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AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Ray, J.
Acts
  • provisions of Clause (2) of Article 286 of the Constitution. 16. Section 33 of the Bihar Sales Tax Act
  • Section 22 of the Madras Act is identical to Section 33 of the Bihar Sales Tax Act.
  • Bihar Sales Tax Act, 1947 defines sale in Section 2(g) thereof. Section 2(i)
  • ARTICLE 286 CONSTITUTION OF INDIA
  • Section 2 of the Bihar Act VII of 1951 the clause
  • Section 2 of the Sales Tax Validation Act
  • Section 12 relates to returns. Section 13
  • Section 22 of the Madras Sales Tax Act
  • Section 33 of the Bihar Sales Tax Act
  • Sales Tax Validation Act (VII) of 1956
  • Rule 26 of the Bihar Sales Tax Rules
  • SECTION 4 SALE OF GOODS ACT
  • Article 286(1)(a) in the section
  • SECTION 72 CONTRACT ACT
  • SALE OF GOODS ACT 1930
  • Section 2 (h) of the Madras Act
  • Section 22 of the Madras Act
  • Section 14 of the Bihar Act
  • Section 4 of the Bihar Act
  • Sales Tax Validation Act
  • SECTION 4 INTEREST ACT
  • Bihar Sales Tax Act
  • Section 2(c)
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Ray, J.
Acts
  • provisions of Clause (2) of Article 286 of the Constitution. 16. Section 33 of the Bihar Sales Tax Act
  • Section 22 of the Madras Act is identical to Section 33 of the Bihar Sales Tax Act.
  • Bihar Sales Tax Act, 1947 defines sale in Section 2(g) thereof. Section 2(i)
  • ARTICLE 286 CONSTITUTION OF INDIA
  • Section 2 of the Bihar Act VII of 1951 the clause
  • Section 2 of the Sales Tax Validation Act
  • Section 12 relates to returns. Section 13
  • Section 22 of the Madras Sales Tax Act
  • Section 33 of the Bihar Sales Tax Act
  • Sales Tax Validation Act (VII) of 1956
  • Rule 26 of the Bihar Sales Tax Rules
  • SECTION 4 SALE OF GOODS ACT
  • Article 286(1)(a) in the section
  • SECTION 72 CONTRACT ACT
  • SALE OF GOODS ACT 1930
  • Section 2 (h) of the Madras Act
  • Section 22 of the Madras Act
  • Section 14 of the Bihar Act
  • Section 4 of the Bihar Act
  • Sales Tax Validation Act
  • SECTION 4 INTEREST ACT
  • Bihar Sales Tax Act
  • Section 2(c)
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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

The plaintiffs brought a suit seeking recovery of Rs. 13,176.69 nP (comprised of Rs. 11,096.69 nP as refund and Rs. 2,080 as interest for the period 24-9-1955 to 24-11-1958). The plaintiffs were assessed for sales tax for the assessment years 1950-51, 1951-52 and 1952-53 under Sales Tax Registration No. DH/2383 by orders dated 25-9-1954 issued by the Assistant Superintendent of Sales Tax, Dhanbad (State of Bihar). Believing themselves liable, the plaintiffs paid Rs. 10,000 by cheque dated 14-12-1953 and, later, deposited Rs. 1,096-13-0 by cheque dated 23-7-1955 to pursue an appeal. The plaintiffs appealed the assessment orders; the Assistant Commissioner, Sales Tax, Chotta Nagpur Division, allowed the appeals by order dated 24-9-1955 holding that the plaintiffs could not be assessed to pay tax in Bihar. The plaintiffs applied for refund (application filed on or about 13-10-1955) but the defendant did not make any refund payment. The suit was defended by an affidavit treated as a written statement in which the defendant denied entitlement to the claimed sum.

At trial the court framed issues concerning (inter alia) whether the payments were made under bona fide mistake, whether the plaintiff was compelled to deposit the later sum to prosecute the appeal, entitlement to refund in view of the Sales Tax Validation Act and Sales Tax Continuance Order, limitation and the court's jurisdiction. The trial court proceeded to consider jurisdiction, the substantive refund claim (including statutory and constitutional issues), mistake, and limitation and gave its findings and final decretal order.

Legal Issues Presented

  1. Was the sum of Rs. 10,000/- paid by the plaintiff under a bona fide mistake, and was the plaintiff compelled to deposit Rs. 1,096-13-0 as stated?
  2. Is the plaintiff entitled to refund of the said sum in view of the provisions of the Sales Tax Laws Validation Act of 1956 and the Sales Tax Continuance Order of 1950?
  3. Is the suit barred by limitation?
  4. Has this Court jurisdiction to entertain or try this suit?
  5. To what relief, if any, is the plaintiff entitled?

Arguments of the Parties

Plaintiff's Arguments

  • The plaintiffs asserted they paid the tax money under a bona fide mistake of law and fact and therefore were entitled to recovery of the amounts paid together with interest.
  • After successful appeals (order dated 24-9-1955), the plaintiffs argued that, with assessment orders set aside, the State of Bihar could not retain the sums collected and a refund should follow.
  • The plaintiffs served notice under the Interest Act and sought interest on the refunded sums.
  • As to jurisdiction, the plaintiffs relied upon facts such as the cheque being drawn on a Calcutta branch of the bank and the alleged receipt of the appellate order at Calcutta to support venue within the court's local jurisdiction.
  • In relation to the Sales Tax Validation Act, the plaintiffs conceded that if there had been a subsisting assessment order the statute would preclude refund; but relied on the absence or setting aside of assessment orders to press their claim.

