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Messrs Adarsh Industrial Corporation, Karnal v. The State Of Haryana And Another .

Punjab & Haryana High Court

Oct 13, 1967

Judgment

Subsequent
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Factual and Procedural Background

This order disposes two writ petitions (Nos. 1443 and 1707 of 1967) raising a common legal question. The Court set out facts primarily from C.W. 1707 of 1961 (Adarsh Industrial Corporation, Karnal). The petitioner in that matter was a partnership firm engaged in extracting edible oils from sarson and other oil seeds. The firm procured oil seeds through commission agents and did not file quarterly returns of purchases under the Punjab General Sales Tax Act, 1948 because it was challenging the validity of the purchase tax on the ground that the Act permitted taxation at more than one stage and thus conflicted with section 15 of the Central Sales Tax Act.

On 15 December 1966 the Assessing Authority, Karnal, imposed purchase tax on the firm's acquisitions and assessed Rs. 8,844.08 as purchase tax plus a penalty of Rs. 300 for failure to file returns and failure to pay. On 10 April 1967 the Supreme Court in Civil Appeals 2386, 2388 of 1966 (Bhiwani Cotton Mills Ltd. v. The State of Punjab) held that the levy of purchase tax under the Act was illegal. Thereafter the petitioner filed a writ petition on 29 May 1967 seeking quashing of the Assessing Authority's order of 15 December 1966 and a writ of mandamus directing refund of the purchase tax collected.

In the other petition (Civil Writ No. 1443 of 1967) the petitioner, Fateh Chand Earn Sarup, had been assessed to purchase tax for three years (1960–1961, 1961–1962 and 1962–1963) by assessment orders dated 22 January 1963, 22 March 1963 and 26 November 1963 respectively. The total amount claimed as refundable in that petition was Rs. 12,059.57. That writ was filed on 25 July 1967, after the Supreme Court's decision in the Bhiwani Cotton Mills case.

Legal Issues Presented

Whether, in the light of the Supreme Court decision declaring the levy of purchase tax under the Punjab General Sales Tax Act to be illegal, writ jurisdiction is available to quash assessment orders made under that Act and to direct refund of tax recovered.
Whether the petitioners were obliged to first exhaust statutory remedies (appeal or revision) under the Act before invoking the High Court's writ jurisdiction in Article 226.
Whether a writ of mandamus directing refund of tax already paid or collected can be issued by the High Court, or whether such a claim must be pursued in a civil suit.
In the case where the writ petition did not expressly pray for quashing of assessment orders but attached those orders and sought refund (with a general residual prayer), whether the High Court may nevertheless quash the orders and grant consequential refund relief.

Arguments of the Parties

Petitioners' Arguments

The purchase tax levied under the Punjab General Sales Tax Act was invalid because the Act allowed taxation at more than one stage and conflicted with section 15 of the Central Sales Tax Act; for that reason they did not file quarterly purchase returns.
Following the Supreme Court decision declaring the levy illegal, the petitioners sought quashing of the assessment(s) and refund of tax collected; in one petition the specific prayer to quash assessments was inadvertently omitted from the written petition but the assessment orders were attached and an oral prayer was made at hearing to set them aside.
The petitioners opposed any adjournment intended to await an ordinance validating the levy, submitting that the cases should be decided on the existing law (i.e., after the Supreme Court decision).

