Aluminium Industries Ltd. v. The Agrl. Income Tax & Rural Sales Tax Officer & Another

1. The petitioner in this writ petition, Which was filed on may 30, 1954, Carries the business of the manufacture and sale of aluminium cables and accessories and seeks to vacate the order by the agricultural income tax and rural sales tax officer, Quilon. The order is marked ext. A, And is dated may 7, 1951. The short ground, On which the prayer to vacate the order rests, Is that part of the sales tax thereby imposed on rs. 26,20,333 - 8 - 0, The turnovers for the assessment years 1st chingam 1125 to 15th edavam 1125 and 30th may 1950 to 31st march 1951, Contravenes article 286 (1) (a) of the constitution, And rs. 71,115 - 7 - 6 out of the tax amount should be refunded. The periods, The turnovers, And the sales tax levied, Have been given in a tabular form in paragraph 3 of the affidavit accompanying the writ petition, Which are extracted below :

table:#1

the further details of the petitioner's complaint are that the sales tax levied after january 26, 1950, During the first assessment year on inter state sales should be returned, And the same orders should be made as against the tax levied on similar sales during the second period. Filing further affidavits had been, During the pendency of the petition in this court, Ordered to prove the case of the tax being on outside sales, And not liable to assessment, Because of article 286 (l) (a). Accordingly, The chief engineer, P. W. D., Electricty branch, Punjab, Has filed an affidavit dated january 4, 1955, And has averred that the punja punjab government electricity department, Had entered into a contract for the purchase of aluminium cables for the bakhra nangal project with the writ petitioner for the sum of rs. 40,96,250/ -. The agreement is sworn to be in 1949, And the deliveries under it had to be periodically effected at the site of the project in the punjab. He further swears that such deliveries extended from may, 1950 to december 1951, When the company supplied aluminium cables to the value of rs. 16,97,554 - 12 - 9 on which the travancore cochin sales tax authorities levied, On account of the sales tax, Rs. 54,375/ -. The chief engineer also swears that on the company demanding the aforesaid amount, The punjab government protested and refused to pay the company the tax amount; and rs. 38,103 - 8 - 9, Which had been already paid on september 21, 1951, Was recovered from the company as per invoice dated december 5, 1951. Finally, The chief engineer swears that the company was still claiming rs. 17,026 - 0 - 9 and the punjab government had not paid the amount on the ground of no tax being chargeable on the transaction concerned. There is, In support of the aforesaid affidavit, A supplementary affidavit by the secretary and accountant of the petitioner company ; which is dated february 25, 1955 ; and no reply affidavit appears to have been filed by the government. Therefore, The averments of the sales tax having been levied on outside sales should, In the circumstances of this case, Be treated as correct, And we must, Therefore, Adjudicate whether grounds exist to justify the prayer for the return of money being disallowed.

2. The first is that the writ petitioner, Having furnished provisional returns and without making the claim for deduction, Paid taxes on such returns, Is precluded from now making the claim. In support of such returns and payment of taxes, Exts. I to xv have been placed on the record of the case, And it is urged that the aforesaid payments being voluntary, Without protest, And without demands at any time for the return of the entire amount, The discretionary power under article 226 should not be exercised in such a case. The next ground taken for dismissing the petition is the considerable delay in invoking the jurisdiction when, In a large number of cases, Delay beyond three months been held to be fatal for getting any relief under the article. The third objection is about an adequate and equally efficacious alternative remedy, By way of filing a claim for restitution of the amount, Being available to the writ petitioner. The fourth ground is the absence of any statutory duty to return the tax amount to justify its being enforced by writ of mandamus.

3. The learned government pleader had, During the course of the argument in the case, Stated that he has had no opportunity to meet the case disclosed in the supplementary affidavit by the chief engineer of punjab; but then that is dated january, 1955, And we are hearing the petition in 1960. With such delay, We feel no useful purpose would be served in further delaying adjudication of the petition, Particularly when the complaint is not absence of knowledge about such an affidavit having been filed here. Therefore, The facts stated in the affidavit should be relied upon for mating appropriate order in this petition, The improbability of a false affidavit by an officer of a state being clear in the case.