Defendant's Arguments

  • The defendant denied that the plaintiffs were entitled to recover the claimed sums.
  • On jurisdiction the defendant contended that statutory payment provisions (Section 14 of the Bihar Act and Rule 26 of the Bihar Sales Tax Rules) prescribed payment to the Dhanbad Treasury, and therefore the cause of action in respect of payment arose at Dhanbad (outside the forum relied upon by plaintiffs).
  • The defendant relied on the Sales Tax Validation Act (1956) and the Sales Tax Continuance Order (1950) to contend that taxes levied, collected, or purported to be levied or collected during specified periods were validated and therefore not refundable merely because assessment orders were later set aside.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Engineering Supplies Ltd. v. Dhandhania and Co. Definition and judicial gloss on the phrase "cause of action" (Rankin, C.J.'s formulation). The court used this definition to analyse where the cause of action arose for jurisdictional purposes and to conclude payment by cheque formed part of the cause of action.
Alexander Brault v. Indrakrishna Kaul Another authoritative definition of "cause of action" (every fact necessary to be proved to support plaintiff's claim). Reinforced the court's approach to determining whether the alleged facts (payments, receipt of orders, allegation of liability in Calcutta) constituted part of the cause of action for jurisdictional purposes.
State of Bombay v. United Motors Held that the explanation to Article 286(1)(a) invested certain sales with the character of intra-state sales, making them taxable by the State where delivery occurred. The court described this decision as the earlier interpretation of Article 286(1)(a) which was later reconsidered by the Supreme Court; it set the historical context for the issue whether explanation-sales could be taxed by the State.
Bengal Immunity Co. Ltd. v. State of Bihar Held that sales falling within the explanation to Article 286(1)(a) remained inter‑state and could not be taxed by the State unless Parliament provided otherwise (overruling aspects of United Motors). The court relied on this decision as the authority that altered the legal position, triggering the Sales Tax Validation Act's remedial operation; it is central to the plaintiffs' appeals having been allowed.
Sundararamier and Co. v. State of Andhra Pradesh Considered the scope and policy of the Sales Tax Validation Act; interpreted the Act as validating state laws and proceedings relating to sales in the specified period and protecting assessments and proceedings. The court relied upon this case to interpret the Sales Tax Validation Act as keeping the State laws in force for the specified period and protecting assessments and proceedings under those laws.
Whitney v. Inland Revenue Commissioners (1926 AC 37) Principle that liability to tax is created by the charging section and does not depend on assessment; assessment merely quantifies the liability. The court cited this authority to support the proposition that liability exists independently of assessment and therefore payment (and inability to claim refund merely because assessment was not made) follows from the charging section.
W. H. Cockerline and Co. v. Commissioners of Inland Revenue (1931) 16 Tax Cas 1 Authority rejecting the contention that payment cannot be made in absence of assessment; assessment is not always a prerequisite to payment. Used to bolster the conclusion that a payment may be made absent a formal assessment and that non-assessment does not negate the statutory liability.
Recols (India Ltd.) (57 Cal WN 468) Observation cited that a tax becomes due only when, after an assessment, a demand for payment is made (a view referenced by plaintiff's counsel). The court noted the decision and the divergent views within it; but observed that in the present case payment had already been made and that other commentary in the case recognised liability accrues before assessment.
Sales Tax Officer, Banaras v. Kanhailal Mukundlal Interpreted Section 72 of the Contract Act: payment by mistake must be a payment which was not legally due and could not have been enforced; mistake relates to thinking money was due when it was not. The court applied the principle to assess whether the plaintiffs had paid money under a recoverable mistake and concluded on the evidence there was no such mistake at time of payment.
Raleigh Investment Co. v. Governor-General in Council (74 Ind App 50 : AIR 1947 PC 78) Principle that an assessment made under statutory machinery, even if based on subsequently invalid provision, is not a nullity akin to an order of a court lacking jurisdiction; test is whether use of statutory machinery was followed. The court referenced this authority in the limitation discussion to explain whether suits challenging assessments are barred while the statutory machinery stands; used in analyzing when limitation would run.
State v. Mask and Co. (referred to as the "Mask case") Authority relied upon (by defendant) in limitation/entitlement to sue context (specific rule in text not elaborated). The court referenced the case in the limitation debate; it appears in the stream of authorities considered in assessing whether a general right of suit exists notwithstanding statutory assessment machinery.
Williams (judgment of Lord Justice Sargant) Passage cited to the effect that non-assessment does not prevent incidence of liability; assessment is machinery to quantify liability. The court cited the passage to support the legal proposition that liability is imposed by the charging section and does not depend on assessment.

Court's Reasoning and Analysis

The court's analysis proceeds in several discrete stages: jurisdiction; entitlement to refund (statutory and constitutional background); whether payments were made under mistake; and limitation.

1. Jurisdiction

The court first examined whether it had jurisdiction. It framed "cause of action" according to authoritative definitions (Engineering Supplies Ltd. v. Dhandhania; Alexander Brault v. Kaul) as "the entire set of facts" necessary to give rise to an enforceable claim. The plaintiffs relied on multiple facts said to arise within the forum: payment by cheque drawn on a Calcutta branch of the bank, alleged receipt of the appellate order at Calcutta, and the defendant's liability to pay the sum at Calcutta. The defendant submitted statutory payment rules (Section 14 of the Bihar Act and Rule 26 of the Bihar Sales Tax Rules) indicated that payments were to be made to the Dhanbad Treasury, suggesting the place of cause of action was Dhanbad. The court held that payment by cheque was a fact the plaintiff had to prove and which the defendant could traverse, and therefore that payment by cheque constituted part of the cause of action. The court found insufficient evidence that the appeals' orders were received at Calcutta but accepted that the doctrine allowing a debtor to seek the creditor could be invoked. On balance, the court concluded it had jurisdiction to entertain the suit.

