of the tax lay on the sellers and assured the purchasers that after paying the tax to the appellant, there would be no further liability on them. After realising the tax, however, the appellant did not pay the amount realised to the <ORG> but kept it in the suspense account of its principals, namely, the purchasers. When the accounts were scrutinized by <ORG>, this was discovered and thereupon the appellant was called upon to pay the amounts realised to the <ORG>. The appellant however objected to the payment on the ground that it was the seller and the relevant notification for the relevant period imposed tax at the purchase point, i.e. on the purchaser. This objection was over-ruled and the appellant was directed to pay the amount to <ORG>.

The main contention raised on behalf of the appellant in <ORG> was that s. 11 (2) of the Act, which authorised the <ORG> to recover from any person, who had collected or collects, after May 1, 1950, any amount by way of tax otherwise than in accordance with *.he provisions of the Act, as arrears of land revenue, was beyond the legislative competance of the State legislature. The argument was that the Act was passed under Entry 54 of List 11 of the Seventh Schedule to the Constitution, which enables the State legislature to enact a law taxing transactions of sale or purchase of goods. The entry therefore vests power in the State legislature to make a law for taxing sales and pur- chases of goods and for making all necessary incidental provisions in that behalf for the levy and collection of sales or purchase tax. But it was urged that that entry did not empower the State legislature to enact a law by which a dealer who may have collected a tax without authority is required to hand over the amount to <ORG>, as any collection without the authority of law would not be a tax levied under the law and it would therefore not be open to the State to collect under the authority of a law enacted under Entry 54 of List II any such amount as it was not a tax on sale or purchase of goods. <ORG> held s. 11 (2) good as an ancillary provision with regard to the collection of sales or purchase tax and therefore incidental to the taxing power under Entry 54 of List 11. Further <ORG> took the view that assuming that Entry 54 of List II could not sustain s. 11 (2), it could be sustained under Entry 26 of List H. Consequently the writ petition was dismissed. <ORG> having refused a certificate to appeal to this Court, the appellant obtained special leave and that is how the matter has come up be-fore us.

It is necessary to read s. II of the Act in order to appre- ciate the point urged on behalf of the appellant. Section 11 is in these terms:-

1 1 (1) No person who is not registered as a dealer &hall collect any amount by way of tax under this Act nor shall a registered dealer make any such collection before the 1st day of May, 1950, except in accordance with such conditions and restrictions, if any, as may be prescribed Provided that Government may exempt persons who are not registered dealers from the provisions of this sub-section until such date, not being later than the 1st day of June, 1950, as Government may direct.

(2) Notwithstanding to the contrary contained in any order of an officer or tribunal or judgment, decree or order of a Court, every person who has collected or collects on or before 1st May, 1950, any amount by way of tax otherwise than in accordance with the provisions of this Act shall pay over to the Government within such time and in such manner as may be prescribed the amount so collected by him. and in default of such payment the said amount shall be recovered from him as if it were arrears of land revenue." It will be seen that s. 11 (1) forbids an unregistered dealer from collecting any amount by way of tax under the Act. That provision however does not apply in the present case, for the appellant is admittedly a registered dealer. Further s. II (1) lays down that a registered dealer shall not make any such collection before May 1, 1950, except in accordance with such conditions and restrictions, if any, as may be prescribed. This provision again does not apply, for we are not concerned here with any collection made by the appellant before May 1, 1950. The prohibition therefore of s. 11 (1) did not apply to the appellant. Then comes s. 11 (2). It applies to collections made after May 1, 1950 by any person whether a registered dealer or otherwise and lays down that any amount collected by way of tax otherwise than in accordance with the provisions of the Act shall be paid over to the Government and in default of such payment, the said amount shall be recovered from such person as if it were arrears of land revenue. It is clear from the words "other- wise than in accordance with the provisions of this Act" that though the amount may have been collected by way of tax it was not exigible as tax under the Act. Section 11 (2) thus provides that amounts collected by way of tax though not exigible as tax under the Act shall be paid over to Government, and if not paid over they shall be recovered from such person as if they were arrears of land revenue. Clearly therefore s, 11 (2) as it stands provides for recovery of an amount collected by way of tax as arrears of land revenue though the amount was not due as tax under the Act.

