Decided on June 07,1968



- (1.) THE petitioner seeks by this proceeding to quash exhibits P-1 to P-5, the orders assessing the petitioner to sales tax in respect of his turnover as dealer in hill produce for the years 1959-60 to 1962-63 and 1965-66 and for refund of the tax already collected thereunder. Under the Schedule to the General Sales Tax Act, 1125, the turnover of hill produce is taxable only at the last purchase point within the State. THE assessments here are under the Central Sales Tax Act, and section 9 (1) of the Central Sales Tax Act provides : " THE tax payable by any dealer under this Act on sales of goods effected by him in the course of inter-State trade or commerce whether such sales fall within clause (a) or clause (b) of section 3 shall be levied and collected by the Government of India in the manner provided in sub-section (3) in the State from which the movement of the goods commenced. "
(2.) IN State of Mysore v. Lakshminarasimhiah ([1965] 16 S. T. C. 231), it was held after referring to the relevant sections of that Act : " The turnover of the respondents sought to be taxed arises out of transactions of sale of handloom and powerloom cloth effected by them in the course of inter-State trade or commerce. Under the Mysore Sales Tax Act, 1957, sale of these goods was liable to tax under section 5 (3) (a) read with entry 7 in Schedule II of the Act, at a single point on sale by the first or the earliest of successive dealers in the State. It is common ground that the respondents are not the first or the earliest of successive dealers in the State in respect of the transactions sought to be taxed. Section 6 charges to tax sales in the course of inter-State trade or commerce of every dealer, but the Act does not prescribe the rates at which tax is to be levied, nor does it set up machinery for assessment, collection and enforcement of liability to pay tax, charged upon inter-State sales of dealers. By section 8 (2) tax payable by the dealer in respect of his sales not falling within sub-section (1) - and the turnover in the present case is not in respect of sales falling within sub-section (1) - has to be calculated at the same rates and in the same manner as would have been calculated, if the sale had taken place inside the appropriate State. The clause in terms only deals with calculation of the tax - the rate at which and the manner in which the tax has to be calculated - under the State law; it does not attract any exemptions from tax prescribed by the State law. " See also the decisions of this Court reported in Laxmi Starch Factory Ltd. v. State ([1965] 16 S. T. C. 794; 1965 K. L. T. 862) and in Pothen Joseph & Sons v. State of Kerala ([1967] 19 S. T. C. 123; 1967 K. L. T. 657 ). The last purchaser within the State was the petitioner and he had already paid the tax when he purchased the goods. When, therefore, he sold the goods in inter-State sale, no tax can be levied on the turnover of the sales under the Central Sales Tax Act in the light of the ruling referred to above. That the tax was illegally levied is not disputed by the respondents. What is contended for on behalf of the respondents is that no application under Article 226 of the Constitution for a writ of mandamus for refund of the tax already collected under these orders would lie. In support of this contention, reliance was placed on the ruling in Suganmal v. State of Madhya Pradesh ([1965] 56 I. T. R. 84 ). In that case, the Indore Industrial Tax Act, 1957, imposed industrial tax on cotton mills. The appellant before the Supreme Court was the managing proprietor of the Bhandari Iron and Steel Company, which carried on the business of mechanical engineers, founders and re-rollers. Although the Bhandari Iron and Steel Co. did not run any cotton mill, it submitted returns and deposited industrial tax to the tune of Rs. 1,75,722-5-2. Final assessments for the different years were made in 1951 and 1952. Appeals were filed against the assessment orders, and in June, 1955, the appellate authority held that the Bhandari Iron and Steel Co. was not liable to pay industrial tax as it did not carry on any business which was liable to be assessed to tax and quashed the various assessment orders. No direction was however given by the appellate authority for the refund of tax which had been realised. After appropriating Rs. 37,951-7-0 towards excess profits duty the Government refunded the sum of Rs. 74,961-9-0 paid after the Constitution came into force and refused to refund the sum of Rs. 62,809-5-2, which had been realised prior to 26th January, 1950. The appellant filed a petition in the High Court for the issue of a writ of mandamus against the respondents directing them to perform their statutory duty and to refund the amount of