Citation Codes

Equivalent Citations

citation codes

Case Number

W.P Nos. 3224 etc. of 1968 etc.

Advocates

M.P.M Abdul Karim, P.M Jumma Khan, K.K.M Mohammed Yaseen, C.S Chandrasekara Sastri, C. Venkataraman, C. Natarajan, D. Srinivasan, T. Martin K. Kumarakaruppan, Israil, P.L Meyappan, P.L Subbiah, D. Raju, S.R Krishnaswami, for Petitioners.
The Asst. Govt. Pleader for Respts.

Judges

Veeraswami, C.J
Gokulakrishnan, J.

Acts

Section 15 in the Central Act by the Amending Act 31 of 1958 and introduction by Madras Act 6 of 1963 of Section 4-A(1) in the Madras General Sales Tax Act
Section 9(1) of the Central Sales Tax Act and Section 5(3)(a) of the Madras General Sales Tax Act
Section 15 of the Central Act read with Sections 4-A(1) and 6 of the State Act
Section 15 and Section 4-A(1) read with Section 6 of the local Act,
Central Amending Act violates Article 301 of the Constitution
Amending Act violates Article 301 of the Constitution.
Act." Sections 2 and 3 of the said Madras Amending- Act
Rule 6(f) of the Madras General Sales Tax Rules, 1959,
Madras General Sales Tax (Second Amendment) Act, 1969,
SECTION 9 A CENTRAL SALES TAX ACT
CENTRAL SALES TAX AMENDMENT ACT 1969
Section 15 of the Central Act,

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Smart Summary

Structured Summary of the Provided Opinion

Factual and Procedural Background

The opinion concerns two batches of petitions seeking writs of mandamus for refund of Central sales tax alleged to have been paid under a mistake of law.

In the first batch three petitions by Mohamed Salam related to assessment years 1957-58 and 1958-59. For 1958-59 there remained a balance of Rs. 1,400 in arrears; when the revenue sought collection, the assessee served a lawyer's notice relying on State of Mysore v. Lakshminarasimhiah Setty and Sons [1965] 16 S.T.C. 231 and then filed these petitions seeking refund of tax already paid and prohibition of collection of the balance.

In the second batch a common petitioner, Ashok Leyland Ltd., sought refund of Central sales tax paid for the assessment years 1962-63 to 1965-66 in respect of the quantum of excise duty included in the chargeable turnover of inter-State sales. The ground relied upon was State Of Madras v. N.K. Nataraja Mudaliar [1968] 22 S.T.C. 376, in which the Supreme Court held that excise duty was entitled to deduction or exclusion from taxable turnover and that payment of tax on excise duty was therefore by mistake.

The petitions were heard by the court and, after considering precedent, legislative amendments and other factors, the court dismissed the petitions (see final operative paragraph).

Legal Issues Presented

Whether the petitioners are entitled to refund of Central sales tax on the ground that the tax was paid under a mistake of law.
Whether this court should grant relief under Article 226 of the Constitution when petitioners had statutory remedies available under the Act and had not pursued them (including the effect of delay and finality of assessments).
Whether subsequent legislative measures (Central Sales Tax (Amendment) Act, 1969 and the Madras General Sales Tax (Second Amendment) Act, 1969) validate past levies and thereby extinguish a claim based on mistake of law.
Whether the Central Amending Act violates Article 301 of the Constitution and whether the local Amending Act is confiscatory and violative of Article 19(1)(f) of the Constitution.

Arguments of the Parties

Petitioners' Arguments

The tax was paid under a mistake of law and therefore entitles the petitioners to a refund (Mohamed Salam relied on State of Mysore v. Lakshminarasimhiah Setty and Sons [1965] 16 S.T.C. 231; Ashok Leyland relied on State Of Madras v. N.K. Nataraja Mudaliar [1968] 22 S.T.C. 376).
The Central Amending Act (and related local amendment) is said to violate Article 301 of the Constitution.
The local Amending Act is contended to be confiscatory and violative of Article 19(1)(f) of the Constitution.

