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Gill And Co. Private... v. Commercial Tax Offic...
Factual and Procedural Background
The appellant, a registered dealer under both the Central Sales Tax Act, 1956 and the Andhra Pradesh General Sales Tax Act, 1957, purchased cotton within Andhra Pradesh and sold it in the course of inter-State trade. As the last purchaser, it paid purchase tax under the State Act but subsequently secured refunds under the proviso to Section 6 of that Act.
Notwithstanding those refunds, the Commercial Tax Officer, Barkatpura, Hyderabad-3, assessed the very same inter-State sales to tax under the Central Act through orders dated July 28 1960, July 6 1961, July 26 1962 and November 25 1964 for the assessment years 1959-60, 1960-61, 1961-62 and 1963-64, respectively. The appellant, unaware that such sales were not taxable, paid the following sums under a mistake of law: Rs 21,921.04 (1959-60), Rs 29,331.73 (1960-61), Rs 21,574.38 (1961-62) and Rs 50,767.44 (1963-64).
In January 1967, relying on the Supreme Court decision in State of Mysore v. Yaddalam Lakshminarasimhiah Setty and Sons, the appellant realised the levy was unlawful and sought cancellation of the assessments and refund of the sums already paid. When the revenue authorities refused, eight writ petitions (Nos. 300–307 of 1967) for certiorari and mandamus were filed before the High Court of Andhra Pradesh.
The High Court summarily dismissed the petitions at the admission stage, citing the lapse of 5-6 years and the availability of an alternative remedy by way of a civil suit. It also refused certificates of fitness to appeal. The present appeals were filed before the Supreme Court by special leave challenging those orders.
Legal Issues Presented
- Whether the High Court was justified in summarily rejecting the writ petitions solely on the ground of delay without examining whether the taxes had been paid under a mistake of law and when that mistake was discovered.
- Whether, in light of Supreme Court precedents, the appellant could seek a writ of mandamus for refund of taxes paid under a mistake, notwithstanding the existence of an alternative civil remedy.
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| State of Mysore v. Yaddalam Lakshminarasimhiah Setty and Sons (1965 2 SCR LR) | Inter-State sales of cotton were not taxable under the Central Sales Tax Act. | Provided the basis for the appellant’s assertion that the assessments were illegal and the payments were made under a mistake of law. |
| State of Kerala v. Aluminium Industries Ltd., Kundara, Quilon | Where tax is collected under a mistake of law, the State has a duty to refund, subject to statutory limitation. | Cited to underline the State’s obligation to investigate and refund once the mistake is brought to its notice. |
| State of M.P. v. Bhailal Bhai | High Courts can order repayment of money realised without authority of law; delay and limitation are relevant discretionary considerations. | Used to show that although discretion exists, it must be exercised after examining delay, limitation and factual controversy, not by summary dismissal. |
Court's Reasoning and Analysis
The Supreme Court held that while the High Court possesses discretion under Article 226 to refuse extraordinary relief, that discretion must be exercised judiciously. The High Court was expected to:
- Determine whether the appellant’s payments were indeed made under a mistake of law.
- Ascertain the date on which the appellant discovered the mistake, as limitation under Article 96 of the Limitation Act (three years from discovery) could be pivotal.
- Consider the established principle that taxes collected without authority should ordinarily be refunded, as recognised in Aluminium Industries and Bhailal Bhai.
By dismissing the petitions at the threshold, the High Court bypassed these inquiries and deprived the parties of a hearing on affidavits. The Supreme Court emphasised that the taxing authorities themselves could not annul their own assessments; therefore, judicial review was the proper avenue. The summary rejection was thus held to be an improper exercise of discretion.
Holding and Implications
APPEALS ALLOWED. The orders of the Andhra Pradesh High Court dismissing Writ Petitions Nos. 300–307 of 1967 are set aside. The High Court is directed to admit those petitions and decide them on the merits after hearing the parties. Appeals challenging the refusal to grant leave under Article 133 were rendered academic and no orders were passed on them. Costs are to follow the final outcome before the High Court (one set of hearing fee).
Implications: The judgment reinforces that High Courts must examine the merits, including questions of mistake of law and limitation, before declining writ relief on grounds of delay. It reiterates the State’s duty to refund unlawfully collected taxes and clarifies the appropriate judicial approach where alternative remedies exist.