The first question therefore that falls for consideration is whether it was open to the State legislature under its powers under Entry 54 of List II to make a provision to the effect that money collected by way of tax, even though it is not due as a tax under the Act, shall be made over to Government. Now it is clear that the sums so collected by way of tax are not in fact tax exigible under the Act. So it cannot be said that the State legislature was directly legislating for the imposition of sales or purchase tax under Entry 54 of List II when it made such a provision, for on the face of the provision, the amount, though collected by way of tax. was not exigible as tax under the law. The provision however is attempted to be justified on the ground that though it may not be open to a State legislature to make provision for the recovery of an amount which is not a tax under Entry 54 of List 11 in a law made for that purpose, it would still be open to the legislature to provide for paying over all the amounts collected by way of tax by persons, even though they really are not exigible as tax, as part of the incidental and ancillary power to make provision for the levy and collection of such tax. Now there is no dispute that the heads of legislation in the various Lists in the Seventh Schedule should be interpreted widely so as to take in all matters which are of a character incidental to the topics mentioned therein. Even so, there is a limit to such incidental or ancillary power flowing from the legislative entries in the various Lists in the Seventh Schedule. These incidental and ancillary powers have to be exercised in aid of the main topic of legislation, which in the present case, is a tax on sale or purchase of goods. All powers necessary for the levy and collection of the tax concerned and for seeing that the tax is not evaded are comprised within the ambit of the legislative entry as ancillary or incidental. But where the legislation under the relevant entry proceeds on the basis that the amount concerned is not a tax exigible under the law made under that entry, but even so lays down that though it is not exigible under the law, it shall be paid over to Government, merely because some dealers by mistake or otherwise have collected it as tax, it is difficult to see how such provision can be ancillary or incidental to the collection of tax legitimately due under a law made under the relevant taxing entry. We do not think that the ambit of ancillary or incidental power goes to the extent of permitting the legislature to provide that though the amount collectedmay be wrongly-by way of tax is not exigible under the law as made under the relevant taxing entry, it shall still be

-)aid over to Government, as if it were a tax. The legisla- turd cannot under Entry 54 of List II make a provision to the effect that even though a certain amount collected is not a tax on the sale or purchase of goods as laid down by the law, it will still be collected as if it was such a tax. This is what s. 11 (2) has provided. Such a provision cannot in our opinion be treated as coming within incidental or ancillary powers which the legislature has got under the relevant taxing entry to ensure that the tax is levied and collected and that its evasion becomes impossible. We are therefore of opinion that the provision contained in s. 1 1 (2) cannot be made under Entry 54 of List 11 and cannot be justified even as an incidental or ancillary provision permitted under that entry.

An attempt was made to justify the provision as providing for a penalty. But as we read s. 11 (2) we cannot find anything in it to justify that it is a penalty for breach of any prohibition in the Act. Penalties imposed under taxing statutes are generally with respect to attempts at evasion of taxes or to default in the payment of taxes properly levied (see ss. 28 and 46 of the Indian Income Tax Act. 1922). The Act also provides for penalties, for example s. 19 and s. 20 . The latter section makes certain acts or omissions of an assessee offences punishable by a magistrate subject to com position under s. 21 . Section 11 (2) in our opinion has nothing to do with penalties and cannot be justified as a penalty on the dealer. Actually s. 20 makes provision in cl. (b) for penalty in case of breach of s. II (1) and makes the person committing a breach of that provision liable, on conviction by a Magistrate of the first class, to a fine. We are therefore of opinion that s. 11 (2) cannot be justified under Entry 54 of List II either as a provision for levying the tax or as an incidental or ancillary provision relating to the collection of tax. In this connection we may refer to cl. (c) of s. 20 , which provides that any person who fails "to pay the amounts specified in sub-section (2) of section 11 within the prescribed time" shall on a conviction by a Magistrate be liable to fine. It is remarkable that this provision makes the person punish- able for his failure to pay the amount which is not authorised as a tax at all under the law, to Government. It does not provide for a penalty collecting the amount wrongly by way of tax from purchasers which may have been justified as a penalty for the purpose of carrying out the objects of the taxing legislation. If a dealer has collected anything from a purchaser which is not authorised by the taxing law, that is a matter between him and the purchaser, and the purchaser may be entitled to recover the amount from the dealer. But unless the money so collected is due as a tax, the <ORG> cannot by law make it recoverable simply because it has been wrongly collected by the dealer. This cannot be done directly for it is not a tax at all within the meaning of Entry 54 of ,List II, nor can the <ORG> legislature under the guise of incidental or ancillary power do indirectly what it cannot do directly. We are therefore of opinion that s.11 (2) is not within the competence of the <ORG> legislature under Entry 54 of List II.

