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Burmah Construction Company v. State Of Orissa And Others
Factual and Procedural Background
Messrs. Burmah Construction Company (“the appellants”) carried out several works-contracts—construction of buildings, roads and bridges—in the State of Orissa. From the quarter ending 30 June 1949 onwards, they were registered as a dealer under the Orissa Sales Tax Act, 1947. Treating the transfer of materials in those contracts as “sales”, the Sales Tax Officers assessed and recovered sales tax and penalties amounting to Rs 1,20,787-3-6 for twenty quarters (June 1949 – March 1954).
After the Madras High Court decision in Gannon Dunkerly (1954), the appellants filed a petition in the Orissa High Court on 9 August 1954 seeking, inter alia, declarations that the levy was ultra vires, quashing of the assessments, restraint against further assessments, and a refund of the sums already paid.
The Orissa High Court, following the Supreme Court judgment in State of Madras v. Gannon Dunkerly & Co. (1959), held the assessments invalid and ordered refund only to the extent not barred by the limitation contained in Section 14 of the Orissa Sales Tax Act. The appellants obtained special leave to appeal to the Supreme Court, contesting the High Court’s refusal to order an unrestricted refund.
Legal Issues Presented
- Whether Section 14 of the Orissa Sales Tax Act, 1947—imposing a 24-month limitation for claiming refund of tax—was ultra vires the legislative competence of the State.
- Whether the High Court, in exercise of its powers under Article 226 of the Constitution, could direct refund of taxes unlawfully collected notwithstanding the time-bar contained in Section 14.
Arguments of the Parties
Appellants' Arguments
- Section 14, by restricting the right to claim refund, is beyond the competence of the State Legislature and therefore void.
- Even if Section 14 is valid, it is not an exclusive remedy; the High Court’s constitutional power to order refund of illegally collected tax is unaffected by the statutory limitation.
Respondent's Arguments
This information was not available in the provided opinion.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Gannon Dunkerly & Co. Ltd. v. State of Madras, 5 STC 216 = AIR 1954 Mad 1130 (Madras HC) | Transfer of property in works-contracts is not a “sale of goods” and therefore outside a State’s sales-tax power. | Formed the basis of the appellants’ challenge to the assessments. |
| State of Madras v. Gannon Dunkerly & Co. Ltd. (1959) SCR 379 (Supreme Court) | Affirmed the Madras High Court view that works-contract turnover is not taxable as a sale. | Relied upon by the Orissa High Court to invalidate the assessments under appeal. |
| State of Orissa v. Orient Paper Mills Ltd. AIR 1961 SC 1438 | A Legislature competent to levy a tax is equally competent to legislate on ancillary matters such as refund and the conditions attached thereto. | Cited by the Supreme Court to uphold the validity of Section 14’s time-limit for refund claims. |
Court's Reasoning and Analysis
1. The Court held that power to legislate on a tax necessarily includes power to legislate on ancillary matters such as machinery for assessment and refund. Relying on Orient Paper Mills, it concluded that Section 14, including its limitation period, was within the State’s legislative competence.
2. The petition before the High Court sought enforcement of the statutory obligation of the Collector under Section 14 to refund excess tax. A writ for refund is maintainable only within the confines of that statutory right; the claimant cannot invoke the statute while ignoring the limitations attached to it.
3. It was unnecessary to decide whether other remedies (e.g., a civil suit) were still open; the appellants had chosen the Section 14 route and were therefore bound by its conditions.
4. Since the High Court’s order merely applied the statutory limitation, it was substantially correct. The Supreme Court, however, slightly clarified the operative portion to specify that only taxes paid pursuant to assessments made within twenty-four months preceding 9 August 1954 were refundable in the writ proceedings.
Holding and Implications
Appeal Dismissed with Costs. The Court affirmed the High Court’s decision, directing refund only of amounts assessed within 24 months before the filing of the writ petition; the claim for the balance was dismissed without prejudice to any other remedies.
Implications: The judgment confirms (a) the constitutional validity of statutory limitation periods governing tax refunds, and (b) that a writ under Article 226 to enforce a statutory refund right is subject to the statutory conditions. No new substantive precedent was created, but the decision reinforces legislative authority to attach procedural limitations to refund claims.