2. Entitlement to Refund — statutory and constitutional framework

The core substantive question was whether, in light of constitutional restrictions (Article 286) and subsequent statutory measures, the plaintiffs were entitled to refund of sums paid for periods both up to 31 March 1951 and for the period 1 April 1951 to 31 March 1953.

The court set out relevant statutory text and constitutional background: the Bihar Sales Tax Act provisions (charging, assessment, payment and refund sections), the Sales Tax Continuance Order 1950 (President's order permitting continuation of pre-Constitution sales tax until 31 March 1951), and Article 286 and its explanation. It reviewed the evolution of judicial treatment: the United Motors decision (which treated explanation-sales as taxable by the delivery State) and the Bengal Immunity decision (which later held explanation-sales to be inter‑state and not taxable by the State absent parliamentary action). The Sales Tax Validation Act (1956) was then enacted to validate State laws and collections for the period 1 April 1951 to 6 September 1955.

The court analysed Section 2 of the Sales Tax Validation Act as consisting of two limbs: (1) declaring valid the laws imposing tax on inter‑state sales during the specified period; and (2) deeming all taxes levied or collected or purported to have been levied or collected during that period to have been validly levied or collected. The court accepted the construction in Sundararamier and Co. v. State of Andhra Pradesh that the Sales Tax Validation Act kept State laws in force for sales in the specified period and protected proceedings and assessments taken under them.

From that statutory construction the court concluded that taxes levied or purportedly levied or collected in the period 1 April 1951 to 31 March 1953 were validated by the 1956 Act and thus could not be impugned merely by the later setting aside of assessment orders. The court held that the setting aside of the assessment orders did not render the levies illegal or unauthorised because the Validation Act removed inconsistent judicial decisions and validated the levies and collections.

3. Liability and the effect of non-assessment

The court addressed whether the absence of a formal assessment precluded the plaintiffs from being liable (or conversely entitled to a refund). Relying on the English authorities (Whitney v. IRC and W. H. Cockerline and Co.) and Indian authorities (including discussion in Recols), the court adopted the principle that the charging section creates the liability and assessment is merely the machinery to quantify that liability. The court therefore held that liability to pay taxes arises from the charging section and does not depend on there being a formal assessment before payment. Because the plaintiffs had admitted liability by paying Rs. 10,000 and later Rs. 1,096-13-0 (the latter pursuant to a notice of demand while an appeal was pending), the absence or later setting aside of assessment orders did not entitle them to a refund.

4. Mistake

The court considered whether the payments were made under a recoverable mistake under the principles in Sales Tax Officer, Banaras v. Kanhailal Mukundlal and Section 72 of the Contract Act—i.e., whether the plaintiffs paid money which was not legally due and which could not have been enforced. The court found on oral evidence that the payments were made in the belief that tax was payable (a belief founded on the then law as interpreted by United Motors). The court concluded that there was no mistake of fact, and no mistake of law could be asserted at the time because the law then permitted taxation (and later the 1956 Act declared such law valid for the specified period). Accordingly the court held there was no recoverable mistake.

5. Limitation

The court reviewed limitation contentions. It noted the plaintiffs' submission that limitation should run from the date assessment orders were set aside. The court examined authorities (including Raleigh Investment and State v. Mask) and explained that for a cause of action based on payment under mistake limitation would begin to run from the date of payment; thus a claim based on a mistake would be time-barred if limitation had run. By contrast, insofar as the cause of action was said to arise from setting aside assessment orders, limitation would not necessarily bar the claim. However, having found no mistake and having held on statutory grounds that levies were validated (and liability subsisted), the court found that the plaintiffs were not entitled to refund in either respect.

6. Answers to the specific issues (as reasoned)

  • Jurisdiction: the court concluded it had jurisdiction to entertain the suit.
  • Entitlement to refund for the period 1 April 1951 to 31 March 1953: the Sales Tax Validation Act validated levies and collections in that period; hence no refund.
  • Entitlement to refund for the period up to 31 March 1951: the Sales Tax Continuance Order and charging provisions lead to the conclusion that the levies and payments were lawful and not refundable on the basis advanced.
  • Mistake: there was no recoverable mistake established on the evidence.
  • Limitation: claims based solely on mistake would be time-barred from date of payment; claims founded on setting aside assessments have a different limitation posture, but on merits the plaintiff was not entitled to relief.

Holding and Implications

Final Ruling: The court dismissed the suit. The opinion records the order: "The suit is dismissed with costs. Certified for two counsel."

Implications and direct consequences:

  • The plaintiffs are not entitled to any refund of the amounts claimed for the periods in question (including sums allegedly paid in respect of assessments later set aside).
  • The court held that taxes levied or purported to be levied or collected for the period 1 April 1951 to 6 September 1955 are validated by the Sales Tax Validation Act (1956); accordingly such levies cannot be attacked in the present suit on the ground relied upon by the plaintiffs.
  • The court held that liability to pay tax arises from the charging section and does not depend on a formal assessment; therefore absence or setting aside of assessment orders did not entitle the plaintiffs to recovery on the facts before the court.
  • The court affirmed its jurisdiction to hear the suit (finding the cause of action included aspects occurring within the forum).
  • On limitation, the court found that a claim based on payment under a mistake would be barred from the date of payment; claims founded solely on the later setting aside of assessment orders raise different limitation questions but in this case were not sustained on merits.

