R.S. Pathak, J.
1. The Judge (Revisions) Sales Tax has made this reference for the opinion of this Court on the following question :-
Whether in the circumstances and on the facts of the case the order for refund is maintainable
2. The respondent M/s. Lord Krishna Sugar Mills Ltd., Saharanpur, is a dealer in sugar and rab. For the assessment year 1950-51, it elected to be assessed to sales tax on the turnover of the assessment year. During that year it recovered the following amounts as sales tax from its customers :-
On sugar sold inside Uttar Pradesh ... Rs. 16,006-7-9.On sugar sold outside Uttar Pradesh ... Rs. 15,476-5-6.On rab ... Rs. 2,234-12-0.
3. Sales tax was chargeable under the U.P. Sales Tax Act on the turnover of sugar sold inside Uttar Pradesh, but the turnover of sugar sold outside Utter Pradesh and the turnover of rab were exempt from sales tax. The respondent deposited Rs. 15,345-4-6 in the Government treasury during the assessment year on different dates in the four quarters of that year, and with each deposit a clear statement was enclosed containing full particulars indicating that the deposit was made on account of the tax due in respect of sales made inside Uttar Pradesh.
4. An assessment order was made against the respondent, and the Sales Tax Officer, besides determining the tax liability of the respondent on the turnover of sales effected inside Uttar Pradesh, held him liable to deposit an amount in the Government treasury under Section 8-A(4) as that amount had been realised as tax on the turnover of sales effected outside Uttar Pradesh and on the turnover of rab. Towards this liability under Section 8-A(4) he appropriated the amount deposited as sales tax.
5. The respondent preferred an appeal, and the Judge (Appeals) determined the tax liability on the turnover of sugar sold inside Uttar Pradesh at Rs. 16,006-7-9 and also found that the respondent had realised Rs. 17,711-1-6 from its customers as tax on the turnover of rab and of sugar sold outside Uttar Pradesh. The Judge (Appeals) directed that the sum of Rs. 15,345-4-6 already deposited by the respondent should be adjusted against the amount which the respondent was liable to deposit under Section 8-A(4), and further required the respondent to deposit the balance remaining due under Section 8-A(4), and also to deposit a sum of Rs. 16,006-7-9 on account of the tax liability. It appears that consequent upon this order the respondent made a further deposit of Rs. 16,006-7-9.
6. The respondent then proceeded in revision before the Judge (Revisions), contending that it was only liable to deposit a sum of Rs. 661-3-3 towards the tax liability, which sum represented the difference between Rs. 16,006-7-9 determined as sales tax and Rs. 15,345-4-6 already deposited during the quarters of the assessment year, and that the sum of Rs. 15,345-4-6 deposited by it during those quarters could not in law be appropriated against the liability under Section 8-A(4). This contention found favour with the Judge (Revisions), and he ordered that out of the deposit of Rs. 16,006-7-9 subsequently made by the respondent a sum of Rs. 15,476-5-6 should be refunded.
7. The principle is well-settled that where two or more distinct debts are owned by a debtor to his creditor, the debtor has a right at the time of making the payment to appropriate the money to any of those debts, and if the creditor accepts the money he is bound to apply it towards the satisfaction of the debt indicated by the debtor. If the debtor fails to make such appropriation at the time of making the payment, the creditor is entitled to appropriate it against such of the debts as he prefers. The principle has been succinctly stated in Peters v. Anderson (1814) 5 Taunt 596, 601:
The person who pays money may, when he pays it, apply the payment to which account he pleases; but if he does not at the time of payment apply it to any specific account, the receiver may apply it to which account he pleases.
8. This rule has been borrowed from the Civil Law of England where it has been consistently held that the option to apply the payment belongs, in the first place, to the debtor, and, in the second, to the creditor. See Devaynes v. Noble; Clayton's case (1816) 1 Mer. 572, 596. In our country, the rule has been codified in the Indian Contract Act and finds expression in sections 59 and 60 of that Act.