Shah, J.— Messrs Burmah Construction Company — a firm carrying on business as building and works contractors — executed several contracts in the State of Orissa for construction of buildings, roads, bridges etc. Messrs. Burmah Construction Company, who are hereinafter referred to as the appellants, were registered as dealer in Orissa under the Orissa Sales Tax Act, 1947 from the quarters ending June 30, 1949. The Sales Tax Officers treating the transfer of the materials used in the construction of the buildings, roads and bridges, as sale of goods, assessed the appellants to tax under the Orissa Sales Tax Act. The tax so assessed under the diverse orders of assessment was paid from time to time. For the quarters ending June 30, 1949 to March 31, 1954 the appellant paid Rs 1,17,869-8-0 as tax and Rs 2,917-11-0 as penalty. The following table sets out the tax and penalty paid to the Sales Tax Authorities for the twenty quarters:
Srl. No. Circle Name Registration No. Tax paid Penalty paid TotalAmount paid Rs as. p. Rs as. p. Rs as. p. 1. PU II 1755 35,336 7 0 350 0 0 35,686 7 0 2. BA 1596 53,990 6 6 310 0 0 54,300 5 6 3. BA 1596-A 2719 3 0 … 2719 3 0 4. MB 806 3376 6 0 1352 4 0 4728 10 0 5. BP 1560 5349 1 0 … 5349 1 0 6. CU III 1375 10,913 12 0 905 7 0 11,819 3 0 7. CU I 3940 6784 6 0 … 6184 6 0 1,17,869 8 6 2917 11 0 1,20,787 3 6
2. Relying upon the judgment of the Madras High Court in Gannon Dunkterly & Co., Ltd. v. State of Madras 5 Mad STC 216=AIR (1954) Mad 1130 the appellants applied on August 9, 1954 to the High Court of Judicature, Orissa for
(a) a declaration that the provisions of the Orissa Sales Tax Act, 1947 authorising imposition of the sales tax on a turnover of works contracts and repair works were ultra vires the State Legislature;
(b) a declaration that the assessment made by the State Sales Tax Authorities on the appellant's works contracts which had resulted in payment of Rs 1,20,787-3-6 by way of sales tax and penalties for different quarters were without jurisdiction and illegal and liable to be quashed and that the appellant was entitled to get refund of the said amount;
(c) a direction restraining the State and its Sales Tax Officers from taking any steps in making any further assessment or complete the assessments pending before them in respect of the appellant's works contracts with the State Government and levying and collecting any sales tax from the appellant on works contracts; and
(d) issue of appropriate writ or directions directing the State of Orissa and its Sales Tax Officers to refund the amount of sales tax and penalties realised from the appellant.
3. Following the judgment of this Court in the State of Madras v. Gannon Dunkerly & Co. Ltd. (1959) SCR 379 which confirmed the decision of the Madras High Court in 5 S.T.C 216, the High Court declared that the assessment of sales tax was not in accordance with law and directed that no steps, either by certificate proceedings or otherwise should be taken to realise the arrears of sales tax in respect of those contracts. The High Court also directed refund of tax paid, if recovery thereof was not barred under Section 14 of the Orissa Sales Tax Act, 1947 on the date of the filing of the application. The High Court also directed the Sales Tax Authorities to revise the assessments made in the light of the decision of this Court in respect of assessments made after the date of the petition. The appellants have appealed to this Court with special leave challenging the order in so far as their claim for refund is partially declared to be barred by the rule of limitation prescribed by Section 14 of the Orissa Sales Tax Act.
4. The appellants challenge the correctness of the order declaring that the portion of the tax paid refund whereof is beyond the period of limitation under Section 14 of the Orissa Sales Tax Act, 1947 or the date of the filing of the application under Article 226, as not refundable on two grounds:
(1) that Section 14 of the Act is ultra vires the State Legislature;
(2) that an application under Section 14 which imposes a statutory obligation upon the Collector to refund the tax unlawfully recovered subject to certain conditions is not the only remedy open to the tax payer from whom tax has been unlawfully recovered and the power of the High Court to direct refund of tax illegally recovered is not restricted by Section 14 of the Act. To the enforcement of other remedies the bar prescribed by the proviso to Section 14 does not apply.