State/Revenue Position (as presented in the opinion)

Legislative amendments and validations (Central Sales Tax (Amendment) Ordinance, 1969, Central Sales Tax (Amendment) Act, 1969, and Madras General Sales Tax (Second Amendment) Act, 1969) validate the levies and extinguish the petitioners' claim of payment by mistake of law.
The petitioners had statutory remedies under the Act which they did not pursue; assessments had become final in some cases and petitioners should not, normally, bypass the statutory remedy and resort to constitutional relief.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
State of Mysore v. Lakshminarasimhiah Setty and Sons [1965] 16 S.T.C. 231	Held that the expression "levied" in Section 9(1) of the Central Sales Tax Act implied no departure from the single-point manner of levy under the Madras General Sales Tax Act; hence tax on inter-State sales at the first-sale stage was unauthorised for the relevant period.	The court treated this decision as governing the period prior to 1st October, 1958 and as a basis for the petitioners' claims for that earlier period.
Khader & Co. v. State of Madras [1966] 17 S.T.C. 396	Observed that after substitution of Section 15 by Amending Act 31 of 1958 and introduction of Section 4-A(1) by Madras Act 6 of 1963, the earlier ratio could not govern the period after 1st October, 1958; and noted that no provision in the Central Act or its rules allowed deduction of excise duty from chargeable turnover.	The court used Khader & Co. to explain the law applicable after the 1958 amendments and to show earlier lack of provision for deducting excise duty under the Central Act, though Khader's view did not assist the revenue for the period prior to 1st October, 1958.
State Of Madras v. N.K. Nataraja Mudaliar [1968] 22 S.T.C. 376	Supreme Court held that the benefit of deduction of excise duty available under local rules would also be available in determining the chargeable turnover of inter-State sales.	The court treated this decision as supporting petitioners' contention regarding excise duty deduction for the relevant assessment years in which that precedent applied.
Tilokchand Motichand v. H.B. Munshi W.P. No. 53 of 1968; [1970] 25 S.T.C. 289 (S.C.)	Ratio of the majority opinion was cited regarding the exercise of discretionary relief under Article 226 where other remedies exist and delay or other factors are relevant.	The court relied on the ratio of the majority in Tilokchand to support the view that Article 226 should not be used to circumvent statutory remedies and that delay and other factors may justify refusing relief.
Larsen & Toubro Ltd. v. Joint Commercial Tax Officer [1967] 20 S.T.C. 150	Referenced by the petitioners; the opinion records that the case was cited but that it was not of assistance to the petitioners.	The court expressly stated that Larsen & Toubro Ltd. v. Joint Commercial Tax Officer was not of assistance to the petitioners' case.
Krishnamurthi and Company v. State of Madras [1969] 23 S.T.C. 1	Referenced regarding the reasonableness and non-confiscatory character of validated retrospective taxation in context.	The court considered Krishnamurthi as supporting the view that the retrospective validation and the tax treatment were neither unreasonable nor confiscatory.

Court's Reasoning and Analysis

The court's analysis proceeds in sequential steps, grounded in (a) the state of the law at the times of the assessments, (b) subsequent judicial decisions, (c) later legislative amendments and validations, and (d) discretionary considerations relevant to relief under Article 226.