Note: This summary is confined to the materials and reasoning explicitly contained in the provided opinion. No extra-textual inferences or additions have been made.

Certified order in the opinion: "The suit is dismissed with costs. Certified for two counsel."

Show full summary ...

    Borakar Eng & Foundry Works v. State Of Bihar

    1. This is a suit for the recovery of Rs. 13,176.69 nP. consisting of a sum of Rs. 11,096.69 nP. as and by way of refund and sum of Rs. 2080/- being interest from 24-9-1955 till 24-11-1958. The plaintiffs case is that the plaintiff was purported to be assessed to pay sales tax to the extent of Rs. 2803-2-0, Rs. 3670-5-0 and Rs. 4623-6-0 for the assessment periods 1950-51, 1951-52 and 1952-53 respectively under the Sales Tax Registration No. DH/2383. The orders for assessment were passed by the Assistant Superintendent of Sales Tax Dhanbad in the State ot Bihar by orders dated 25-9-1954. The plaintitt states that under a bona fide mistake that it was liable to pay sales tax for the said periods and that the defendant had a right to demand and receive such taxes from the plaintiff, the plaintitt paid a sum of Rs. 10,000/- to the defendant on account of such taxes. The payment was made by cheque, being cheque No. 041203 dated 14-12-1953 for Rs. 10,000/- drawn on the Oriental Bank of Commerce Ltd., having its office at 12, India Ex-

    change Place, Calcutta within the jurisdiction. The plaintiff was compelled to deposit a further sum of Rs. 1096-13-0 in respect of such assessment in order to appeal from the said pretended orders. The said payment was also made by cheque No. 011015 dated 23-7-1955 for Rs. 1096-13-0 drawn on Oriental Bank of Commerce Ltd. having its office at 12, India Exchange Place, Calcutta within the jurisdiction.

    2. The plaintiff preferred appeals from the said pretended orders. By an order dated 24-9-1955, the Assistant Commissioner, Sales Tax, Chotta Nagpur Division in the State of Bihar allowed the appeal holding inter alia that the plaintiff could not be assessed to pay tax in Bihar. On or about 13-10-1955, the plaintiff filed with Superintendent of Sales Tax, Dhanbad from Calcutta within the jurisdiction an application for refund of Rs. 11,096-13-0. The defendant did not pay the said sum or any portion thereof. Under these circumstances, the plaintiff claims refund ot Rs. 11,096.69 nP. and claims interest. The plaintiff states that by letter dated 7-6-1958 notice was, served on the defendant under the Interest Act claiming interest at 6 per cent.

    3. On behalf of the defendant, the affidavit affirmed by Radha Raman Prasad on 17-12-1959-was treated as written statement. The defendant denies that the plaintiff was entitled to claim the said sum.

    4. The brief of documents, which was tender ed and marked as Ex. A, shows that on 14-12-1953 the plaintiff sent a cheque for Rs. 10,000/- in compliance with the direction of the Sales tax authorities of Bihar. On 25-9-1954, there were three several orders in respect of the years 1950-51, 1951-52 and 1952-53. It is recorded in the said orders that 'the dealer is liable to tax with effect from 26-1-1950.' The plaintiff was not a registered dealer. The plaintiff gave an explanation in its letter dated 30-11-1953 contending that the plaintiff was not liable to registration in Bihar. The Sales Tax authority held that the plaintiff did not wilfully fail to apply for registration and under those circumstances did not impose any penalty on the plaintiff. The plaintiff thereafter filed three appeals against the assessment orders. The appeals were disposed on 24-9-1955. It was held in those appeals that according to the latest decision of the Supreme Court, the plaintiff could not be assessed to pay any tax in Bihar.

    5. The following issues were framed at the trial:

    1. (a). Was the sum of Rs. 10,000/- paid by the plaintiff under a bona fide mistake as stated in paragraph 2 of the plaint?

    (b) Was the plaintiff compelled to deposit with the defendant the sum of Rs. 1096-13-0 as stated in paragraph 3 of the plaint?

    2. Is the plaintiff entitled to refund of the said sum in view of the provisions of the Sates Tax Laws Validation Act of 1956 and Sales Tax Continuance Order of 1950?

    3. Is the .suit barred by limitation?

    4. Has this Court jurisdiction to entertain or try this suit?

    5. To what relief, if any, is the plaintill entitled?

    6. I shall first deal with the question of jurisdiction. It is alleged in the plaint that paragraphs 2, 3, 4, 5, 9 and 10 are parts of the cause of action which arose within the jurisdiction. Paragraph 10 of the plaint alleges notice under S. 80 of the Code as part of the cause of action. Counsel for the plaintiff conceded that it was not a part of cause of action. I took the view that Section 80 is not part of the cause of action and I am told by counsel that it has recently been held by Appellate Court that that view is correct. As to paragraphs 2, 3, 4, 5 and 9 in the plaint, the plaintiff bases part of the cause o action first on payment of Rs. 10,000/- by cheque drawn on Oriental Bank of Commerce Ltd., having its office at 12, India Exchange Place, Calcutta. Secondly that the order dated 24-9-1955 allowing the appeal was received by the plaintiff at Calcutta. Thirdly, paragraph 9 alleges that the defendant is liable to pay the sum of Rs. 13,176.69 nP. at Calcutta.

    7. The phrase 'cause of action' has received considerable judicial gloss. The definition enunciated by Rankin, C. J. in Engineering Supplies Ltd. v. Dhandhania and Co. , is

    "the entire set of facts that gives rise to an enforceable claim or in the words of Fry L. J., 'everything, which, if not proved, gives the defendant as immediate right to judgment, in other words, every fact which is material to be proved to entitle the plaintiff to succeed, every fact which the defendant could have a right to traverse."

