Introduction 

• This case revolves around the jurisdictional limits of the civil courts and the power of taxing authorities to levy non- uniform taxes. 

Facts 

• In this case, Tobacco dealers were the petitioners who used to sale and purchase tobacco for various activities. 
  • In 1950, Madhya Bharat Sales Tax Act (MBSTA) was introduced under which taxes were levied on sellers and manufacturers as per the provisions of section 3 of the said act. 
• As per section 5 of MBSTA, single point tax was applied into which minimum and maximum value was fixed while the actual rate to be fixed by the government through notifications. 
  • Several notifications were released by the government and taxes were collected. 
  • Various applications and suits were filed by the dealers under section 80 of the Code of Civil Procedure (CPC) and for infringing their right under Article 301 of the constitution of India (COI). 
• The MBST Act was challenged based on Art 301 of COI and on the ground that equal taxes are not levied on similar products referring to the case of Bhailal v. State of Madhya Pradesh (1960). 
  • The trial court granted the decision in favor of the applicant, which the state challenged in the High court. 
  • It was contented that no taxes can be imposed as per Article 301 of COI. 
  • As per section 17 of The MBST Act no suit can be instituted as no assessment can be called into question in the court of law. 
  • The High Court ordered that the trials are incompetent based on the contentions. 
• Appeal was filed in the Supreme court against the order of the High Court. 

Issues Involved  

• Whether collection of different taxes from importers and suppliers are in violation of Article 301 of the constitution or not? 
• Whether the suit is triable or not based on section 17 of the MBST Act? 
• Whether civil court has the jurisdiction to try the case for refund of taxes or the High court has the jurisdiction under Article 226 of the constitution? 
• Whether the Limitation Act can be a ground of defense in the present case or not? 

Observations 

• The Supreme Court observed that Article 301 of COI guarantees free trade and due to levy of taxes on importers and manufacturers it restricts the trade and commerce freely and hence the court struck down the notifications of taxes of the government. 
• In the MBST Act provisions regarding review, revisions, appeal, rectification and references to the High Court are given. 
  • Section 17 of the MBST is contrary and prevents the court from assessing the levied taxes and the parties by the tax authorities. 
  • This led to dismissal of order of the High Court and appeals and suits were allowed. 
• The Supreme court, after referring to various cases and acts, concluded that civil courts have jurisdiction to try the cases until they are expressly barred by the statute. 
  • The court also laid down certain guidelines when civil court can make inference. 
• The Supreme court held that when the writ is filed within three years of the imposition of tax, it is triable by the High court, whereas after three years relief can be sought by the civil court. 

Conclusion 

The Supreme court delivered the judgement in favor of the authorities based on the Indian Income Tax Act as the authorities are covered under the statute and it was held that collected tax cannot be overturned.