The court first noted that, at the time the assessments were made, State of Mysore v. Lakshminarasimhiah Setty and Sons established that for the relevant earlier period the Central Act had not departed from the single-point scheme of levy adopted by the State Act; thus, for that period inter-State tax at the first-sale point was unauthorised.
It then considered later developments. Khader & Co. indicated that after the amendments (notably substitution of Section 15 by the Amending Act 31 of 1958 and introduction of local Section 4-A(1)) the State of Mysore decision would not govern the post-1 October 1958 period and that the Central Act lacked a rule permitting deduction of excise duty when computing turnover.
The Supreme Court in State Of Madras v. N.K. Nataraja Mudaliar subsequently held that the benefit of deduction of excise duty available under local rules should be available in determining chargeable turnover for inter-State sales; this favored the petitioners on the excise-duty point where applicable.
On the narrow point of legal entitlement at the time of the assessments, the court acknowledged that "when the assessment orders in these cases were made, there was no legal basis to tax the inter-State sales or to include the excise duty paid in the taxable turnover of such sales" (i.e., the assessments were legally vulnerable on those grounds).
The court then turned to the central remedial question: whether payment by mistake of law entitles the petitioners to a mandamus directing refund. It emphasized that issuing mandamus for refund is discretionary and that the court must consider relevant factors: delay in seeking relief, availability of statutory remedies under the Act that the petitioners did not pursue (including suit for recovery with payment of court-fee), and whether Article 226 is being used to circumvent other adequate remedies. The court relied on the majority ratio in Tilokchand to support the proposition that Article 226 should not be used to bypass statutory remedies in ordinary cases.
The court further held that long delay (assessments being four or five years old or more) and the petitioners' failure to use available statutory remedies were reasons to decline discretionary relief even if payment was by mistake of law.
Independently, the court analysed the effect of subsequent statutory measures: the Central Sales Tax (Amendment) Ordinance, 1969, the Central Sales Tax (Amendment) Act, 1969, and the Madras General Sales Tax (Second Amendment) Act, 1969. Those statutes (and the Ordinance) substituted a new Section 9, validated earlier assessments by a deeming provision that they "shall be deemed to be as valid and effective as if such assessment ... had been made ... under the principal Act as amended by this Act," and by retroactive provisions removed the operation of local rules that permitted exclusion of excise duty and deemed taxable turnover to have included excise duty. The court found these provisions cut at the root of the petitioners' claim of payment by mistake of law.
The court addressed the constitutional contentions and found them unpersuasive: it was not persuaded that the Central Ordinance or the Amending Act violated Article 301; it did not find the local Amending Act confiscatory or violative of Article 19(1)(f). The court noted the single-point taxation purpose of Section 15 of the Central Act and observed that, given validation and the fact that the tax representing excise duty had been collected from customers, the retrospectively validated levy was neither unreasonable nor confiscatory (and cited Krishnamurthi and Company v. State of Madras in support).

Holding and Implications

Core Ruling: The petitions for mandamus seeking refund of Central sales tax are dismissed.

Implications:

The petitioners are not granted refund; the court declined to exercise its discretionary jurisdiction under Article 226 in these matters, having regard to delay, the availability of statutory remedies which were not pursued, and the precedential guidance cited (including Tilokchand).
Subsequent legislative measures (Central Sales Tax (Amendment) Act, 1969 and the Madras General Sales Tax (Second Amendment) Act, 1969, and the preceding Ordinance) have validated earlier levies and, as applied by the court, deprive petitioners of the plea of payment by mistake of law in respect of the assessed periods to which those validating provisions apply.
The court rejected the petitioners' constitutional challenges under Article 301 and Article 19(1)(f) as not made out on the facts and law presented in these petitions.
No order as to costs was made against the petitioners (the petitions were dismissed but with no costs).
The opinion does not purport to lay down a novel or broad new precedent beyond applying established decisions and statutory validation to the facts; the dismissal rests on discretionary refusal to grant mandamus and on the effect of retrospective statutory validation.

This summary is based exclusively on the material contained in the provided opinion. No information not present in that text has been added.

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M. Mohammed Aslam And Others v. The Commissioner Of Commercial Taxes Board Of Revenue, Madras And Another.

1. These are two batches of petitions for mandamus for refund of Central sales tax paid. The relief is sought on the ground that the payment had been made under a mistake of law. In three of the petitions, in which Mohamed Salam was the assessee, the tax paid related to the assessment years 1957-58 and 1958-59. In respect of the second year, there was a balance of Rs. 1,400 in arrears. When this was sought to be collected by the revenue, the assessee served on it a lawyer's notice that, in view of State of Mysore v. Lakshminarasimhiah Setty and Sons [1965] 16 S.T.C. 231, the tax charged on inter-State sales was illegal and followed it up by filing the petitions in this court for direction to refund the tax already paid and also for prohibition from collecting the balance. In the second batch, Ashok Leyland Ltd., which is the common petitioner, seeks refund of Central sales tax paid for the assessment years 1962-63 to 1965-66 on the quantum of excise duty included in the chargeable turnover of inter-State sales. The ground in them is The State Of Madras v. N.K Nataraja Mudaliar. [1968] 22 S.T.C. 376 in which the Supreme Court held that excise duty was entitled to deduction or exclusion from the taxable turnover of such sales and the payment of tax on excise duty was, therefore, by mistake.