    Lort-Williams, J. in the decision reported in Alexander Brault v. Indrakrishna Kaul , said

    " 'Cause of action' may be defined as every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the Court. It does not comprise every piece of evidence which is necessary to prove each fact, but every fact which is necessary to be proved."

    8. In the present case, payment of Rs. 10,000/-and further sum of Rs. 1098-13-0 is certainly a tact which the plaintiff has to prove in order to succeed and it is a fact which the defendant had the right to traverse. Counsel on behalf of the defendant contended that Section 14 of the Bihar Act enacted that "tax payable under the Act was to be paid in a manner provided". Rule 26 of the Bihar Sales Tax Rules requires that "every dealer shall pay the amount of the tax due from him into the Government treasury or by postal money order to the Treasury Officer". On these rules, it was contended that the Dhanbad Treasury at Dhanbad was the place where the payment was to be made under the Statute and therefore that was the place where the cause of action arose in regard to payment. The requirement of the statute as to payments certainly has to be fulfilled in order to entitle an assessee to pay under the statute. But it cannot be gainsaid that as far as the cause ot action is concerned the payment by cheque constitutes a part of the plaintiff's cause of action. As to the second part of cause of action, viz., the receipt of the orders at Calcutta, there is the document in Ex. A appearing at p. 20. This does not show that the order was received by the plaintiff at Calcutta. The witness on behalf of the plaintiff Har Charan Das was not asked as to whether (where?) the plaintiff received the orders. The third part of the cause of action, viz., the money being payable bv the defendant to the plaintiff raises the applicability of the doctrine ot the debtor seeking the creditor. I see no reason as to why the plaintiff cannot invoke the applicability of the doctrine as part of the cause of action. I am, therefore, of opinion that this Court has jurisdiction to entertain this suit.

    9. The most important question in the suit is whether the plaintiff is entitled to any refund.

    Counsel on behalf of the plaintiff contended that as a result of the appeals heard by the Sales Tax Authorities assessment orders are set aside and therefore in the absence of any assessment order the State of Bihar is not entitled to retain any money. The appeals were allowed by holding that according to the latest decision of the Supreme Court (meaning the Bengal Immunity case) the plaintiff could not be assessed to pay tax in Bihar. That is the basis of setting aside the assessment. It should also be noted that the assessments of all the three years were set aside by one composite order though there were three separate assessments for the three years. aS to payment of sales tax it appears that there was one composite payment for all the three years on 14-12-1953 for the sum of Rs. 10,000/- and the balance sura of Rs. l,096/8/- was paid on 23-7-1955 during the pendency of the appeals before, the Sales Tax Authorities.

    10. The Bihar Sales Tax Act, 1947 defines sale in Section 2(g) thereof. Section 2(i) defines turnover as the aggregate of the amount of the sale prices received and receivable by a dealer in respect of sale or supply of goods or carrying out of any contract effected or made during a given period, or. where the amount of turnover is determined in the prescribed manner the amount so determined. In Section 2(c) a dealer is defined as any person who sells or supplies any goods whether for commission or remuneration or otherwise. Section 4 of the Bihar Act is the charging section. Section 4 has undergone amendments from time to time. The basis of the section has remained the same, namely, that every dealer whose gross turnover during a certain period exceeded a certain amount shall be liable to pay tax under the Act. Section 5 deals with the rate of tax and enacts that tax shall be levied at certain rate on the taxable turnover. Section 12 relates to returns. Section 13 relates to assessment. Section 14 relates to payment and recovery of tax. Section 15 relates to refund. Section 33 which came into the Statute by the Adaptation of Laws Order enacted that notwithstanding anything contained in the Act (a) a tax on the sale and purchase of goods shall not be imposed under the Act (i) where such sale or purchase takes place outside the State of Bihar, (b) that the tax on the sale or purchase of any goods shall not be after 31-3-1951 imposed where such sale or purchase takes place in the course of inter-State trade or commerce except in so far as Parliament may by law otherwise provide. The explanation to Article 286(1)(a) is also reproduced there.

    11. The definition of sale in the Bihar Sales Tax Act underwent various changes. From 1-7-1947 to 30-9-1948 there was a definition with which we are not concerned in the present case. From 1-10-1948 to 31-3-1951 that is after amendment by Bihar Act VI of 1949 and prior to amendment by Section 2 of the Bihar Act VII of 1951 the clause stood as follows:

    Sale means with ail its grammatical variations and cognate expressions, any transfer of property in goods for cash or deferred payment of other valuable consideration, including a transfer of property in goods involved in the execution of a contract but does not include a mortgage, hypothecation, charge or pledge..... Provided further that notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930. the sale of any goods (i) which are actually in Bihar at the time when, in respect thereof, the contract of sale as defined in Section 4 of that Act is made or (ii) which are produced or manufactured in Bihar by the producer or manufacturer thereof, shall wherever the delivery or contract of sale is made, be deemed for the purpose of this Act to have taken place in Bihar,

    From 1-4-1951 to 31-3-1952 an explanation was added to this definition of sale. Section 33 of the Bihar Sales Tax Act was inserted by the Adaptation of Laws Order, 1951 published in the Government of India, Ministry of Law, Notification No. S. R. O. 508 dated 4-4-1951 and is deemed to have come into force on 26-1-1950. It is only necessary to state here that Section 33 of the Bihar Sales Tax Act is in same words as Article 286(1)(a) ot the Constitution.

