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Sri Venkataramana Trading Company Vs. Commercial Tax Officer, Gudur and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case NumberWrit Petition Nos. 3922 and 3923 of 1977
Judge
Reported in[1983]54STC347(AP)
ActsConstitution of India - Article 226; Andhra Pradesh General Sales Tax Act
AppellantSri Venkataramana Trading Company
RespondentCommercial Tax Officer, Gudur and ors.
Appellant AdvocateT. Ramam, Adv.
Respondent AdvocateGovernment Pleader
Excerpt:
.....a declaration that the levy was bad and for refund on the ground of mistake of law discovered on 2nd may, 1968, when the high court rendered judgment in another case. the petitioner unsuccessfully applied to the department for refund for the years between 1940-41 to 1961-62 and moved the high court under article 226 of the constitution of india is september, 1968. krishna iyer, j. in fact bhailal's case [1964]6scr261 clearly stated that refund could be ordered under article 226 in cases where it was collected in violation of a fundamental right or a statutory right......case in commissioner of income-tax v. tribune trust air 1948 pc 102 where the privy council held that assessment made without giving an exemption which ought to have been given, was not a nullity. his lordship distinguished the same as follows : 'if the levy is illegal, the constitutional remedy goes into action. the privy council ruling does not contradict this rule of law ...... the judicial committee was not considering the sweep of the constitutional remedy de hors statutory challenges but was construing the plea of 'nullity' with reference to an order passed, erroneously may be, put within jurisdiction and impugned before the statutory tribunals.' 18. however in pratap narain's case : [1975]100itr698(sc) , the appellant was denied relief on facts, on the ground of aches. 19......
Judgment:

Jagannadha Rao, J.

1. These two writ petitions raise a common question and can be disposed of together.

2. W.P. No. 3922 of 1977 is filed for the issue of a writ of certiorari quashing the assessment order passed in G.I. No. 10722/71-72 dated 14th March, 1975, confirmed in appeal on 30th March, 1976, by the Assistant Commissioner (CT) (Appeals), Guntur, and to direct the authorities to levy the tax in accordance with law.

3. For the assessment year 1971-72 the petitioner returned a turnover of Rs. 2,68,947.15. The assessing officer determined the net turnover at Rs. 14,81,792.88 by adding the excise duty paid by M/s. Ananda Rao & Company of Nellore directly into the treasury, to the taxable turnover of the petitioner. The petitioner preferred an appeal to the Assistant Commissioner and disputed the levy of sales tax on the amount of excise duty added to the taxable turnover but the appeal was dismissed by the Assistant Commissioner by following a judgment of this Court in Shaw Wallace & Co. Ltd. v. State of Andhra Pradesh (T.R.C. Nos. 27 and 28 of 1974) reported in [1976] 37 STC 448 which held that the assessing authorities could add such excise duty to the taxable turnover. The petitioner stated in his affidavit that he did not prefer any further appeal to the Tribunal as he was under a bona fide and mistaken impression that the tax was leviable by including the excise duty in the turnover and that the department was also labouring under the same mistake. Subsequently the petitioner came to know that the judgment of the High Court in Shaw Wallace & Co. Ltd. v. State of Andhra Pradesh [1976] 37 STC 448 was overruled by the Supreme Court in the judgment in McDowell and Co. Ltd. v. Commercial Tax Officer : [1977]1SCR914 . The petitioner stated that the judgment of the Supreme Court was reported in the STC on 15th February, 1977, that he immediately approached his chartered accountant for necessary action, and applied for certified copies of the orders of assessment as well as the appellate order inasmuch as the original assessment order was filed in the appeal and the appellate order was misplaced. Thereafter he preferred this writ petition on 8th September, 1977.

4. In W.P. No. 3923 of 1977 the petitioner is the same and he prayed for the issue of a writ of certiorari quashing the assessment order in G.I. No. 10722/70-71 dated 14th March, 1975, confirmed in appeal on 30th March, 1976, by the Assistant Commissioner (CT) (Appeals), Guntur, and to direct the authorities to levy the tax in accordance with law.

