- (1.) These three appeals on certificates granted by the High court of Madhya Pradesh are connected and will be dealt" with together. Two of the appeals (Nos. 849 and 855) are by the State of Madhya Pradesh and the third appeal is by the Gwalior Rayon Silkmanufacturing (Weaving) Company. We shall refer hereinafter to the State as the appellant and the Gwalior Rayon Silk Manufacturing. (Weaving) Company as the respondent. The respondent was established in Gwalior after an agreement with the Ruler of the then Gwalior State dated 7/04/1947. By that agreement the Ruler agreed to exempt the respondent "from payment of all taxes and/or duties, in any form or nature whatsoever, on its incomes, profits and gains of business, levied or to be hereinafter levied in the Gwalior State, or any part thereof, for a period of twelve years reckoned from the date on which the factory or factories has or have started working or starts or start working". The Gwalior State merged thereafter in the United State of Madhya Bharat and when the Constitution came into force on 26/01/1950, the United State of Madhya Bharat became the Part B State of Madhya Bharat. The Legislature of the State of Madhya Bharat passed the M. B. Sales Tax Act, 1950 (No. 30 of 1950) which was brought into force from May I, 1950 In consequence thereof the Sales Tax Officer started proceedings to levy sales tax on the sales made by the respondent. Thereupon the respondent filed a suit (No. 6 of 1953) in the court of the District Judge, Gwalior, in which he contended that the State of Madhya Bharat was bound by the agreement of 7/04/1947, in view of Article 295 (2) of the Constitution and therefore it was not open to the State of Madhya Bharat or its officers to levy sales tax on the sales made by the respondent. The respondent therefore prayed for a declaration that it was exempt from sales tax for the period mentioned in the agreement and that a perpetual injunction be issued against the State of Madhya Bharat prohibiting it from realising sales tax for one year, which had already been assessed, and further prohibiting it from imposing any sales tax on the respondent till the end of June, 1962. Later, however, the respondent filed a writ petition under Article 226 of the Constitution on 23/09/1960, in which it put forward the same contention and prayed for the same reliefs with the addition that the assessments which had been made for the years from 1950-51 to 1956-57 should be quashed and the tax paid refunded. The suit was dismissed by the District Judge and the respondent went in appeal to the High court. This appeal was heard along with the writ petition and was allowed. As to the writ petition the High court held that in view of Article 295 (2) of the Constitution the exemption granted by the agreement of 7/04/1947. still continued and the assessments made against the respondent for the years 1950-51 to 1956-57 must therefore be quashed. As to the prayer for refund, the High court rejected it on the basis of the decision of this court in Sales Tax Officer v. Kanhaiya Lal,where it was held that in exercising the discretion 'as to refund the court must have regard to estoppel, acquiescence, limitation and the like. The High court found that the respondent had not given any detail of the tax paid and nothing had also been said as to how considerations of estoppel, acquiescence, limitation etc. did not apply. In these circumstances the prayer for refund was rejected. The High court however issued a direction restraining the State of Madhya Pradesh and its officers from making any assessment under the M. B. Sales Tax Act or the Madhya Pradesh General Sales Tax Act and from levying or collecting the tax in contravention of the exemption granted by the agreement of 7/04/1947, and quashed the proceedings taken by the Sales Tax Authorities in contravention of the said exemption.
(2.) This decision has led to three appeals before us, (i) by the appellant against the order decreeing the suit (Appeal No. 855) ; (ii) by the appellant against the order in the writ petition restraining it from making any assessment under the M. B. Sales Tax Act or the Madhya Pradesh General Sales Tax Act in contravention of the exemption granted under the agreement of 7/04/1947) and quashing all assessment proceedings taken thereunder (Appeal No. 849) ; and (iii) by the respondent against the order refusing refund in the writ petition (Appeal No. 848).
(3.) These appeals were heard by us along with civil appeals in Union of India v. Gwalior Rayon Silk Manufacturing (Weaving) Company Limited, judgment in which has just been delivered. In those appeals we had to consider the effect of this agreement after 1/04/1950, in view of the legislative provisions made thereafter, and we have held therein that though the agreement of 7/04/1947, might cast an obligation on the government of India under Article 295 (1) (b) , the legislative provisions made from 1/04/1950, would supersede the agreement and thereafter the legislative provisions would prevail in spite of the obligation cast on the government of India by Article 295 (1) (b). The principle of that decision in our opinion applies to Article 295 (2) also under which the obligation in the present case devolved on the Part B State of Madhya Bharat, and in that view the legislative provisions made by the M. B. Sales Tax Act, 1950, or the Madhya Pradesh General Sales Tax Act, 1958, would prevail as against the agreement. In this view of the 'matter the appeals of the appellant must succeed and the appeal of the respondent must fail.;