Respondents' / State's Arguments

The petitioner had not exhausted statutory remedies available under the Act (appeal or revision) against the order of the Assessing Authority and therefore should not invoke writ jurisdiction.
The petitioner should approach a civil court for recovery of amounts paid; a writ of mandamus to refund tax is not maintainable.
In the 1707 matter the respondent said the petitioner had not specifically raised the conflict with the Central Sales Tax Act before the Assessing Authority; the Assessing Authority's view had earlier been supported by the High Court in C.W. No. 1591 of 1963 (a view later reversed by the Supreme Court).
In C.W. No. 1443 the State additionally argued that because the petition had not prayed specifically for quashing the three assessment orders, a petition solely for mandamus to refund was not maintainable (relying on Sugan Mal v. State of Madhya Pradesh).
The Advocate General suggested adjourning the proceedings for a few days because the Government of Haryana was expected to promulgate an ordinance validating the levy of purchase tax.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Bhiwani Cotton Mills Ltd. v. The State of Punjab (Civil Appeals 2386, 2388 of 1966; Supreme Court, judgment dated 10 April 1967)	Held that the levy of purchase tax under the Punjab General Sales Tax Act was illegal.	The Court treated this Supreme Court decision as dispositive on the illegality of the purchase tax and as the foundational basis for quashing the assessments and ordering refunds in the present petitions.
State of Madhya Pradesh v. Bhailal Bhai, A.I.R. 1964 S.C. 1006	Where a tax assessed and paid is declared invalid by a competent court, the payment is made under a mistake (Section 72, Contract Act) and the Government must repay; High Courts under Article 226 can order repayment as consequential relief.	The Court relied on this authority to reject the State's contention that the petitioner must pursue a civil suit; it held that the High Court could, under Article 226, order repayment by way of mandamus when tax has been illegally collected.
Sugan Mal v. State of Madhya Pradesh, 1965 16 S.T.C. 398	Held that where assessment orders have been quashed in appeal but the appellate authority did not direct refund, a petition under Article 226 solely for mandamus to order refund will not normally be entertained.	The Court distinguished the present facts from Sugan Mal, noting that in the present case the assessment orders had not been previously quashed by an appellate authority; therefore Sugan Mal did not preclude relief here.
Sri Satya Narain Singh v. District Engineer, P.W.D., 1962 Supp. 3 S.C.R. 105	A broad residual prayer (e.g., "any other appropriate writ, order or direction") may enable the court to grant consequential relief not specifically pleaded.	The Court relied on this authority to justify granting relief to quash assessment orders and order refunds notwithstanding omission of a specific written prayer to set aside the assessments, observing the attached orders and the residual prayer supported the relief.
C.W. No. 1591 of 1963 (Bhiwani Cotton Mills Ltd. v. State of Punjab), High Court decision dated 23 November 1965	The High Court had earlier supported the Assessing Authority's view (i.e., did not consider the levy illegal at that time).	The Court noted that this earlier High Court decision had since been reversed by the Supreme Court and thus could not preclude relief based on the Supreme Court's later ruling.

Court's Reasoning and Analysis

The Court proceeded in a stepwise manner:

Admissible legal foundation: The Court accepted that, by the Supreme Court's decision in the Bhiwani Cotton Mills case dated 10 April 1967, the levy of purchase tax under the Punjab General Sales Tax Act was illegal. That factual/legal foundation rendered assessments made under that levy void or without jurisdiction.
On adjournment: The Court rejected the Advocate General's request to adjourn pending a possible ordinance. The Court explained two reasons: uncertainty about the ordinance's promulgation and the possibility that any ordinance might itself be challenged, so adjourning was inappropriate.
On exhaustion of statutory remedies: The State's contention that petitioners should have first pursued appeal or revision under the Act was rejected. Because the Assessing Authority had no jurisdiction to levy the tax (after the Supreme Court ruling), the resulting assessments were void and could be challenged directly by writ petition; the petitioners were not guilty of laches, and the timing of their petitions was within a short interval after the Supreme Court decision.
On whether mandamus for refund is maintainable: The Court relied on the authoritative principle in State of Madhya Pradesh v. Bhailal Bhai that payments of tax declared invalid are payments made under a mistake (Section 72, Contract Act) and that a Court exercising Article 226 jurisdiction may order repayment of money realized by the Government without authority of law. The Court noted the Government had not raised prima facie triable issues such as limitation or undue delay which might have barred equitable relief.
On the contention arising in C.W. No. 1443 (omission to pray for quashing): The Court observed that (a) the State had not raised this objection in its return (hence could have been dealt with earlier), (b) the assessment orders were attached to the writ petition and a representation seeking quashing had been made to authorities, and (c) the writ petition's residual prayer for "any other appropriate writ, order or direction" supported granting consequential relief. The Court distinguished Sugan Mal on its facts, because there the assessments had already been quashed on appeal without a refund direction; here the assessments remained in existence until the High Court acted.
Conclusion of analysis: On the basis of these legal principles and the chronological sequence (assessments made under a levy later declared illegal; timely petitioning; absence of delay or limitation objections), the Court found it appropriate to quash the impugned assessment orders and to issue writs of mandamus directing refund of the illegally recovered purchase tax.