5. The subject-matter of this writ petition is the assessment made in the assessment year 1970-71 for which the petitioner returned a net turnover of Rs. 2,11,426.86. However, the assessing officer determined the net turnover at Rs. 2,26,123.84. Later he reopened the assessment and enhanced the turnover to Rs. 4,01,468.14 on the ground that the excise duty paid on the relevant purchase of liquors and beer by Ananda Rao & Company, Nellore, has to be added to the taxable turnover. The appeal preferred by the petitioner was dismissed by the appellate authority following the judgment of this Court reported in Shaw Wallace & Co. Ltd. v. State of Andhra Pradesh [1976] 37 STC 448. The remaining facts in this writ petition are identical with the facts in W.P. No. 3922 of 1977 and the averments in the affidavit regarding the bona fide belief of the petitioner and of the department and the reasons for the delay in filing the writ petition are also one and the same.

6. The question that arises for consideration is : Whether the petitioner can have the assessment orders and the appellate orders quashed under article 226 of the Constitution of India without following the remedies provided in the A.P. General Sales Tax Act on the ground that the said orders are liable to be quashed on account of illegality or error apparent on the face of the record. The question is whether in view of the subsequent judgment of the Supreme Court in McDowell & Co. Ltd. v. Commercial Tax Officer : [1977]1SCR914 the assessment orders and the appellate orders in each of the writ petitions are liable to be quashed. It is therefore necessary to advert to the relevant rulings of the Supreme Court and of this Court on this question.

7. The Supreme Court has laid down in Sales Tax Officer v. Kanhaiya Lal : [1959]1SCR1350 that tax paid under a mistake of law is liable to be refunded. In that case, the respondent was assessed to sales tax on his forward transactions in silver bullion by the assessment order dated 31st May, 1949, 30th October, 1950, and 22nd August, 1951. Later, the levy on such transactions was held ultra vires by the High Court in another case by judgment dated 27th February, 1952, and confirmed by the Supreme Court on 3rd May, 1954. The respondent filed the writ petition in 1952. The State did not contend that the proper remedy was a suit or departmental appeal. The only contention was that the money paid under a mistake of law was irrecoverable. Though that was the law as applied in England, America and Australia, their Lordships observed that the India law was different. Bhagwati, J., accepting the view of the Privy Council in Shiba Prasad Singh's case AIR 1949 PC 297 held that section 72 of the Contract Act was applicable to cases where tax was paid under a mistake of law and further held that the money was recoverable subject to estoppel, waiver, limitation or the like. However it was held that no question of estoppel would arise when both the parties were labouring under a mistake of law. His Lordship added :

'Merely because the State of U.P. had not retained the moneys paid by the respondent but had spent them away in the ordinary course of the business of the State would not make any difference to the position ...............'

8. and the direction for refund issued by the High Court was confirmed. In this case the writ petitioner was held entitled to take advantage of an adjudication by the High Court in a different case. However, the power of the High Court under article 226 of the Constitution of India to order refund was not in dispute.

9. The next in the line is State of Madhya Pradesh v. Bhailal Bhai : [1964]6SCR261 . There the petitioners were assessed to sales tax on their sales of tobacco in accordance with a notification of the Government. The said notification was challenged as infringing article 301 of the Constitution of India and refund was claimed in a petition under article 226 of the Constitution of India. The High Court upheld this contention and ordered refund. On appeal by the State, the said view was affirmed. Das Gupta, J., held that tax paid under a mistake of law could be recovered under section 72 of the Contract Act. Referring to the question whether the High Court had power to order refund under article 226 of the Constitution of India it was observed :

'We see no reason to think that the High Courts have not got this power. If a right has been infringed - whether a fundamental right or a statutory right - and the aggrieved party comes to the court for enforcement of the right, it will not be giving complete relief if the court merely declares the existence of such right or the fact that that existing right has been infringed .......... ......... we are clearly of the opinion 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.'

10. Adverting to the question of laches, it was observed :

'Among the several matters which the High Courts rightly take into consideration in the exercise of that discretion is the delay made by the aggrieved party in seeking this special remedy and what excuse there is for it.'

11. The said power under article 226 was reiterated in State of Kerala v. Aluminium Industries Limited [1965] 16 STC 689 (SC). There the respondent questioned by way of writ petition, the assessment order and claimed refund on the ground that the sales were exempt from tax under article 286(1)(a) of the Constitution of India as it then stood. Wanchoo, J. (as he then was), observed that there was no question of estoppel when the mistake of law was common to both the parties under section 72 of the Contract Act. Dealing with the question of limitation it was observed :

'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 becomes known to the person who has made the payment by mistake.'

