A State Legislature is competent to retrospectively amend a sales tax act to provide that refund of tax paid which the dealer was not liable to pay can only be claimed by the person from whom the dealer had actually realized it.

Headnote:
SALES TAX - Refund of tax paid - Retrospective amendment of Act - Validity - Orissa Sales Tax Act, 1947 (Orissa Act 14 of 1947), Ss. 9B, 14, 14A - Constitution of India, Arts. 19(1)(f), 286(1)(a).
Fact of the Case:

The assessee, a paper manufacturer, collected tax from purchasers on all sales, including sales to dealers in other States. After the Supreme Court held that inter-State sales were not taxable, the assessee applied for a refund of tax paid on such sales. The Sales Tax Officer and the Board of Revenue refused the refund, holding that the assessment orders had become final and could not be reopened. The High Court held that the assessee was entitled to a refund for the last three quarters, but not for the first two quarters, as the claim was barred by limitation.
Finding of the Court:

The Supreme Court held that the assessee was not entitled to a refund of the tax paid, as the Orissa Legislature had retrospectively amended the Sales Tax Act to provide that refund of tax paid which the dealer was not liable to pay could only be claimed by the person from whom the dealer had actually realized it. The Court held that this amendment was within the competence of the State Legislature and that it did not impose an unreasonable restriction on the assessee's fundamental right to acquire, hold and dispose of property.
Issues: Whether the retrospective amendment of the Orissa Sales Tax Act, 1947, which provided that refund of tax paid which the dealer was not liable to pay could only be claimed by the person from whom the dealer had actually realized it, was valid.
Ratio Decidendi: The Supreme Court held that the amendment was valid because: * The State Legislature was competent to legislate with respect to the subsidiary or ancillary matter of granting refund of tax improperly or illegally collected. * The amendment did not impose an unreasonable restriction on the assessee's fundamental right to acquire, hold and dispose of property, as it was in the interest of the general public to prevent the assessee from making a profit out of the tax collected.
Final Decision: The Supreme Court dismissed the assessee's appeals and allowed the State's appeals.

Judgment

SHAH, J. : The Orient Paper Mills Ltd., - hereinafter called the assessees- are a public limited company having their registered office at Brajrajnagar in the district of Sambalpur, Orissa State. The assessees are manufacturers of paper and paper-boards and are registered as dealers under the Orissa Sales Tax Act, 1947-hereinafter referred to as the Act. The assessees used to collect tax from the purchasers on all sales effect by them including sales to dealers in other States. For the quarters ending March 31, 1950. June 30, 1950, September 30, 1950. December 31, 1950 and March 31, 1951, the assessees paid Sales-tax which they were assessed by the Assistant Collector of Sales-tax to pay, on their turnover which included sales outside the State of Orissa.

2. After this court delivered the judgment in State of Bombay v. United Motors (India) Ltd., 1953 SCR 1069 the assessees applied for refund under S. 14 of the Act of tax paid in respect of goods despatched for consumption outside the State of Orissa contending that according to the law expounded by this court, the transactions of sales outside the state were not taxable under the Act because of the prohibition imposed by Art. 286 (1) (a) of the Constitution read with the Explanation. Refund was refused by the assistant Sales Tax Officer and the order was confirmed by the board of Revenue. In the view of the taxing authorities, the orders of assessment in respect of the five periods had become final on the diverse dates on which they were made and were not liable to be reopened merely because the law applicable to the transactions was not correctly appreciated by the taxing authorities. In petitions moved by the assessees for writs of certiorari and mandamus against the orders of the board of Revenue, the High Court of Orissa held that the only restriction upon the right of a dealer to apply for refund which "is found within the four corners of S. 14 of the Act" being the law of limitation prescribed by the proviso to that section, transactions in question not being liable to tax as they were inter-State transactions, the tax collected must be refunded on applications submitted within the period prescribed. The High Court then proceeded to hold that the recovery of tax paid for the first two quarters was barred by limitation but not recovery of tax paid for the remaining three quarters, and issued an order in the nature of mandamus directing refund of tax in respect of the last three quarters. The State of Orissa and the assessees have appealed with special leave against the judgment of the High Court by these five appeals.

3. Counsel for the State of Orissa contends that no refund could be granted because the orders of assessment had become final and S. 14 of the Act applied only to cases of refund in which a superior taxing authority in appeal or revision against the order of assessment directs or declares that the tax has not been properly collected, and it does not been properly collected, and it does not apply to cases of assessment which have become final, even if made on an erroneous view of the law. The assessees support the view of the High Court that S. 14 applies to all claims for refund and also contend that the recovery of tax paid for the first two quarters was not barred by the law of limitation.

4. It is unnecessary for the purposes of these appeals to consider the respective contentions of the parties. In our view the claim of the assessees must fail because of the retrospective amendment of the Act by the Orissa Legislature, By S. 14A which was incorporated by the Orissa Sales Tax (Amendment) Act, 28 of 1958, it was provided:

"Notwithstanding anything contained in this Act where any amount is either deposited; by any person under sub-sec. (3) of S. 9B or paid as tax by a dealer and where such amount or any part thereof is not payable by such person or dealer, a refund of such amount or any part thereof can be claimed only by the person from whom such per

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1961 Supreme(SC) 132

A State Legislature is competent to retrospectively amend a sales tax act to provide that refund of tax paid which the dealer was not liable to pay can only be claimed by the person from whom the dealer had actually realized it.

Cases Referred (1)