- (1.) THIS is a writ application by one Madangopal and three others under Art. 226 of the Constitution of India.
(2.) THE petitioners' case is, that the Central Government having imposed control on cloth, the Rajasthan Government appointed Messrs. Madan & Co. of Sujangarh in the year 1950 as its agent for purchasing the quota of cloth for Churu District from supply centres outside the State, that is, for importing it in the said district and distributing it throughout the district to retail dealers in accordance with the instructions of the Government. THE said company was known as importer-cum-wholesale dealer. THE said company therefore, as agent of the Rajasthan Government, purchased cloth from different supply-centres outside Rajasthan, according to the instructions of the Collector, Churu, and sold it to persons specified by the Collector at the rates fixed by the Government after adding the taxes which it had actually paid. Its only interest in the transaction was to receive percentage of the commission which was below five percent on the ex-factory price. Madan & Co. was a partnership firm and petitioner No. 1 Madangopal was its partner. It is stated that petitioners Nos. 2 and 3 were not partners during the relevant period and that petitioner No. 4 Girdharilal joined the firm after 31st March, 1951. It may be noted here that the relevant period, according to the petitioners, was between January, 1950 to 31st March, 1951. THE petitioners proceed to say that during the said period the said agent of the Government of Rajasthan, i. e. Messrs. Madan & Co. purchased cloth in the Bombay State from certain supply centres and paid sales-tax to the suppliers. THE said tax was charged under the Bombay Sales Tax Act. THE amount of sales-tax so paid by the said company to the sellers in the Bombay State was passed on to the retail dealers of the cloth who used to purchase it from the company under permits. THE retailers, in their turn, passed on the sales-tax to the consumers by adding it to the control price. Thus, the sales-tax recovered by the Bombay Government from the manufacturers in that State was actually passed on to the consumers within the limits of Churu District. In the State of Bombay Vs. THE United Motors (India) Ltd. (1), their lordships of the Supreme Court restrained the State of Bombay from imposing or authorising the imposition of tax on sales and purchases which were exempted from taxation by Art. 286 of the Constitution of India. THEreafter, the Government of Rajasthan thought of claiming refund of the sales-tax realised by the Government of Bombay on the cloth imported into Rajasthan from the State of Bombay. Ms. Madan and Company was called upon to supply full data of the amount of sales-tax for which the refund could be claimed. On 4th April, 1954, the required information was supplied to the Collector with a letter marked Ex. C together with a statement marked Ex. D. According to the statement Ex D, it was shown that an amount of Rs. 6864/2/3 was paid as sales-tax by Madan and Company. THE petitioners' grievance is that instead of compelling the State of Bombay to refund the Sales-Tax the Sub-Divisional Officer, Ratangarh, issued a certificate of public demand under sec. 4 of the Rajasthan Public Demands Recovery Act for an amount of Rs. 10739/1/3 without showing how this figure was arrived at. It is contended on behalf of the petitioners that no amount of sales-tax by way of refund was received by Messrs. Madan & Company from the suppliers in the Bombay State and, under the circumstances, it was altogether illegal for the Sub-Divisional Officer, Ratangarh to issue a certificate demanding the said amount from the company. The company submitted its representation to the Sub-Divisional Officer, Ratangarh, in respect of the said demand, but instead of giving it an opportunity of being heard the Tehsildar, Sujangarh, by his letter Ex. J, dated 19th July, 1960 informed petitioner No. 1 that the objections raised by the company were rejected by the Collector, Churu. The Tehsildar, Sujangarh, further issued notices to all the petitioners directing them to deposit one-fourth of the amount individually and he threatened action against them in case they failed to deposit the amount. Petitioners Ridhkaran and Nathmal filed replies denying their partnership in Madan and Company. Petitioner Girdharilal also filed a reply saying that he was not a partner during the period commencing from January 1950 to 31. 3. 1951. All these representations, however, were of no avail. It is, therefore, prayed by the petitioners that notice Ex. G and certificate Ex. H being void and illegal they should be quashed and the respondents should be restrained from taking any proceedings for the recovery of the said amount under the Public Demands Recovery Act. No reply has been filed on behalf of the respondents so far, although a period of more than three years has elapsed since non-petitioners Nos. 1 and 3 were served. Non-petitioner No. 2 was also served before 24th August, 1961. When the case came up for hearing on 1st May, 1963, the learned Deputy Government Advocate asked for time and the case was adjourned. One year and three months have elapsed since then and still no reply is forth-coming. The learned officiating Government Advocate has, with great regret, expressed his inability to contest the facts stated in the writ petition, because he has received no instructions so far. Under the circumstances, there in no alternative left for us but to proceed on the assumption that the facts stated by the petitioners are correct since they are not controverted. On that assumption, it is difficult to justify the action taken by the respondents against the petitioners. If petitioners Nos. 2 and 3 were not partners of Messrs. Madan & Company, they could not be called upon to refund any amount to the State. Similarly, if petitioner No. 4 was not a partner of the said company during the relevant period, namely, January 1950 to 31st March, 1951 for which the demand has been made, he could not also be compelled to pay any amount to the State. Even petitioner No. 1 Madangopal could not be compelled to refund the amount which Madan & Company of which he was a partner, had already paid to the suppliers in the State of Bombay and which he had not received either from the suppliers or from the Government of Bombay. It is also not clear how the company could be called upon to pay Rs. 10739/1/3 when in the statement Ex. D filed by the company, it was shown that an amount of Rs. 6864/2/3 only was paid as sales-tax. According to petitioner No. 1 Madan & Company was only an agent of the Government of Rajasthan for importing cloth from the suppliers residing within the State of Bombay and it is not clear how the Government of Rajasthan could call upon the company to refund the amount of sales-tax which it had paid to the suppliers in the State of Bombay, simply because the Government of Rajasthan was not successful in getting a refund of that amount direct from the Government of Bombay. It appears from a copy of the letter issued by the Commissioner, Civil Supplies, Rajasthan, Jaipur, to all Collectors under No. 271/tex/360-96, dated 11th March, 1954, that they were requested to obtain full data of the amount of sales-tax paid by the importers so that the Bombay Sales-Tax authorities may be moved at departmental level. It appears from Exs. C and D that Messrs. Madan & Company supplied the information which was in their possession. It thus transpires from the above correspondence that the Government of Rajasthan was thinking of claiming the refund from the Government of Bombay or from the suppliers and when it was not successful in its attempt, Messrs. Madan & Company was called upon to make the refund. We find it difficult to understand how the petitioners could be compelled to refund the amount which they had not received from the suppliers or the State of Bombay. The writ application is, therefore, allowed and the impugned notice Ex. G and certificate Ex. H issued by the Sub-Divisional Officer, Ratangarh, on 11th November, 1959, are hereby quashed. The respondents are restrained from proceeding against the petitioners to recover the amount mentioned therein. The petitioners will receive their costs from the respondents. .;