12. A finding was called for as to whether the writ petition was filed within three years of the date on which the mistake first became known to the respondent.

13. Unlike Kanhaiya Lal's case : [1959]1SCR1350 , in the last two cases the writ petitioner was not a third party who was trying to obtain refund under article 226 on the basis of an adjudication in some other case.

14. There is an exhaustive discussion of the point by Mathew, J., in D. Cawasji & Co. v. State of Mysore : 1978(2)ELT154(SC) . There the petitioners filed writ petitions in June and July, 1968, after the judgment of the Mysore High Court dated 2nd May, 1968, striking down the provision of the Mysore Elementary Education Act for a declaration that the levy was bad and for refund on the ground of mistake of law discovered on 2nd May, 1968, when the High Court rendered judgment in another case. After accepting the view in Bhai Lal's case : [1964]6SCR261 and that of Aluminium Industries [1965] 16 STC 689 (SC), Mathew, J., observed :

'We are aware that the result of this view would be to enable a person to recover the amount paid as tax even after several years of the date of payment, if some other party would successfully challenge the validity of the law under which the payment was made and if only a suit or writ petition is filed for refund by the person within three years from the date of declaration of the invalidity of the law. That might both be inexpedient and unjust so far as the State is concerned.'

15. Mathew, J., distinguished the case in Tilokchand Motichand's case : [1969]2SCR824 as a case where the payments were not made under a mistake of law. The principle that 'everybody is presumed to know the law applied' in the latter case was also criticised by Mathew, J., as follows :

'We are not quite sure that if the maxim that everyone is presumed to know the law is applied, there will be any case of payment under a mistake of law unless that presumption is rebutted in the first instance, for, the moment it is assumed that every one is presumed to know the law, it is clear that no one can make a mistake as to the law. It is sometimes said that every man is presumed to know the law, but there is only a slovenly way of stating the truth that ignorance of law is not in general an excuse (see Frederick Pollock, 'Jurisprudence and Legal Essays', page 89). 'There is no presumption in this country that every person knows the law; it would be contrary to common sense and reason if it were so (see Maule, J., in Martindale v. Falkner (1846) 2 CB 706, 719).''

16. Having thus upheld the right to refund even on the basis of a declaration of the invalidity made in some other case, the Supreme Court in Cawasji's case : 1978(2)ELT154(SC) refused to give relief on another ground. There the earlier declaration as to the invalidity of the assessment was obtained by the same parties in an earlier batch of writ petitions but they did not claim refund in that batch. Hence they were held precluded from claiming that relief by separate petitions on the ground that they could not be allowed to 'split up their claim' for refund from the main relief.

17. In the case of Raja Pratap Narain : [1975]100ITR698(SC) the petitioner was paying tax on income from a mango grove from 1939-40 but his objections were overruled and every year assessments were likewise made. In 1963 the High Court held the income to be not taxable in relation to the 1939-40 year. The petitioner unsuccessfully applied to the department for refund for the years between 1940-41 to 1961-62 and moved the High Court under article 226 of the Constitution of India is September, 1968. Krishna Iyer, J., accepted the power of the High Court to (order) refund under article 226. His Lordship referred to the Privy Council case in Commissioner of Income-tax v. Tribune Trust AIR 1948 PC 102 where the Privy Council held that assessment made without giving an exemption which ought to have been given, was not a nullity. His Lordship distinguished the same as follows :

'If the levy is illegal, the constitutional remedy goes into action. The Privy Council ruling does not contradict this rule of law ...... the Judicial Committee was not considering the sweep of the constitutional remedy de hors statutory challenges but was construing the plea of 'nullity' with reference to an order passed, erroneously may be, put within jurisdiction and impugned before the statutory tribunals.'

18. However in Pratap Narain's case : [1975]100ITR698(SC) , the appellant was denied relief on facts, on the ground of aches.

19. The decision in Swadeshi Cotton Mills case : (1975)4SCC378 cannot help the respondents. There the writ petitions were dismissed by the High Court on the ground of laches. The Supreme Court refused to interfere. However the observations made there in that everybody is deemed to know the law of the land are sufficiently weakened by the latter judgment of Mathew, J., in Cawasji's case : 1978(2)ELT154(SC) referred to above and also run counter to the earlier cases in Kanhaiya Lal's case : [1959]1SCR1350 , Bhailal Bhai's case : [1964]6SCR261 and the Aluminium Industries case [1965] 16 STC 689 (SC). In fact those cases were not referred.