    12. Article 286(1)(a) came up for consideration before the Supreme Court in the case of State of Bombay v. United Motors . It was held there that though the sales falling within the explanation would in fact be in the course of inter-state trade they became by reason of the fiction introduced therein, invested with the character of intra-state sates and would be liable to be taxed by the State within which the goods were delivered for consumption. The scope of the explanation to Article 286(1)(a) again came up for consideration before the Supreme Court in Bengal Immunity Co. Ltd. v. State of Bihar, . By the judgment dated 6-9-1955 it was held that the sales falling within the explanation of Article 286 being inter-state in character could not be taxed by reason of Article 286(2) unless Parliament lifted the ban and that the explanation to Article 286(1)(a) controlled only that clause and did not limit the operation of Article 286(2) and that the law had not been correctly laid down in the United Motors' case, . The Sales Tax Validation Ordinance No. 3 of 1956 was promulgated on 30-1-1956 and that was later replaced by the Sales Tax Validation Act (VII) of 1956 and that came into force on 21-3-1956.

    13. In the present case the State of Bihar levied taxes on the plaintiff for the period up to 81-3-1951 and also for the periods 1-4-1951 to 31-3-1952 and 1-4-1952 to 31-3-1953. The assessment orders were set aside. Under these circumstances two questions arise. First, whether the plaintiff is entitled to refund of taxes levied and paid up to 31 March. 1951 and secondly, whether the plaintiff is entitled to refund of taxes levied and paid for 1 April 1951 to 31 March 1953.

    14. I shall first deal with the plaintiff's claim ' of refund for the taxes for the period 1 April 1951 to 31 March 1953. The defendant relies on the Sales Tax Validation Act and contends that taxes which have been levied or collected or purported to be levied or collected during the said period are deemed to have been validly levied or collected. The plaintiff contends that in the absence of assessment the defendant is not entitled to retain any money levied. Under Section 2 of the Sales Tax Validation Act it is enacted that notwithstanding any judgment, decree or order of any Court no law of a State imposing or authorising the imposition of a tax on the sale or purchase of any goods where such sale or purchase took place in the course of inter-state trade or commerce during the period between 1 April 1951 and 6 September 1955 shall be deemed to be invalid or ever to have been invalid merely by reason of the fact that such sale Or purchase took place in the course of inter-state trade or commerce; and all such taxes levied or Collected or purported to have been levied or collected during the aforesaid period shall be deemed always to have been validly levied or collected in accordance with law. This section consists of two principal limbs. The first limb states that the law imposing taxes on inter-state trade or commerce during the specified period from 1 April 1951 to 6 September 1955 is valid. The second limb enacts that all levies and collections or purported levies or collections are valid. Counsel for the plaintiff conceded that if there had been an assessment order in existence the plaintiff could not claim any refund. The question which falls for determination is whether the setting aside of the assessment order or the absence of an assessment order entitles the plaintiff to claim refund. In my opinion, the answer is in the negative. What has been held by the Act to be valid is tax levied or collected or purported to have been levied or collected. Even in the absence of any assessment, it is indisputable that taxes have been levied or purported to have been levied. In the case of Sundararamier and Co. v. State of Andhra Pradesh, , the Sales Tax Validation Act was considered. It was held that the policy behind the said Act is obviously to declare the law as interpreted in the United Motors case, , as the law governing sales falling within the Explanation up to the date of the judgment in the Bengal Immunity case, , and to give effect to the law as laid down in that decision for the sales effected subsequent thereto (p. 1458 (of SCR) : (at p. 485 of AIR)). It was also hold that the true construction of the Sales Tax Validation Act is that the laws of the States are kept in force in respect of sales which had taken place during the specified period, and that proceedings in respect thereof for assessment are within the protection of the Act (p. 1467 (of SCR): (at pp. 488-489 of AIR)). I am, therefore, of opinion, that as a result of the 3956 Act the law imposing or authorising tax cannot be impugned and whatever has been levied or collected or purported to have been levied or collected is equally unassailable. The Sales Tax Authorities, it cannot be contended, illegally levied or collected any money. The setting aside of the assessment order does not render the levies or purported levies illegal or unauthorised. To hold levies to be illegal would be to rob the 1956 Act of its content. Furthermore the effect of the non-obstante clause in the 1956 Act operates to set aside as no longer valid anything contained in any judgment, decree or order of anv court which is inconsistent with the enactment. The 1956 Act is a permanent statute operating on all sales which took place during the specified period. Therefore all levies or collections or purported levies or collections covered by the 1956 Act are valid.

    15. The Bihar Sales Tax Act came into force on 1 July, 1947. On 26 January, 1950 the definition of sale under the Act provided that notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930, the sale of any goods which are actually in Bihar at the time when in respect thereof the contract of sale as defined in Section 4 of the Sale of Goods Act is made or which are produced or manufactured in Bihar by the producer or manufacturer thereof, shall wherever the delivery of contract of sale is made be deemed for the purposes of the Bihar Sales Tax Act to have" taken place in Bihar. The Constitution of India by Article 286 imposed restrictions on taxes on the sale or purchase of goods. Article 286(1) provides that no law of a State shall impose or authorise imposition of tax on the sale or purchase of goods where such sale or purchase takes place outside the State. The explanation to Article 286(1) provides that for the purposes of Sub-clause (a) a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State, notwithstanding the fact that under the general law relating to sale of goods the property in the goods by reason of such sale or purchase passed in another State. Article 286 provides that except in so far as Parliament may by law otherwise provide no law of a State shall impose or authorise the imposition of a tax on the sale or purchase of any goods where such sale or purchase takes place in the course of inter-State trade or commerce. It is further provided there that the President may by order direct that any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately before the commencement of the Constitution shall, notwithstanding that the imposition of such tax is contrary to the provisions of this clause, continue to be levied until the 31st day of March, 1951. In exercise of the powers conferred by the proviso to Clause (2) of Article 286 of the Constitution of India the President was pleased to make the Sales Tax Continuance Order, 1950, which came into force on 26 January, 1950. Clause 2 of the Sales Tax Continuance Order states that any tax on the sale or purchase of goods which was -being lawfully levied by the Government of any State immediately before the commencement of the Constitution of India shall until 31 March, 1951 continue to be levied notwithstanding that the imposition of such tax is contrary to the provisions of Clause (2) of Article 286 of the Constitution.