2. In view of the subsequent legislative amendments and validation, it becomes unnecessary to deal with the ground of mistake at any great length. State of Mysore v. Lakshminarasimhiah Setty and Sons [1965] 16 S.T.C. 231 held on 10th November, 1964, that the use of the expression "levied" under Section 9(1) of the Central Sales Tax Act and Section 5(3)(a) of the Madras General Sales Tax Act implied that the former Act did not make any departure from the manner of levy of tax on the specified goods at a single point under the latter Act. At the relevant periods, the point at which intra-State sales of tanned hides and skins attracted local tax was the stage of first sales in the State. Due to the assimilation of the point of charge, the tax on inter-State sales at that stage was regarded as unauthorised. In Khader & Co. v. State of Madras [1966] 17 S.T.C. 396 to which one of us was a party, the view was expressed that State of Mysore v. Lakshminarasimhiah Setty and Sons [1965] 16 S.T.C. 231 could not govern the period after 1st October, 1958, because of the substitution of Section 15 in the Central Act by the Amending Act 31 of 1958 and introduction by Madras Act 6 of 1963 of Section 4-A(1) in the Madras General Sales Tax Act and it was held that the scheme of the amended Section 15 of the Central Act read with Sections 4-A(1) and 6 of the State Act suggested that so far as the goods mentioned in Schedule I were concerned, their sales were liable to levy both under the State Act as well as under the Central Act but in the case of declared goods mentioned in Schedule II, though levies might be made under both the Acts, levy under the State Act was liable to be refunded. This point of view does not help the revenue for the period prior to 1st October, 1958, in respect of which State of Mysore v. Lakshminarasimhiah Setty and Sons [1966] 17 S.T.C. 396 would hold the field.

3. As regards the excise duty, Khader & Co. v. State of Madras [1966] 17 S.T.C. 396 pointed out that whereas Rule 6(f) of the Madras General Sales Tax Rules, 1959, directed deduction of excise duty from the taxable turnover, no such provision had been made in the Central Act or the rules made thereunder for such deduction and that, therefore, in determining the aggregate turnover of the inter-State sales, excise duty paid was not deductible. But applying the reasoning of State of Mysore v. Lakshminarasimhiah Setty and Sons [1965] 16 S.T.C. 231 the Supreme Court in State Of Madras v. N.K Nataraja Mudaliar. [1968] 22 S.T.C. 376 held that the benefit of deduction available under the local rules would also be available in determining the chargeable turnover of inter-State sales.

4. It follows, therefore, that when the assessment orders in these cases were made, there was no legal basis to tax the inter-State sales or to include the excise duty paid in the taxable turnover of such sales. But the question is whether on the ground of payment of tax by mistake of law, the petitioners are entitled to a direction for refund. Apart from the relief sought being discretionary and the exercise of the discretion will depend upon the facts and circumstances in each case, including undue delay in moving for the relief, we are of the view that the court, in considering the relief sought, should take into account the fact that the petitioners, if they were aggrieved against the assessment orders should have pursued their remedies provided under the Act, but they having not resorted to them, they have allowed them to become final and also the further fact that, when they had a right of suit for recovery of refund on payment of court-fee therefor, they ought not, normally, to be allowed to by-pass it and to resort to the constitutional remedy. We are inclined to think that Article 226 of the Constitution is not intended to circumvent other remedies where they can well be resorted to. These are not the cases where other remedies are inadequate or unsuitable or the imminence of the situation warrants immediate relief under Article 226 of the Constitution. Apart from these considerations, inasmuch as the orders of assessments were made more than four or five years before, or even more in some of the cases, the long delay in resorting to this court is also a factor dissuading it from exercising its discretion. We feel justified in taking that view having regard to the ratio of the majority opinion of the Supreme Court in Tilokchand Motichand v. H.B. Munshi W.P.No. 53 of 1968; since reported at [1970] 25 S.T.C. 289 (S.C.). In our opinion, the question of refund is not to be approached solely from the standpoint of fundamental rights and the powers in the abstract of this court to give relief in that context. As we said, the issuance of mandamus for refund being in the discretion of the court, in exercising it, the court should bear in mind the other factors and circumstances, not only the payment having been made by mistake of law. On that view, we should decline to order refund.

