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M. Mohamed Salam Vs. Commissioner of Commercial Taxes, Board of Revenue and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberWrit Petition Nos. 1351, 1352, 2551 to 2556, 2581 to 2608, 2620 to 2646, 3224, 3225, 3226 to 3228, 3
Judge
Reported in(1971)IIMLJ143; [1970]26STC163(Mad)
AppellantM. Mohamed Salam
RespondentCommissioner of Commercial Taxes, Board of Revenue and anr.
Appellant AdvocateM.R.M. Abdul Karim, ;P.M. Jumma Khan, ;K.K. Mohammed Yaseen, ;C.S. Chandrasekhara Sastry, ;C. Venkataraman, ;C. Natarajan, ;D. Srinivasan, ;T. Martin, ;K. Kumara Kuruparan, ;Ismail, ;P.L. Meyappan, ;P
Respondent AdvocateAssistant Government Pleader and ;Additional Government Pleader
DispositionPetition dismissed
Cases ReferredKrishnamurthi and Company v. State of Madras
Excerpt:
.....always to have included the excise duty, if any, paid by a dealer to the central government in respect of the goods sold by him. but we fail to see how this fact lays heavier burden on inter-state sales than on local sales and thus impedes the free flow of the former......of state of mysore v. lakshminarasimhiah setty and sons [1965] 16 s.t.c. 231, the tax charged on inter-state sales was illegal and followed it up by filing the petitions in this court for direction to refund the tax already paid and also for prohibition from collecting the balance. in the second batch, ashok leyland ltd., which is the common petitioner, seeks refund of central sales tax paid for the assessment years 1962-63 to 1965-66 on the quantum of excise duty included in the chargeable turnover of inter-state sales. the ground in them is the state of madras v. n.k. nataraja mudaliar [1968] 22 s.t.c. 376 in which the supreme court held that excise duty was entitled to deduction or exclusion from the taxable turnover of such sales and the payment of tax on excise duty was,.....
Judgment:
ORDER

K. Veeraswami, C.J.

1. These are two batches of petitions for mandamus for refund of Central sales tax paid. The relief is sought on the ground that the payment had been made under a mistake of law. In three of the petitions, in which Mohamed Salam was the assessee, the tax paid related to the assessment years 1957-58 and 1958-59. In respect of the second year, there was a balance of Rs. 1,400 in arrears. When this was sought to be collected by the revenue, the assessee served on it a lawyer's notice that, in view of State of Mysore v. Lakshminarasimhiah Setty and Sons [1965] 16 S.T.C. 231, the tax charged on inter-State sales was illegal and followed it up by filing the petitions in this court for direction to refund the tax already paid and also for prohibition from collecting the balance. In the second batch, Ashok Leyland Ltd., which is the common petitioner, seeks refund of Central sales tax paid for the assessment years 1962-63 to 1965-66 on the quantum of excise duty included in the chargeable turnover of inter-State sales. The ground in them is The State of Madras v. N.K. Nataraja Mudaliar [1968] 22 S.T.C. 376 in which the Supreme Court held that excise duty was entitled to deduction or exclusion from the taxable turnover of such sales and the payment of tax on excise duty was, therefore, by mistake.

2. In view of the subsequent legislative amendments and validation, it becomes unnecessary to deal with the ground of mistake at any great length. State of Mysore v. Lakshminarasimhiah Setty and Sons [1965] 16 S.T.C. 231 held on 10th November, 1964, that the use of the expression 'levied' under Section 9(1) of the Central Sales Tax Act and Section 5(3)(a) of the Madras General Sales Tax Act implied that the former Act did not make any departure from the manner of levy of tax on the specified goods at a single point under the latter Act. At the relevant periods, the point at which intra-State sales of tanned hides and skins attracted local tax was the stage of first sales in the State. Due to the assimilation of the point of charge, the tax on inter-State sales at that stage was regarded as unauthorised. In Khader & Co. v. State of Madras [1966] 17 S.T.C. 396 to which one of us was a party, the view was expressed that State of Mysore v. Lakshminarasimhiah Setty and Sons [1965] 16 S.T.C. 231 could not govern the period after 1st October, 1958, because of the substitution of Section 15 in the Central Act by the Amending Act 31 of 1958 and introduction by Madras Act 6 of 1963 of Section 4-A(1) in the Madras General Sales Tax Act and it was held that the scheme of the amended Section 15 of the Central Act read with Sections 4-A(1) and 6 of the State Act suggested that so far as the goods mentioned in Schedule I were concerned, their sales were liable to levy both under the State Act as well as under the Central Act but in the case of declared goods mentioned in Schedule II, though levies might be made under both the Acts, levy under the State Act was liable to be refunded. This point of view does not help the revenue for the period prior to 1st October, 1958, in respect of which State of Mysore v. Lakshminarasimhiah Setty and Sons [1966] 17 S.T.C. 396 would hold the field.

3. As regards the excise duty, Khader & Co. v. State of Madras [1966] 17 S.T.C. 396 pointed out that whereas Rule 6(f) of the Madras General Sales Tax Rules, 1959, directed deduction of excise duty from the taxable turnover, no such provision had been made in the Central Act or the rules made thereunder for such deduction and that, therefore, in determining the aggregate turnover of the inter-State sales, excise duty paid was not deductible. But applying the reasoning of State of Mysore v. Lakshminarasimhiah Setty and Sons [1965] 16 S.T.C. 231 the Supreme Court in State of Madras v. N.K. Nataraja Mudaliar [1968] 22 S.T.C. 376 held that the benefit of deduction available under the local rules would also be available in determining the chargeable turnover of inter-State sales.