4. The first point raised in this petition is practically settled by the supreme court in sales tax officer versus kanhaiya lal (air 1959 sc 135). There a firm dealing at banaras in bullion gold silver ornaments and forward contracts in silver bullion, Had been assessed on forward transactions in silver bullion to sales tax under the relevant enactment of uttar pradesh, And had deposited amounts towards the sales tax liability. The levy of sales tax on forward transactions, However, Was held ultra vires by the high court, And the firm then asked for the amount being refunded. The commissioner of sales tax refused, And a writ petition was filed for quashing the assessment and for issuing a mandamus requiring the taxing authority to refund the amounts. Chaturvedi j. Quashed the assessment, Issued mandamus directing the sales tax authorities to refund, And a division bench of the high court upheld the decision. Bhagwati j. Dismissing the appeal to the supreme court, Held that the term "mistake" in section 72 of the contract act was without any qualification, And the true principle underlying it was that, If one party under a mistake, Whether of fact or law, Paid to another money, Which was not due by contract or otherwise, That money must be repaid. The learned judge also held that if the terms of the provisions in an indian act be plain and unambiguous, The court could not resort to the position in law as it obtained in england or in other countries. The learned judge further held that whether principle of estoppel applied or there were circumstances attendant upon the transaction, Which disentitled the party to recover back the monies paid, Would depend upon the facts and circumstances of each case, And no question of estoppel could ever arise where both the parties be labouring under the mistake of law and one party be not more to blame than the other. In this connection, The learned judge says:

"estoppel arises only when the plaintiff by his acts or conduct makes a representation to the defendant of a certain state of facts which is acted upon by the defendant to his determent ; it is only then that the plaintiff is estopped from selling up a different state of facts even it this position can be availed of where the representation is in regard to a position in law, No such occasion arises when the mistake of law is common to both the parties. The other circumstances would be such as would entitle a court of equity to refuse the relief claimed by the plaintiff because on the facts and circumstances of the case it would be inequitable for the court to award the relief to the plaintiff. These are, However, Equitable considerations, And could scarcely be imported when there is a clear and unabiguous provision of law which entitles the plaintiff to the relief claimed by him."

5. Therefore, The proposition has become well settled that even payment of tax under bona fide mistake of one's right is covered by section 72 of the contract act, And, Precludes acceptance of the english and american rules that taxes voluntarily paid cannot be recovered on ground of their illegality. The learned government pleader disputes such a proposition being settled and urges that the case was so decided because the advocate general of u. P. Conceded about mandamus being available, Where the tax been paid under mistake, He further argues that the supreme court, Because of such concession, Did not consider the question whether mandamus under such circumstances would be an appropriate writ. We will deal later whether mandamus can be issued in such a case. What appears to us to be settled by the case is the principle that payment of tax under mistake of payee's legal right, Would not preclude the claim of the amounts being returnable. Whether such a claim can be enforced by a mandamus or a suit, Is another point. What is established is that a petitioner is not precluded, By merely having made provisional returns and paid the tax, From claiming refund on grounds, Of their being under mistake of law.

6. The remaining objections to the petition being allowed should be considered together, And the decisions concerning these may well begin with citations of the pronouncements of the supreme court, Where principles governing issuance of writs been laid down. One such principle is that the fundamental principles guiding grant of writs in english courts, And not rules that are technical should be followed. That proposition has been stated in t. C. Basappa versus t. Nagappa (air 1954 sc 440) where mukherjea j. (as he then was) observes as follows :

"we can make an order or issue a writ in the nature of 'certiorari' in all appropriate cases and in appropriate manner, So long as we keep to the broad and fundamental principles that regulate the exercise of jurisdiction in the matter of granting such writs in english law."