Holding and Implications

Holding (core rulings):

In C.W. 1707 of 1961 (Adarsh Industrial Corporation): The Court accepted the petition, quashed the Assessing Authority's order dated 15 December 1966, and issued a writ of mandamus directing the respondents to refund the amount of purchase tax illegally recovered from the petitioner. There was no order as to costs.
In C.W. 1443 of 1967 (Fateh Chand Earn Sarup): The Court accepted the petition, quashed the three assessment orders dated 22 January 1963, 22 March 1963 and 26 November 1963, and as a consequential relief issued a writ of mandamus directing the respondents to refund the amount of purchase tax illegally recovered (total claimed Rs. 12,059.57). There was no order as to costs.

Implications:

Direct effect: The immediate consequence of the decision is the quashing of the challenged assessment orders in both petitions and an order directing refund of the purchase tax illegally collected from the petitioners.
Remedial scope: The Court affirmed that, where tax levied under a statute is subsequently declared invalid by a competent court, the High Court in exercise of its Article 226 jurisdiction may grant consequential relief including repayment ordered by writ of mandamus; petitioners need not necessarily pursue a civil suit for recovery in such circumstances.
Precedential effect: The decision applies existing Supreme Court authority (notably State of M.P. v. Bhailal Bhai and the Bhiwani Cotton Mills decision) to the facts of these petitions. The opinion does not purport to lay down novel legal principles beyond the application of those precedents.

Petitions accepted.

Show all summary ...

P.C Pandit, J.:— This order will dispose of two writ petitions Nos. 1443 and 1707 of 1967 in which a common question of law arises for decision. For appreciating that question, I would give the facts only in one case i.e C.W 1707 of 1961 filed by Adarsh Industrial Corporation, Karnal.

2. The petitioner is a partnership firm carrying on the business of extracting edible oils from Sarson and other oil seeds at Karnal. Their main business was of extraction of oil from the oil seeds and for that purpose they secured these commodities through their commission agents from various markets. They did not file quarterly returns of purchase of oil seeds as required under the Punjab General Sales Tax Act, 1948 (hereinafter called the Act), because according to them they were challenging the very validity of the purchase tax on the ground that the Act did not provide for a single point taxation and the provisions of the Act permitted the levy of purchase tax at more stages than one and was, consequently, in conflict with section 15 of the Central Sales Tax Act. The petitioner firm's case for the assessment for the year 1963–1964 came up for consideration before the Assessing Authority, Karnal, on 15th of December 1966. The said authority, in spite of the various pleas raised by the petitioner firm, imposed purchase tax on the acquisitions of oil seeds by the petitioners. Rs. 8844/08 had been imposed as purchase tax apart from a penality of Rs. 300/-, since the petitioners had not filed purchase tax return and had also failed to pay the amount of the tax. On 10th of April 1967, the Supreme Court in Civil Appeals 2386, 2388 of 1966 (Bhiwani Cotton Mills Ltd. v. The State of Punjab . C.A 2386 of 1966.) held that the levy of purchase tax under the Act was illegal. That led to the filing of the present writ petition on 29th of May 1967 in which a prayer was made that the order of The Assessing Authority dated 15th of December 1966 be quashed and a writ of mandamus be issued to the authorities concerned to refund the amount of purchase tax which had been deposited/collected from the petitioner firm.