20. The last of the cases is the one in Shiv Shankar Dal Mills v. State of Haryana : [1980]1SCR1170 . There the dealers had paid market fees at the increased rate of 3 per cent under the Haryana Act 22 of 1977. The excess 1 per cent fee (above 2 per cent) was declared ultra vires by the Supreme Court on 4th May, 1979, in another case. Thereafter, some other dealers who had, under mistake, paid larger sums which, after the decision of the Supreme Court dated 4th May, 1979, became refundable, demanded issue of a writ to that effect. Krishna Iyer, J., observed :

'..........Where public bodies, under colour of public laws, recover people's money, later discovered to be erroneous levies, the dharma of the situation admits of no equivocation. There is no law of limitation, especially for public bodies, on the virtue of returning what was wrongly recovered to whom it belongs. Nor is it palatable to our jurisprudence to turn down the prayer for high prerogative writs, on the negative plea of 'alternative remedy' since the root principle of law married to justice, is ubi jus ibi remedium.'

21. However, on the facts of that case, instead of granting refund to the dealers, the Supreme Court directed the excess fee so collected by the market committees to be deposited into court, with a view to be paid to those customers who had paid to the dealers as in the Nawabganj Sugar Mills case : [1976]1SCR803 .

22. So far as our High Court is concerned, in Challa Appa Rao & Co. v. Commercial Tax Officer, Narsapur [1970] 25 STC 256; ILR [1969] AP 418, the power under article 226 of the Constitution of India to direct refund on the ground of mistake of law was considered. In writ petitions filed by certain persons after the invalidity of the law was declared by the Supreme Court in another case, Jagan-mohan Reddy, C.J., and Madhava Reddy, J. (as they then were), upheld the power not only in regard to cases where a particular taxing statute was held ultra vires but also where the assessment was 'illegal' on account of an error apparent on the face of the record or where the statute was wrongly interpreted and no other interpretation was possible, provided the other assessees approached the High Court within reasonable time. In fact Bhailal's case : [1964]6SCR261 clearly stated that refund could be ordered under article 226 in cases where it was collected in violation of a fundamental right or a statutory right.

23. As to what is a reasonable time to approach the High Court from the date of discovery of the mistake, this Court in Appa Rao's case [1970] 24 STC 256; ILR [1969] AP 418 held that six months would be reasonable and any further delay had to be explained and the Bench followed the judgment of Subba Rao, C.J. (as he then was), in V. S. Rao v. D.T.S., Vijayawada 1957 ALT 785. Of course in Aluminium Industries' case [1965] 16 STC 689 (SC), the Supreme Court applied the three year rule as for suits.

24. As stated in Secretary to Government v. Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. : AIR1973Ker69 (FB) for this purpose, it does not matter whether a suit would, in fact, lie or not. The inquiry should be, when would a suit for the relief claimed become barred by time if a suit lay.

25. In the present cases, the Supreme Court decided in C.A. Nos. 248-251 and 934-936 of 1976 dated 25th October, 1976, that sales tax cannot be levied on the amount of exercise duty as it was not included in the sale bills. The said judgment of the Supreme Court was reported in McDowell & Co. Ltd. v. Commercial Tax Officer : [1977]1SCR914 on 15th February, 1977. According to V. S. Rao's case 1957 ALT 785 six months was the reasonable period and the petitioner should have filed the writ petitions by 15th August, 1977, but filed the same on 8th September, 1977. There is a delay of 23 days taking six months as the admissible period and this delay had to be explained as stated in V. S. Rao's case 1957 ALT 785. The petitioner explained in his affidavit that after the Supreme Court judgment was reported on 15th February, 1977, he approached the auditor and then obtained certified copies of the assessment order which was filed in the appeal and for a certified copy of the order in the appeal which he could not find. Before us it was not seriously contended that explanation was not proper.

26. For all the above reasons, we are of the opinion that the petitioners are entitled to the benefit of the judgment of the Supreme Court in McDowell & Co. Ltd. v. Commercial Tax Officer : [1977]1SCR914 and that there is an error apparent on the face of the record in these impugned assessment orders and the respective appellate orders. They are liable to be quashed as there is no unreasonable delay in invoking article 226 of the Constitution of India. The writ petitions are accordingly allowed. There will be no order as to costs in the circumstances of the case. Advocate's fee Rs. 200 each.


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