7. The first question is whether there had been delay to justify this petition being dismissed on that ground, And we would answer it by beginning with ext. F, Which is the earliest paper in the case. By it the taxing officer was. On august 29, 1951, Informed that the major part of the petitioner's sales of aluminium were to the provincial government, Electricity department, And that the materials were despatched from kundara. The officer was further informed that the sales took place outside travancore cochin; and, Therefore, The writ petitioner was not authorised to collect sales tax. The reply to this letter is ext. C and is dated september 1, 1951, In which the officer said that the matter had to be determined with due regard to the circumstances of each case, When and where exactly the sale involved in that case was completed. The document next in date, That has been furnished to us, Is of june 17, 1952, Where the writ petitioner wrote that the turnover so assessed included certain sales to the east punjab government, Aggregating to rs. 16,95,607 - 5 - 9 between 26th january 1950 and 31st march 1951 as per statement attached, And that a sum of rs. 52,988 - 1 - 6 had been paid by way of the sales tax in respect of such sales. In this letter a claim was put forward that the payment was by mistake apparent from the record, And as such must be refunded under rule 34 of the sales tax rules. The next letter is of september 22, 1952, Which is also to the agricultural income tax and rural sales tax officer, Wherein the petitioner has clearly stated that the claim had been made under article 286, Clause (1) ; and the reply is dated october 1st, 1952. Wherein it was written that there were several complicated questions in the matter of refund of the sales tax and that the main question, Whether the government should refund that tax, Should be referred direct to the government. The petitioner then applied to the government on february 19, 1953. Which is ext. E in the case, Claiming that the turnover of rs. 17,40,010 - 1 - 9 was in respect of sales of cables to the east punjab state after january 26, 1950, For consumption in the east punjab state, And the collection of tax of rs. 54,375 - 5 - 0 in respect of such sales was not justified. The petitioner, In paragraph 7 of ext. E, Asked for the refund of the tax, Which he said had become irregular and illegal under article 286 (1) (a) of the constitution. This application does not appear to have been properly adjudicated and it was only after the writ was filed in this court that the petitioner got ext. D of august 23, 1955, Which refused to refund the sales tax, Because the account for the year 1950 - 51 had been closed in the absence of any appeal or revision from the company, And hence the question of refund in respect of closed transactions did not arise. It is therefore, Clear that from august, 1951, Till the filing of the petition in this court, The company had been seeking return of certain amounts paid in error of the legal right, Though the grounds for such return have, In certain letters, Not been properly stated. It is further obvious that there was no refusal to the demand till after the petition was filed. The learned government pleader has relied on long gaps in the aforesaid correspondence as showing the absence of diligence on the part of the writ petitioner. He has also commented on the silence of several months between the different correspondence. Yet the fact remains that if mandamus is to be issued, There should be a clear demand and denial, And a party should be allowed reasonable intervals between repeating the demands, Provided the circumstances of the case do not indicate such repetition to be futile. Having started the demand and there being no definite refusal, We think the writ petitioner was not bound to rush immediately to court, And allowed rightly the taxing authority a fair opportunity of considering the demand for refund. That reply came after the writ petition, And we feel the petitioner was justified in the cautious approach, As he would only get relief by mandamus, Which writ is generally not granted in absence of clear demand and refusal. We, Therefore hold that the benefit of article 226 should not be withheld in this case merely on the ground of the writ petition being filed some time in 1954.

8. The next question is whether the petitioner has any other adequate relief to justify a writ being denied, But it is obvious that, Should the petitioner's constitutional rights be infringed, His having any other adequate remedy would not disentitle him to invoke article 226. That was settled in mehta versus state of madhya pradesh (air 1954 sc 403), And it cannot be denied that collecting tax not|legally due does infringe the right to carry on business. That apart, We are deciding in 1960 the writ, Which had been filed in 1954; and clearly the claim to recover the money from the government on ground of mistake, Would now not be within time. In such circumstances the writ of mandamus should be issued if the petitioner be otherwise entitled to the writ.