The respondent in this connection relies on the decision of this Court in <CITATION> ("). That case in our opinion has no application to the facts of the present case. In that case the dealer had been assessed to tax and had paid the tax. Later in view of the judgment of this Court in <CITATION> (2) the amounts paid in (1)  1 S. C. R. 549. (2)  S. C. R. 1069.

respect of goods despatched for consumption outside the <ORG> were held -to be not taxable. The dealer then applied for refund of tax, which was held to be not exigible. The refund was refused and and the dealer went to <ORG> by a writ petition claiming that it was entitled to refund under s. 14 of the Orissa Sales Tax Act (which was the law under consideration in that case). <ORG> allowed the petition in part and there were appeals to this Court both by the dealer and the <ORG>. In the meantime, the Orissa legislature amended the law, by introducing s. 14A , in the principal Act, which provided that refund could be claimed only by a person from whom the dealer had actually realised the amount as tax. That provision was challenged in this Court but was upheld on the ground that it came within the incidental power arising out of Entry 54 of List

11. That matter dealt with a question of refund and it cannot be doubted that refund of the tax collected is always a matter covered by incidental and ancillary powers relating to the levy and collection of tax. We are not dealing with a case of refund in the present case. What s. II (2) provides is that something collected by way of tax, though it is not really due as a tax under the law enacted under Entry 54 of List II must be paid to the <ORG>. This situation in our opinion is entirely different from the situation in <ORG> case("). The respondent further relies on a decision of <ORG> in <CITATION> (2). That decision was with respect to s. 8-B of the Madras General Sales Tax Act of 1939 as amended by Madras Act 1 of 1957. Though the words in s. 8-B (2) were not exactly the same as the words in s. 11 (2), with which we are concerned here, the provision in substance was to the same effect as s. 11 (2). In view of what we have said above, that decision must be held to be incorrect. Lastly, we come to the contention of the respondent that s. 11 (2) is within the legislative competence of the <ORG> legislature in view of Entry 26 of List 11. That entry deals with "trade and commerce within the <ORG> subject to the provisions of entry 33 of List III". It is well settled that (1)  1 S.C.R. 549.

(2) [1962] XIII S.T.C. 967.

taxing entries in the legislative Lists I and II of the Seventh Schedule are entirely separate from other entries. Entry 26 of List 11 deals with trade and commerce and has nothing to do with taxing or recovering amounts realised wrongly as tax. It is said that s. 11 (2) regulates trade and commerce and the <ORG> legislature therefore was competent under Entry 26 of List II to enact it. We have not been able to understand what such a provision has to do with the regulation of trade and commerce; it can only be justified as a provision ancillary to a taxing statute. If it cannot be so justified-as we hold that it cannot-we are unable to uphold it as regulating trade and commerce under Entry 26 of List II, There is in our opinion no element of regulation of trade and commerce in a provision like s, 11 (2).

We are therefore of opinion that the State legislature was Incompetent to enact a provision like s. 11 (2). We may also add that the provision contained in s. 20(c) , being consequential to s. 11 (2) will fall along with it. In consequence it was not open to the Sales Tax Officer to ask the appellant to make over what he had collected from the purchasers ,wrongly as sales tax. It is not disputed, as appears from the final assessment order of the Sales Tax Officer, that the appellant was not liable to pay the amount as sales tax for the relevant period. We therefore allow the appeal and quash the assessment order dated September 27, 1956 insofar as it is based on s. II (2). The appellant will get his costs in this <ORG> as well as in the High <ORG>.

Appeal allowed.