    16. Section 33 of the Bihar Sales Tax Act which became a part of the Statute by the Adaptation of Laws Order was deemed to have come into force on 26 January, 1950. In the decision of the United Motors case, , imposition of such a tax was held to be valid. The decision in the Bengal Immunity case, , held that the State could not tax such explanation sales. In the United Motors case, , the construction put by the Supreme Court on the explanation to Article 286(1) which also was a part of Section 33 of the Bihar Sales Tax Act was that though but for it the sales mentioned therein would be in the course of inter-state trade and commerce, its effect was to convert them into inter-State sales, so as to bring them within the taxing power of the delivery state. In the Bengal Immunity case, , it was held that the explanation sales were not divested of their character as inter-state sales as the explanation to Article 286(1)(a) did not govern Article 286(2) and that in the absence of parliamentary legislation as contemplated by Article 286(2) taxation falling within its purview would be unconstitutional.

    17. In the case of . Section 22 of the Madras Sales Tax Act came up for consideration. Section 22 of the Madras Act is identical to Section 33 of the Bihar Sales Tax Act. In the Andhra Pradesh case, , it was contended by the State that because Section 22 of the Madras Act bodily incorporated the explanation of Article 286(1)(a) in the section itself and as under that explanation sales falling within its ambit would be sales inside the state of Madras they became taxable as sales within, the definition in Section 2 (h) of the Madras Act and that accordingly the explanation sales became taxable by the State as sales within that State. It was held that in the context and setting the explanation to Section 22 of the Madras Act authorises the State of Madras to impose a tax on sales falling within its purview. The effect of the non-obstante clause in Section 22 of the Madras Act was held in the Andhra Pradesh case to render explanation effective. The combined result of the definition of sale and Section 33 of the Bihar Sales Tax Act is that any sales in which goods are delivered for consumption in the State of Bihar the property therein shall be deemed to have passed inside the State notwithstanding that it has under the Sale of Goods Act passed outside the State. On that construction those sales will fall within the definition and will be taxable. Adaptation Order by the President is not open to attack. In the Andhra Pradesh case. , it was held that though there was an imposition of tax on explanation sales it could be enforced only when Parliament so provided. That would be so by reason of the judgment in the Bengal Immunitv case, .

    18. The true scope of the Sales Tax Validation Act was further held in the Andhra Pradesh case, , to be that the Sales Tax Validation Act lifted the ban imposed on the State against taxing inter-state sales. For this reason Section 22 of the Madras Act which is identical to Section 33 of the Bihar Sales Tax Act was held to be within the protection afforded by Section 2 of the Sales Tax Validation Act. The result of the Sales Tax Validation Act is that that portion of the explanation which relates to sales in which property passes outside the taxing state but the goods are delivered inside the taxing state and which was unenforceable before became valid and enforceable. , it is stated that Section 22 of the Madras Act and the corresponding provision in the other statute (namely, Section 33 of the Bihar Sales Tax Act) cannot be held to be null and void and non est by reason of their being repugnant to Article 286(2) and the bar under that Article having been removed there is no legal impediment to effect being given to them. , it is stated that if the States have the power under entry 54 to impose a tax on inter state sales subject only to the restriction enacted in Article 286(2) then by virtue of the Sales Tax Validation Act such law is rendered operative and proceedings taken thereunder are valid.

    19. Counsel for the plaintiff did not contend that under the law the State had not the right to impose taxes. The only contention was that by reason of the assessment orders having been set aside the State of Bihar did not have the right to retain the money. As to the period upto 31 March, 1951 counsel on behalf of the plaintiff contended that the Sales Tax Continuance Order did not validate the levies. As for the period subsequent to 31 March, 1951 the contention was that only levy of taxes was valid. In both cases it was argued that there could not be any levy in the absence of assessment. I am unable to accept the contention. The liability to pay tax is founded on the charging section. In the present case the plaintiff was called upon to register itself as a dealer under the Bihar Sales Tax Act. The plaintiff submitted statements and produced books. The plaintiff paid in the beginning Rs. 10,000/-. The plaintiff thereby admitted liability. The last payment of Rs. 1096-13-0 was for the period ending 31 March, 1953 and that was paid to prefer the appeal. I have already held that levies or purported levies for the period covered by the 1956 Act are valid. Liability to pay is created by the charging sections. Payment has been made and thereafter there is no assessment. The question in substance is whether there can be payment without assessment and whether the plaintiff is entitled to any refund.

    20. In the case of Whitney v. Inland Revenue CommissioneRs. 1926 AC 37, Lord Dunedin said:

    Once that it is fixed that there is liability, it is antecedently highly improbable that the statute should not go on to make that liability effective ..... Now there are three stages in the imposition of a tax : there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next there is the assessment. Liability does not depend on assessment. That ex hypothesi has already been fixed. But assessment particularises the exact sum which a person liable has to pay. Lastly come the methods of recovery, if the person taxed does not voluntarily pay.