4. It follows, therefore, that when the assessment orders in these cases were made, there was no legal basis to tax the inter-State sales or to include the excise duty paid in the taxable turnover of such sales. But the question is whether on the ground of payment of tax by mistake of law, the petitioners are entitled to a direction for refund. Apart from the relief sought being discretionary and the exercise of the discretion will depend upon the facts and circumstances in each case, including undue delay in moving for the relief, we are of the view that the court, in considering the relief sought, should take into account the fact that the petitioners, if they were aggrieved against the assessment orders should have pursued their remedies provided under the Act, but they having not resorted to them, they have allowed them to become final and also the further fact that, when they had a right of suit for recovery of refund on payment of court-fee therefor, they ought not, normally, to be allowed to by-pass it and to resort to the constitutional remedy. We are inclined to think that Article 226 of the Constitution is not intended to circumvent other remedies where they can well be resorted to. These are not the cases where other remedies are inadequate or unsuitable or the imminence of the situation warrants immediate relief under Article 226 of the Constitution. Apart from these considerations, inasmuch as the orders of assessments were made more than four or five years before, or even more in some of the cases, the long delay in resorting to this court is also a factor dissuading it from exercising its discretion. We feel justified in taking that view having regard to the ratio of the majority opinion of the Supreme Court in Tilokchand Motichand v. H.B. Munshi W.P.No. 53 of 1968; since reported at [1970] 25 S.T.C. 289 . In our opinion, the question of refund is not to be approached solely from the standpoint of fundamental rights and the powers in the abstract of this court to give relief in that context. As we said, the issuance of mandamus for refund being in the discretion of the court, in exercising it, the court should bear in mind the other factors and circumstances, not only the payment having been made by mistake of law. On that view, we should decline to order refund.

5. In any case, the petitioners cannot ask for refund because of the Central Sales Tax (Amendment) Ordinance, 1969, followed by the Central Sales Tax (Amendment) Act, 1969, as well as the Madras General Sales Tax (Second Amendment) Act, 1969, which had validated the levies and cut at the root of the petitioners' claim of payment by mistake of law. The effect of the Central Act, like the preceding Ordinance, is to get over the ratio of State of Mysore v. Lakshminarasimhiah Setty and Sons [1965] 16 S.T.C. 231 as also the adverse tax effect consequent on State of Madras v. N.K. Nataraja Mudaliar [1968] 22 S.T.C. 376 as to deductibility of the excise duty in computing the taxable turnover of inter-State sales. The adoption by Section 9 of the Central Sales Tax Act and the assimilation to its purpose of the scheme of single point taxation of declared goods under the State Act has been, so to speak, reversed by the Central Ordinance and the Act which replaced it, by substituting a new Section 9 for the old Section 9, with the result that the inter-State sales attract Central tax by reason of their being so and the point of their charge has been disannexed from the one at which such sales would be chargeable under the local Act, if they were intra-State sales. Further, there is a provision validating the earlier assessment which 'shall be deemed to be as valid and effective as if such assessment, reassessment, levy or collection or action or thing had been made, taken or done under the principal Act as amended by this Act.' Sections 2 and 3 of the said Madras Amending- Act have in effect, by a process of retro-operation, omitted all the relative local rules during the period commencing on the 5th January and ending with the 31st March, 1959, as well as during the period commencing from 1st April, 1959 and ending with the 31st March, 1966, which had permitted exclusion of excise duty from the taxable turnover and by a deeming provision that taxable turnover shall include and shall be deemed always to have included the excise duty, if any, paid by a dealer to the Central Government in respect of the goods sold by him. These two sections are followed by Section 4 which validates the levy and collection of tax and directs that they shall be deemed to be and to have always been validly levied or collected in accordance with law as if the Amending Act had been in force at all material times when such tax was levied or collected. The result of these Central and local amending statutory provisions is, obviously, to deprive the petitioners of the plea of payment of tax under a mistake of law. In fact, it is not argued for them that it is not the effect of those provisions.

6. But the contention in support of the petitions is that the Central Amending Act violates Article 301 of the Constitution and that the local Act is confiscatory and is violative of Article 19(l)(f) of the Constitution. We are not impressed by this contention. It is true that on account of Section 15 and Section 4-A(1) read with Section 6 of the local Act, though there may be levy of local tax at the prescribed point in respect of sales of declared goods and the Central tax on inter-State sales of the same goods, in the event of both the taxes being levied, the former should be refunded to the dealer who paid it. But we fail to see how this fact lays heavier burden on inter-State sales than on local sales and thus impedes the free flow of the former. The whole object of single point scheme of taxation is, as envisaged by Section 15 of the Central Act, to limit the levy of sales tax in respect of declared goods to one single specified point in the series of sales, including inter-State sales. If there is no inter-State sale of particular declared goods, the same goods would suffer tax at the appropriate point of sale within the State. We do not think that there is anything in Larsen and Toubro Ltd. v. Joint Commercial Tax Officer [1967] 20 S.T.C. 150 which is of assistance to the petitioners. We are not persuaded that the Central Ordinance or the Amending Act violates Article 301 of the Constitution. Nor do we think that the contention that the local Amending Act is confiscatory is made out. It is not disputed that the tax on that part of the Central turnover which represented excise duty, had been collected from the customers. The tax having been levied and paid on that basis, which has been validated retrospectively, it is neither unreasonable nor confiscatory. Krishnamurthi and Company v. State of Madras [1969] 23 S.T.C. 1 also supports this view.

7. The petitions are dismissed but with no costs.


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