Rs. 62,809-5-2. The High Court dismissed the writ petition. It was held by the Supreme Court that a petition under Article 226 of the Constitution of India solely for the issue of a writ of mandamus directing the State to refund money alleged to have been illegally collected by the State as tax was not ordinarily maintainable because a claim for such a refund could always be made in a suit against the authority which illegally collected the money as tax; that in the absence of statutory provision whereby the tax realised had to be refunded when the appellate authority set aside the assessments, no duty was cast on the State to refund the amount it had realised which was subsequently found by the appellate authority to be not in accordance with law. It was also held that the mere order of the appellate authority that the tax collected was not authorised by any law was not a decision to the effect that the State was to return the amount to the assessee; nor could it be taken to amount to a law making it incumbent on the State to refund the amount and that the question whether the State was bound under section 72 of the Contract Act to return the amount on the ground that it was paid under a mistake was a matter for decision in a regular suit and not in proceedings under Article 226. In State of Kerala v. Aluminium Industries Ltd. ([1965] 16 S. T. C. 689), the question whether an application under Article 226 will lie for a direction to refund tax paid under a mistake of law came up for consideration and the Supreme Court observed as follows : " There is no doubt in view of the decision of this Court in Sales Tax Officer v. Kanhaiya Lal ([1958] 9 S. T. C. 747) that money paid under a mistake of law comes within the word 'mistake' in section 72 of the Contract Act and there is no question of estoppel when the mistake of law is common to both the parties, which was the case here inasmuch as the respondent did not raise the question relating to Article 286 of the Constitution and the Sales Tax Officer had no occasion to consider it. In such a case where tax is levied by mistake of law it is ordinarily the duty of the State subject to any provision in the law relating to sales tax (and no such provision has been brought to our notice) to refund the tax. If refund is not made, remedy through court is open subject to the same restrictions and also to the period of limitation (see Article 96 of the Limitation Act, 1908), namely, three years from the date when the mistake becomes known to the person who has made the payment by mistake (see State of Madhya Pradesh v. Bhailal ([1964] 15 S. T. C. 450; A. I. R. 1964 S. C. 1006)), In this view of the matter it was the duty of the State to investigate the facts when the mistake was brought to its notice and to make a refund if the mistake was proved and the claim was made within the period of limitation. " In Burmah Construction Company v. State of Orissa ([1961] 12 S. T. C. 816), the same question was considered and it was held that a liability to refund can be enforced by a proceeding under Article 226 of the Constitution. In State of Madhya Pradesh v. Bhailal Bhai ([1964] 15 S. T. C. 450; A. I. R. 1964 S. C. 1006), the Supreme Court held that a direction for a refund can be made in a proceeding under Article 226, subject to certain conditions, one of them being that the application should be filed within three years from the date when the mistake became known to the party. Das Gupta, J. , observed : " The petitioners claim to have discovered their mistake in making the payments after they came to know of these decisions. It is reasonable to think however that the petitioners must have discovered their mistake as soon as the High Court's decision in the case of Mohammed Siddique v. State of Madhya Bharat [a. I. R. 1956 M. B. 214] dated January 17, 1956, became known to them. "
(3.) THE question was considered in the recent ruling of the Supreme Court in Dhulabhai v. State of Madhya Pradesh ([1968] 22 S. T. C. 416; 68 I. T. R. Short Notes page 25 ). Seven propositions were laid down in that case. THE relevant one for our purpose is proposition No. 4. It states : " When a provision is already declared unconstitutional or the constitutionality of any provision is to be challenged, a suit is open. A writ of certiorari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit. " I hold that the writ petition is maintainable. The question whether it is filed within three years from the date when the mistake became known to the petitioner is not of any importance in this case, as admittedly it is filed within 3 years from the date of decision of the Supreme Court in State of Mysore v. Lakshminarasimhiah ([1965] 16 S. T. C. 231 ).;

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