    In the case of W. H. Cockerline and Co. v. Commissioners of Inland Revenue, (1931) 16 Tax Cas 1, a contention was made that there could be no payment without an assessment. Lord Hanworth M.R. did not accept that contention to be sound and said that it was not necessary in all cases, in order to enable the Crown to receive money, that there should be an assessment actually served of that sum which was ultimately paid. The observations of Lord Dunedin in 1926 AC 3Y, were referred to. A passage in Lord Justice Sargant's judgment in the case of Williams was also referred to. That passage is as follows :

    "I cannot see that the non-assessment prevents the incidence of the liability, though the amount of the deduction is not ascertained until assessment. The liability is imposed by the charging section. The subsequent provisions as to assessment and so on are machinery only. They enable the liability to be quantified, and when quantified to be enforced against the subject, but the liability is definitely and anally created by the charging section and all the materials for ascertaining it are available immediately."

    Counsel for the plaintiff relied on the decision in the matter of Recols (India Ltd.), 57 Cal WN 468, on the observation appearing at page 473 that a tax becomes due only when after an assessment a demand for payment is made. In other words the contention was that without an assessment order the sales tax authorities could not demand payment. In the present case the sales tax authorities are not demanding any payment. Payment has already been made. The question is whether the plaintiff can claim refund. In the present case there was also a notice of demand and pursuant to the last notice of demand the sum of Rs. 1096/13/- was paid for the year ending 1953. At page 472 in 57 Cal WN 468, Chakravartti, C. J. said that the liability to pay the tax accrues before an assessment is made. In the same case Sinha, J. said that as soon as there is a taxable turnover the tax is due. If a dealer files a return and pays the proper tax he has admitted the liability. It is only if the return is not correct that an assessment is made. A distinction is to be observed between the liability to pay tax on the taxable turnover and a liability to pay what has been demanded after assessment. Since liability does not depend on assessment the plaintiff cannot claim any relief merely on the setting aside of the assessment, because there is the liability imposed by the charging section to pay.

    21. I am therefore of opinion first that the liability to pay is under the charging section and the absence of an assessment order does not destroy that statutory liability. Secondly, taxes which have been levied or collected or purported to be levied or collected in respect of the period between I April 1951 and 31 March 1953 are valid under the Sales Tax Validation Act. Thirdly upto 31 March, 1951 the law imposing tax is valid. Taxes have been paid. Neither the levy nor the payment is illegal, therefore the plaintiff is not entitled to any refund.

    22. The next question is whether the payment was made under any mistake as alleged in the plaint. The witness Harcharan Das stated that the payment was made under the belief that the sum was payable. He further said that the belief was because of the judgment of the Supreme Court in the case of United Motors. . Counsel for the plaintiff relied on the decision of Sales Tax Officer, Banaras v. Kanhailal Mukundlal, . At page 1360 (of SCR) : (at p. 141 of AIR), it is said that payment by mistake in Section 72 of the Contract Act must refer to a payment which was not legally due and which could not have been enforced. The mistake is in thinking that the money paid was due when in fact it was not due. At page 1361 (of SCR) : (at p. 141 of AIR), it is stated that the mistake lies in thinking that the money paid was due when in fact it was not due and that mistake, if established, entitles the party paying the money to recover it back from the party receiving the same. The state of mind would be the only thing relevant to consider as to whether it was a case of mistake. On the oral evidence I am unable to hold that there was any mistake at the time of payment. It was not contended in the present case that there was any mistake of fact. There could not be mistake of law at the time of payment because at that time tax was lawfully imposed. It was the law of the land as a result of the United Motors case, that such sales tax was payable. The 1956 Act also enacts that the law imposing sales tax is valid. It is manifest that at no stage is there any law which says that there is no liability for sales tax.

    23. The third question which was canvassed in this suit was as to limitation. It was contended on behalf of the plaintiff that the only period of limitation would be from the date of setting aside of the assessment. It was submitted that as a result of the statute no suit could lie to set aside or modify the assessment. Reliance was placed on the decision of the Judicial Committee in Raleigh Investment Co. v. Governor-General in Council, 74 Ind App 50 : (AIR 1947 PC 78), for the proposition that as long as the assessment stood no suit would lie. Counsel for the defendant contended that the plaintiff had a general right of suit and reliance was placed on the decision in Mask case, (Secy, of State v. Mask and Co.,) . Lord Uthwatt in the Raleigh Investment case, 74 Ind App 50 : (AIR 1947 PC 78), said that an assessment made under the machinery provided by the Act, if based on a provision subsequently held to be ultra vires is not a nullity like an order of the court lacking jurisdiction. The use of the machinery provided by the Act, not the result of that use, is the test whether the suit is one in regard to assessment made under the Act. In the present case the plaintiff seeks to recover the money first on the ground that the payment was made under a mistake and secondly, that the assessment orders have been set aside. In so far as the suit relates to cause of action for the recovery of money paid under mistake I have held that in fact there was no mistake and even if there had been a mistake the suit would he barred by limitation. For in such case limitation would commence from the date when the payment was made by mistake. In so far as the cause of action relates to the plaintiff being entitled to refund, on setting aside the assessment orders the cause of action is not barred by limitation.

    24. In view of my decision on the question that the plaintiff is not entitled to any refund I answer the issues as follows :

    1A. No. 1B. Yes.

    2. No.

    3. In so far as it relates to cause of action for recovery of payment of money under a mistake, the answer is in the affirmative. In so far as it relates to cause of action for refund arising for setting aside of the assessment ordeRs. the answer is in the negative.

    4. Yes.

    The suit is dismissed with costs. Certified for two counsel.

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