Mitter, J.— These appeals by special leave against orders of the High Court of Andhra Pradesh arise out of eight writ petitions numbering 300 of 1967 to 307 of 1967 for the issue of writs of certiorari and mandamus in respect of assessments made under the Andhra Pradesh General Sales Tax Act for the years 1959-60, 1960-61, 1961-62 and 1963-64 in respect of purchase and sale of cotton. It appears from the special leave petition that the appellant purchased in the State of Andhra Pradesh at various centres and used to sell the same in the course of inter-State trade or commerce being registered as a dealer both under The Central Sales Tax Act, 1956 and under The Andhra Pradesh General Sales Tax Act, 1957. The appellants' case further was that being the last dealer who had bought the cotton in the State of Andhra Pradesh it had paid purchase tax under the State Act for assessment years mentioned and as the cotton was sold in the course of inter-state trade, the appellant applied for and received refund of the purchase tax in accordance with the proviso to Section 6 of the State Act. By several assessment orders dated July 28, 1960, July 6, 1961, July 26, 1962 and November 25, 1964 for Assessment Years 1959-60,1960-61, 1961-62 and 1963-64 respectively under the Central Act, the Commercial Tax Officer Barkatpura, Hyderabad-3 assessed to Sales Tax the sales of cotton made by the appellant in the course of inter-state trade or commerce in respect whereof the appellant had obtained refunds under the proviso to Section 6 of the State Act. The appellant claims not to have been aware that such inter-state sales were not taxable under the Central Act and under a misapprehension and mistake of law paid taxes amounting to Rs 21,921-04, for the year 1959-60, Rs 29,331-73 for the year 1960-61, Rs 21,574-38 for the year 1961-62 and Rs 50,767-44 for the year 1963-64. The appellant claims to have discovered the said mistake in the course of proceedings for assessment for the year 1962-63. It is alleged that the discovery was made through the help of its attorneys who had pointed out to the appellant that the levy of tax under the Central Act was illegal in view of the decision of this Court in State of Mysore v. Yaddalam Lakshminarasimhiah Setty and Sons 1965- 2 SCR LR. This discovery is alleged to have been made in January, 1967. The appellant further claims to have called upon the respondent to cancel the orders of assessment and refund the amount of the taxes which had been recovered illegally but the respondents failed and neglected to do so.
2. The High Court of Andhra Pradesh dismissed the writ petitions when they came up for admission, mainly on the ground that the petitions for the grant of the extraordinary remedy could not be admitted after the lapse of a long period. The High Court was also of the view that the question of time when the mistake was discovered was a question of fact which had to be enquired into and as the appellant had a remedy open to it by way of a suit in a court of law, which was a more convenient and effective remedy the same should be pursued by it.
3. A group of Civil Miscellaneous Petitions numbering 129 to 136 of 1967 presented before the High Court for grant of leave to appeal to this Court was rejected on the ground that the cases were not fit for the exercise of the discretion of the High Court “having regard to the fact that the orders became final nearly 5 to 6 years earlier”.
4. In our opinion, the High Court was not justified in disposing of the writ petitions in the above manner. Of course the High Court had a discretion under Article 226 of the Constitution to refuse to admit the petitions if it thought that they were frivolous or that they had been presented after the lapse of a period for which there was no justification. It had however to examine the question as to whether the appellant had paid the taxes under a mistake of law as also when the appellant came to discover its mistake. The taxing authorities could not very well be asked to quash the assessment orders already made by them. It is now well settled by this Court in State of Kerala v. Aluminium Industries that:
“In such a case where tax is levied by mistake of law it is ordinarily the duty of the State subject to any provision in the law relating to sales tax to … refund the tax. If refund is not made, remedy through court is open subject to the same restrictions and also to the period of limitation (see Article 96 of the Limitation Act, 1908), namely, three years from the date when the mistake had become known to the person who has made the payment by mistake (see State of Madhya Pradesh v. Bhailal Bhai).”
5. The Court further pointed out that it was the duty of the State to investigate the facts when the mistake was brought to its notice and to make a refund if mistake was proved and the claim was made within the period of limitation.
6. In State of Madhya Pradesh v. Bhailal Bhai this Court held that “the High Courts have 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 was further pointed out in that case that the High Courts had to take into consideration in the exercise of that discretion the delay, if any, made by the aggrieved party in seeking this special remedy and also the nature of controversy of facts or law to be decided as regards the availability of consequential relief. It was observed that—
“Whether repayment should be ordered in the exercise of this discretion will depend in each case on its own facts and circumstances.... It may however be stated as a general rule that if there has been unreasonable delay the court ought not ordinarily to lend its aid to a party by this extraordinary remedy of mandamus. Again, where even if there is no such delay the Government or the statutory authority against whom the consequential relief is prayed for raises a prima facie triable issue as regards the availability of such relief on the merits on the grounds like limitation the court should ordinarily refuse to issue the writ of mandamus for such payment.”
7. The High Court did not examine the merits of the case at all as it could not before admitting the petitions and hearing the Sales Tax Authorities against the cases urged in the writ petitions. Whether the case of the appellant was true, namely, that it discovered the mistake only in January 1967 and that the assessments were illegal were all matters which the High Court had to examine after affidavits had been filed. It was open to the High Court to give a hearing to the parties on these questions and then come to its conclusion as to whether it would not use its discretion under Article 226 of the Constitution. But the petitions could not be rejected summarily as was done by the High Court in these cases.
8. Eight of the appeals arise out of the rejection of the writ petitions and eight others out of refusal to grant special leave to appeal to this court. We allow the appeals against the orders rejecting the writ petitions and direct the High Court to admit the writ petitions and hear the matters out in the normal way. Since we have granted special leave against the orders rejecting the writ petitions, it is not necessary to consider whether the High Court erred in refusing to certify the appeals under Article 133. There will therefore be no orders on the appeals against the orders refusing to certify the appeals. The costs of these appeals will abide by the decision of the High Court in the writ petitions. One set of hearing fee.
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