5. In any case, the petitioners cannot ask for refund because of the Central Sales Tax (Amendment) Ordinance, 1969, followed by the Central Sales Tax (Amendment) Act, 1969, as well as the Madras General Sales Tax (Second Amendment) Act, 1969, which had validated the levies and cut at the root of the petitioners' claim of payment by mistake of law. The effect of the Central Act, like the preceding Ordinance, is to get over the ratio of State of Mysore v. Lakshminarasimhiah Setty and Sons [1965] 16 S.T.C. 231 as also the adverse tax effect consequent on State Of Madras v. N.K Nataraja Mudaliar. [1968] 22 S.T.C. 376 as to deductibility of the excise duty in computing the taxable turnover of inter-State sales. The adoption by Section 9 of the Central Sales Tax Act and the assimilation to its purpose of the scheme of single point taxation of declared goods under the State Act has been, so to speak, reversed by the Central Ordinance and the Act which replaced it, by substituting a new section 9 for the old section 9, with the result that the inter-State sales attract Central tax by reason of their being so and the point of their charge has been disannexed from the one at which such sales would be chargeable under the local Act, if they were intra-State sales. Further, there is a provision validating the earlier assessment which

"shall be deemed to be as valid and effective as if such assessment, reassessment, levy or collection or action or thing had been made, taken or done under the principal Act as amended by this Act."

Sections 2 and 3 of the said Madras Amending- Act have in effect, by a process of retro-operation, omitted all the relative local rules during the period commencing on the 5th January and ending with the 31st March, 1959, as well as during the period commencing from 1st April, 1959 and ending with the 31st March, 1966, which had permitted exclusion of excise duty from the taxable turnover and by a deeming provision that taxable turnover shall include and shall be deemed always to have included the excise duty, if any, paid by a dealer to the Central Government in respect of the goods sold by him. These two sections are followed by Section 4 which validates the levy and collection of tax and directs that they shall be deemed to be and to have always been validly levied or collected in accordance with law as if the Amending Act had been in force at all material times when such tax was levied or collected. The result of these Central and local amending statutory provisions is, obviously, to deprive the petitioners of the plea of payment of tax under a mistake of law. In fact, it is not argued for them that it is not the effect of those provisions.

6. But the contention in support of the petitions is that the Central Amending Act violates Article 301 of the Constitution and that the local Act is confiscatory and is violative of Article 19(l)(f) of the Constitution. We are not impressed by this contention. It is true that on account of Section 15 and Section 4-A(1) read with Section 6 of the local Act, though there may be levy of local tax at the prescribed point in respect of sales of declared goods and the Central tax on inter-State sales of the same goods, in the event of both the taxes being levied, the former should be refunded to the dealer who paid it. But we fail to see how this fact lays heavier burden on inter-State sales than on local sales and thus impedes the free flow of the former. The whole object of single point scheme of taxation is, as envisaged by Section 15 of the Central Act, to limit the levy of sales tax in respect of declared goods to one single specified point in the series of sales, including inter-State sales. If there is no inter-State sale of particular declared goods, the same goods would suffer tax at the appropriate point of sale within the State. We do not think that there is anything in Larsen and Toubro Ltd. v. Joint Commercial Tax Officer [1967] 20 S.T.C. 150 which is of assistance to the petitioners. We are not persuaded that the Central Ordinance or the Amending Act violates Article 301 of the Constitution. Nor do we think that the contention that the local Amending Act is confiscatory is made out. It is not disputed that the tax on that part of the Central turnover which represented excise duty, had been collected from the customers. The tax having been levied and paid on that basis, which has been validated retrospectively, it is neither unreasonable nor confiscatory. Krishnamurthi and Company v. State of Madras [1969] 23 S.T.C. 1 also supports this view.

7. The petitions are dismissed but with no costs.

M. Mohammed Aslam An... v. The Commissioner Of ...