3. In the return filed by the Assessing Authority, it was mentioned that at no stage did the petitioner-firm raised any objection that the provisions of the Act were in conflict with the provisions of the Central Sales Tax Act. The view taken by the Assessing Authority had been supported by this Court in C.W No. 1591 of 1963 (Bhiwani Cotton Mills Ltd. v. State of Punjab) decided on 23rd November 1965. It was admitted that the said decision was later on reversed by the Supreme Court in its judgment dated 10th of April 1967 relied on by the, petitioner-firm in the writ petition. It was, however, pleaded that the petitioner-firm was not ententled to the refund of the purchase tax through writ proceedings.

4. From the pleadings of parties, it would thus be apparent that it was admitted by the respondents that the levy of the purchase tax under the provisions of the act was illegal in view of the Supreme Court decision dated 10th of April 1967. It was suggested by the Advocate General, Haryana, that this writ should be ??? for a few days, because the Government of Haryana was soon going to promulgate an ordinance validating the levy of the purchase tax. Counsel for the petitioner firm, however, strongly opposed to this adjournment and submitted that was no ground for adjourning the case which should be decided on the law as it now stood. I do not see any reason why these cases should be adjourned, because in the first place, it could not be said with certainty as to when the said ordinance would be promulgated and secondly, that ordinance might again be challenged as was submitted by the learned counsel for the petitioner-firm.

5. Two objections were raised by the learned counsel appearing for the State. Firstly, it was submitted that the petitioner-firm had not exhausted the remedies provided under the act by way of an appeal or revision against the order of the Assessing Authority before approaching this Court, and secondly, that, in any case, the petitioner-firm should go to a civil court for the recovery of the purchase tax and no writ of mandamus for a refund of the tax could be issued.

6. So far as the first argument is concerned, there is no force in the same. In view of the pronouncement of the Supreme Court, the Assessing Authority had no jurisdiction to levy the purchase tax. In other words, the petitioner-firm had been assessed to tax under a void legislation and the assessment against them was, therefore, not valid and of no effect. The order of the Assessing Authority is dated 15th of December, 1966 and the writ petition was filed in this court on 29th of May 1967 i.e after about five months of the passing of the order by the Assessing Authority and about 1½ months of the decision of the Supreme Court. The order of the Assessing Authority, being without jurisdiction could be challenged in writ proceedings, especially when the petitioner-firm was not guilty of laches.

7. As regards the second objection, the matter is concluded by a decision of the Supreme Court in State of Madhya Pradesh v. Bhailal Bhai . A.I.R 1964 S.C 1006. were it was held—

“Where sales tax, assessed and paid by the dealer, is declared by a competent court to be invalid in law, the payment of tax already made is one made under a mistake within Section 72 of the Contract Act and so the Government to whom the payment has been made by mistake must in law repay it. In this respect, the High Court has, in exercise of its jurisdiction under Article 226 of the Constitution of India, power for the purpose of enforcement of fundamental rights and statutory rights to give consequential relief by ordering repayment of money realised by the Government without the authority of law.

It may be mentioned that in the present case, the Government has not raised any prima facie triable issue as regards the availability of the relief to the petitioner-firm regarding the refund of the tax on the merits on the grounds like limitation. It is also not their case that there has been unreasonable delay on the part of the petitioner-firm to approach this Court. If that had been the position, then as observed by the Supreme Court in the above-mentioned decision, this Court might not have issued a writ of mandamus for such payment. The only objection raised by the learned counsel for the State was that the petitioner-firm should approach the civil court for this purpose. There is thus no merit in this contention as well.

8. I would, therefore, accept this petition, quash the order dated 15th December, 1966 passed by the Assessing Authority and as a consequential relief issue a writ of mandamus directing the respondents to refund the amount of purchase tax illegally recovered from the petitioner firm by them. There will however, be no order as to costs.