9. We have lastly to consider whether the state is under the duty to refund, And whether the taxing authorities have failed to perform the duty under a legal misapprehension. Dealing with the first part of the question, It appears to us that the right of a person to claim refund of money paid as tax, Which was not constitutionally leviable, Is recognised in this country. Apart from the authority cited earlier in this judgment, We find venkatarama aiyar j. In sundararama iyer versus state of andhra pradesh (air 1958 sc 468) giving, At page 485, One of the reasons for enacting the sales tax laws validation act, In these words:

"now the result of the decision in the bengal immunity company case (air 1955 sc 661) was that the levy of the tax on the explanation sales became unauthorised and the states were faced with large claims for restitution of the amounts realised, Involving threat to their economic stability."

we are also fortified in this view by rayalaseema constructions versus dy. Commercial tax officer (1959 - 10 stc 345) where 'levy' and 'collection' of taxes in article 265 of the constitution were treated as comprehensive to include and envelope the entire process of taxation commencing from the taxing statute to the taking away of the money from the pocket of the citizen. We are, Therefore, Convinced that the state's constitutional duty of not levying and collecting tax, Except by authority of law, Entails the further duty of returning what been collected contrary to the constitutional provisions. It is further clear that a person aggrieved by such an unjustified enrichment can, Under section 72 of the contract act, Claim the return by suit. It follows that writ of mandamus under article 226 can be issued, Should, Fundamental principles governing grant of such writs justify its being issued. Such circumstances are established in this case; for, We find the taxing officer directing the writ petitioner to the government for purposes of making the claim of refund, And we also find the government being asked. This request was refused, Though after the writ petition was filed; and, Therefore, The condition of the demand having been made and refused, Is in this case complied with. There is also the failure to perform a duty, Because the refusal to entertain the application for refund rests on the ground of the assessment having become final due to inaction of not filing appeal and revision against the assessment order. We are afraid these considerations are inadequate for rejecting the application, Because the party's case for the refund rests on the payment having been made under mistake of the petitioner's constitutional exemption for outside sales, With the result of such objections not having been raised at the time of the assessment. In these circumstances, There would be no error in the order, Which the higher tribunals could correct. We think such grounds do not justify rejection of the application, Nor do they exonerate the state from discharging its obligations. It follows that there has been in this case an improper refusal to discharge the duty of properly considering how far the case for refund been made out, And the state ought to be directed to properly decide the claim. The learned government pleader has urged that as no such prayer for refund on ground of the outside sales had been made, The writ petition should be dismissed. But we find that the claim was clearly put forward to the government which had not been properly considered due to the legal mistake of a party being precluded by failure of not appealing. We are, Therefore, Directing the respondents to do what, In the circumstances of the case, The respondents were bound to do i. E., Not to keep money by contravening a constitutional direction and to properly decide the claim for the refund on ground of the sales being outside sales. The exercise of power under article 226 in such a case is but proper. Should the decision be again not correct the writ petitioner would have his relief by writ of certiorari, Should such writ be then legally available to him.

10. For these reasons, We feel this is a fit case, In which we should issue mandamus to the state government to determine the claim of the writ petitioner for return of rs. 54,375 - 5 - 0, On ground of such levy being contrary to article 286 (1) (a) of the constitution and paid by mistake and further, On the claim being justified, To return what be found to have been wrongly collected. We have confined the order to the aforesaid amount, Because we find that there had been no earlier claim for refund of the taxes of what we are directing the respondents to reconsider now. Nor are there sufficient material on record to satisfy us about the remaining amounts having been paid by mistake. We reject the petition for any relief with regard to what is in excess of the above direction. In other words, The claim for refund of rs. 25,673 - 8 - 6 is dismissed and the order is to properly deal with the claim of rs. 54,375 - 5 - 0, And pay on its being established. Having regard to the circumstances of the case, The parties will bear their costs.