9. It is now well-settled that the rule extends to statutory debts owed to the State, unless there is some provision to the contrary in the statute under which the debt comes into existence. In Jogendra Mohan Sen v. Uma Nath Guha (1908) I.L.R. 35 Cal. 636, a Bench of the Calcutta High Court applied the provisions of sections 59 and 60 of the Indian Contract Act to payments made on account of Government revenue. In Lal Behary v. Rajendra (1926) A.I.R. 1926 Cal. 866, on the question whether the Collector could appropriate a payment, made to a specific kist of revenue only to that kist, Graham, J., observed:.in view of the provisions of Section 59 of the Contract Act, it was not open to the Collector to appropriate those payments to any kist save and except the September kist in accordance with the express direction of the plaintiffs at the time when they made the payments.
10. It is not disputed that the amount deposited towards the tax liability and the amount liable to be, deposited under Section 8-A(4) represented debts owed by the respondent to the State. Now no provision of law has been placed before us on behalf of the State to justify the appropriation against the liability under Section 8-A(4). In view of the considerations mentioned above, we are of opinion that it was not open to the Sales Tax Authorities to appropriate the sum deposited on account of sales tax against the respondent's liability under Section 8-A(4).
11. It remains to be considered whether the Judge (Revisions) had jurisdiction to direct refund of the tax paid in excess. The respondent had originally deposited the sum of Rs. 15,345-4-6. This was appropriated against the liability under Section 8-A(4), and he was called upon to deposit a further sum of Rs. 16,006-7-9 towards the tax liability. If the amount originally paid as tax could not be appropriated against the liability under Section 8-A(4), then clearly the direction requiring the respondent to deposit a further sum in the amount of Rs. 16,006-7-9, towards the tax liability, was without authority of law. The tax liability was determined at Rs. 16,006-7-9. The respondent had already deposited Rs. 15,345-4-6. He could be called upon to deposit a further sum of Rs. 661-3-3 only. The Judge (Revisions) was plainly right in directing a refund of Rs. 15,345-4-6.
12. It is urged for the State that the Judge (Revisions) had no power under Section 10(5) to direct a refund inasmuch as the power under that provision could be exercised only if the revising authority reduced the amount of tax assessed. It is true that in the instant case no question arose of reducing the tax liability. But, in our judgment, there is ample power in the revising authority in the exercise of its jurisdiction under Section 10(3) to make an order of refund in cases not covered by the provisions of Section 10(5); The language of Section 10(3) is wide. The revising authority is entitled to pass such order as it thinks fit. That power is not confined merely to revising an order passed by the assessing authority or the appellate authority. It would also include the power to pass consequential orders. The order directing refund is a consequential order, following the order holding that the respondent was not liable to deposit a further sum of Rs. 16,006-7-9. We are of the view that the Judge (Revisions) had jurisdiction to make the order of refund, which he did, under Section 10(3) in favour of the respondent.
13. Learned counsel for the State further contends that consequent to the demand made by the Sales Tax Authorities the respondent paid a further sum towards the sales tax due and that he must, therefore, be taken to have acquiesced in the appropriation of the sum paid originally as sales tax towards the liability under Section 8-A(4). This point was never raised before the Judge (Revisions), and we cannot permit it to be raised now. It does not arise out of the order of the Judge (Revisions) and it necessarily requires an investigation into facts. Besides, the mere fact of payment by the respondent consequent to a demand made by the Sales Tax Authorities under colour of law would not justify the application of the doctrine of acquiescence. Section 8 provides for the issue of a notice of demand calling upon the assessee to pay the tax assessed. The law requires him to pay the sum indicated in the demand. Failure or omission On his part to comply with the demand exposes him to penal proceedings.When a statute contains a provision for imposing a penalty in case of non-compliance with an order or direction issued under it, it cannot be said that such compliance amounts to acquiescence.
14. Accordingly, the question referred to this Court must be answered in the affirmative.
15. We direct that copies of this judgment shall be sent to the Judge (Revisions) Sales Tax and the Commissioner of Sales Tax, U.P., under the seal of the Court and the signature of the Registrar as required, by Section 11(6) of the Act.
16. The respondent shall be entitled to its costs which we assess at Rs. 100. Counsel's fee is also assessed at Rs. 100.