9. In Civil Writ No. 1443 of 1967, the petitioner, Fateh Chand Earn Sarup, had been assessed to purchase tax for three years 1960–1961, 1961–1962 and 1962–1963 and the three assessment orders were annexures ‘A’ ‘B’ and ‘C’ to the writ petition and were made on dated 22nd January, 1963, 22nd March, 1963 and 26th November, 1963 respectively. The total amount of purchase tax, the refund of which is being claimed, is Rs. 12059/57 np for the three years. The writ was filed on 25th of July 1967 i.e after about 3½ months of the decision of the Supreme Court in the case of Bhawani Cotton Mills Ltd. Apart from the two objections mentioned above, learned counsel for the State took an additional ground in this petition and submitted that the petitioner-firm was not entitled to the refund of the tax, because in their petition they had not asked for the quashing of the three assessment orders and a petition under Article of the Constitution solely for the issue of a writ of mandamus directing the State to refund the money alleged to have been illegally collected by it as tax was not maintainable, because a claim for such a refund could always be made in a suit against the authority which had illegally collected the tax. For this reliance was placed on the Supreme Court decision in Sugan Mal v. State of Madhya Pradesh . 1965 16 S.T.C 398..

10. It is partinent to mention that this objection was not taken by the State in the return filed by it. Had it done so, the petitioner could have applied for making this additional prayer in the writ petition. It stems to have been left by them inadvertence. It is note-worthy that all the three assessment orders have been filed with the writ petition. In the representation that they had made to the authorities for the refund of the tax after the decision of the Supreme Court, a prayer for quashing the illegal assessments had been made (vide annexure ‘D’ to the writ petition). The mere fact that the petitioners are claiming the refund of the purchase tax assumes that after the decision of the Supreme Court in Bhiwani Cotton Mills Ltd. the assessment orders had become void and of no effect. It is true that in the petition no specific prayer has been made for the quashing of these orders, but this, in my view had been done due to sheer inadvertance, because otherwise there was no point in their attaching those three orders along with the writ petition. Mr. D.C Gupta, learned counsel for the petitioner-firm, submitted that it was by mere oversight that he forgot to add this prayer in the petition and he made an oral prayer at the time of hearing that the assessment orders be also set aside. The relief claimed in the writ petition is in the following words:—

“It is, therefore humbly prayed that the writ petition be accepted and the respondents be directed to refund the amount of Rs. 12059/57 imposed levied and collected as purchase tax for the years 1960–1961, 1961–1962 and 1962–1963 from the petitioner. Any other appropriate writ, order or direction as may be just and convenient under the facts and circumstances of the case may also be issued, passed and given in favour of the petition and against the respondents.”

The petitioner firm can be granted this relief because it would be covered by the words' ‘any other appropriate writ, order or direction as may be just and convent under the facts and circumstances of this case may also be issued…“mentioned in the prayer clause quoted above. Reference in this connection may be made to a Supreme Court decision in Sri Satya Narain Singh v. District Engineer P.W.D . 1962 Supp. 3 S.C.R 105.. In Sugan Mal's case, relied on by the learned counsel for the State, the facts were quite different. There, the assessment Orders had been quashed in appeal, but no direction was, however, given by the appellate authority for the refund of tax which had been realised from the appellant, who then filed a petition under Article 226 of the Constitution for the refund of the amount which had been illegally collected from him by the Industrial Tax Officer. It was under those circumstances that the Supreme Court held that no petition for the issue of a writ of mandamus would be normally entertained for the purpose of merely ordering the refund of the money, to the return of which the petitioner claimed a right. In the present case, however, the assessment orders had not been previously quashed by the appellate authority. There is thus no substance in this contention also.

11. I would, therefore, accept this writ petition as well, quash the three assessment orders in question and as a consequential relief issue writ of mandamus directing the respondents to refund the amount of purchase tax illegally recovered from the petitioner firm by them. There would however, be no order as to costs in this writ petition as well.

Petition accepted.