5. Section 14 of the Orissa Sales Tax Act, 1947, provides:
“14. The Collector shall, in the prescribed manner, refund to a dealer applying in this behalf any amount of tax paid by such dealer in excess of the amount due from him under this Act, either by cash payment or, at the option of the dealer, by deduction of such excess from the amount of tax due in respect of any other period:
Provided that no claim to refund of any tax paid under this Act shall be allowed unless it is made within twenty-four months from the date on which the Order of assessment was passed or within twelve months of the final order passed on appeal, revision, review or reference in respect of the order of assessment, whichever period is later.”
By the first paragraph, Section 14 imposes an obligation upon the Collector to refund to a dealer any amount paid by such dealer in excess of the amount due from him under the Act. But the obligation is restricted; refund is not to be made unless an application is made within 24 months of the date on which the order of assessment was passed or within 12 months of the final order passed on appeal, revision, review or reference in respect of the order of assessment, whichever period is later. The Orissa Sales Tax Act was enacted by the Orissa Legislature in exercise of the Legislative authority conferred upon it by Item 48 of List II of the Seventh Schedule of the Government of India Act 1935. In dealing with the vires of Section 14-A of the Orissa Sales Tax Act, which was incorporated in the amended Act 28 of 1958 and which sought to confer a right to claim refund by an application to the Collector upon the person from whom tax was collected by the dealer, this Court observed in the State of Orissa v. Orient Paper Mills Ltd. AIR (1961) SC 1438 that “The power to legislate with respect to a tax comprehends the power to impose the tax, to prescribe machinery for collecting the tax, to designate the officers by whom the liability may be enforced and to prescribe the authority, obligations and indemnity of those officers. The diverse heads of legislation in the Schedule to the Constitution demarcate the periphery of legislative competence and include all matters which are ancillary or subsidiary to the primary head. The Legislature of the Orissa State was therefore competent to exercise power in respect of the subsidiary or ancillary matters of granting refund of tax improperly or illegally collected”. If the power to legislate in respect of tax comprehends the power to legislate in respect of refund of tax improperly or illegally collected, imposition of restrictions on the exercise of the right to claim refund will not be beyond the competence of the Legislature. Granting refund of tax improperly or illegally collected and the restriction on the exercise of that right are both ancillary or subsidiary matters relating to the primary head of tax on sale of goods. The provisions of Section 14 of the Act are therefore not ultra vires the State Legislature.
6. It is not necessary to consider in this case whether Section 14 prescribes the only remedy for refund of tax unlawfully collected by the State. The appellants have not filed any civil suit for a decree for refund of tax unlawfully collected from them. This appeal arises out of a proceeding filed in the High Court substantially to compel the Collector to carry out his statutory obligations under Section 14 of the Act. The High Court normally does not entertain a petition under Article 226 of the Constitution to enforce a civil liability arising out of a breach of contract or a tort to pay an amount of money due to the claimant and leaves it to the aggrieved party to agitate the question in a civil suit filed for that purpose. But an order for payment of money may sometimes be made in a petition under Article 226 of the Constitution against the State or against an officer of the State to enforce a statutory obligation. The petition in the present case is for enforcement of the liability of the Collector imposed by statute to refund a tax illegally collected and it was maintainable: but it can only be allowed subject to the restrictions which have been imposed by the Legislature. It is not open to the claimant to rely upon the statutory right and to ignore the restrictions subject to which the right is made enforceable.
7. We are therefore of the opinion that the High Court was right in restricting the order of refund in the petition under Article 226 of the Constitution. The order of refund passed by the High Court, however, requires to be slightly modified and we direct that it shall run as follows:
“That part of the sales tax which has been paid by Messrs Burmah Construction Co. shall be refunded by the State of Orissa to the Burmah Construction Company if the order of assessment pursuant to which payment was made was within 24 months of the date on which the petition was filed in the High Court, namely, 9th of August, 1954. Without deciding whether the Burmah Construction Co. has the right to recover the balance of the amount of the tax paid by other appropriate proceedings, the claim to recover the balance of the tax paid is dismissed.”
8. The appeal substantially fails and is dismissed with costs.
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