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SUPREME COURT OF INDIA
20th January, 1964
P.B. GAJENDRAGADKAR, K.N. WANCHOO, K.C. DAS GUPTA, J.C. SHAH AND N. RAJAGOPALA AYYANGAR, JJ.
State of M.P. and another (In all the Appeals) Appellants
Versus
1. Bhailal Bhai (In C. A. No. 362 of 1962) 2. Bhikabhai (In C. A. No. 363 of 1962) 3. Chhaganbhai (In C. A. No. 364 of 1962) 4. Govindbhai (In C. A. No. 365 of 1962) 5. Ratilal (In C. A. No. 366 of 1962) 6. Bhikabhai and others (In C. A. No. 367 of 1962) 7. Shivabhai (In C. A. No. 368 of 1962) 8. Raichandbhai (In C. A. No. 369 of 1962) 9. Hazarilal (In C. A. No. 370 of 1962) 10. Maganbhai (In C. A. No. 371 of 1962) 11. Sanabhai (In C. A. No. 372 of 1962) 12. Mansukhlal (In C. A. No. 373 of 1962) 13. Kasturchand (In C. A. No. 374 of 1962) 14. Venibhai (In C. A. No. 375 of 1962) 15. Kalidas (In C. A. No. 376 of 1962) 16. Chhotabhai (dead) after him Smt. Dhai Ben and others (In C. A. No. 377 of 1962). Respondents.
(1) Civil Appeal Nos. 362 to 377 of 1962.
(2) Civil Appeal Nos. 858 to 867 of 1962*
State of M.P. and another (In all the appeals) Appellants
Versus
1. Amarchand (In C. A. No. 858 of 1962)
2. Bhailal Bhai (In C. A. No. 859 of 1962)
3. Khodabhai and others (In C. A. No. 860 of 1962).
4. M/s. Hafiz Noorbux Ramjanbux (In C. A. No. 861 of 1962)
5. M/s. Gangaram Bhagwandas (In C. A. No. 862 of 1962)
6. M/s. Laxminarain Kanhaiyalal (In C. A. No. 863 of 1962)
7. M/s. Badriprasad Baijnath (In C. A. No. 864 of 1962)
8. M/s. Baldeoprasad Lakkhuram (In C. A. No. 865 of 1962)
9. M/s. Babulal Bhaiyalal (In C. A. No. 869 of 1962)
10. M/s. Jogannath Ramsahay (In C. A. No. 867 of 1962), Respondents. 1007
(3) Civil Appeals Nos. 25 to 29 of 1963.**
The State of M.P. and another (in all the Appeals) Appellants
Versus
1. Ambalal (In C. A. No. 25 of 1963)
2. Biharilal (In C. A. No. 26 of 1963)
3. Narsibhai (In C. A. No. 27 of 1963)
4. Maganbhai (In C. A. No. 28 of 1963)
5. Parshottam (In C. A. No. 29 of 1963) Respondents.
Civil Appeals Nos. 362 to 377 of 1962; 858 to 867 of 1962 and 25 to 29 of 1963.
Advocate appeared
Mr. Adhikari, Advocate General for the State of Madhya Pradesh, (Mr. I. N. Shroff, Advocate, with him), for Appellants (in all the Appeals); Mr. M. C. Setalvad, Senior Advocate, (M/s. S. N. Andley, Rameshwar Nath and P. L. Vohra, Advocates of M/s. Rajinder Narain and Co., with him), for Respondent (In C. A. No. 362 of 1962); M/s. S. N. Andley, Rameshwar Nath and P. L. Vohra, Advocates of M/s. Rajinder Narain and Co., Advocates, for Respondents (In C. A. Nos. 363 to 377 and 858 to 867 of 1962 and 25 to 27 of 1963) :
Under section 5 of the Madhya Bharat Sales Tax Act, 1950, the State issued a notification imposed sales tax in respect of Tobacco on the importers in the State. The validity of this tax was successfully challenged by the assessee before the High Court. The State moved the Supreme Court.
Held: There can be no doubt that the tax payable at the point of sale by importer in the Madhya Bharat directly impeded the freedom of trade and commerce guaranteed by Art, 301 of the Constitution. The trade and commence between Madhya Bharat and other parts of India is directly impeded by this tax. 1961 (1) SCR 809 relied on. AIR 1962 SC 1406 and AIR 1962 SC 928 referred to. [Para 8
This tax is also not saved by Art.304 (a) of the Constitution. Similar goods manufactured or produced in the State of Madhya Bharat have not been subjected to the tax which tobacco leaves, manufactured tobacco and tobacco used for Bidi manufacturing imported from other State have to pay on the sale by the importer. This tax is, therefore, not within the saving provisions of Art. 304 (a). As already pointed out, it contravenes the provisions of Art 301 of the Constitution. The tax is invalid. 1960 JLI 656 confirmed. 1956 MBLJ 68 =AIR 1956 MB 214 approved. [Para 12
(2) Contract Act - S. 72 - tax paid under mistake - the Government should repay it.
The payment of a tax made under a mistake is covered by section 72 of the Contract Act and the Government to whom the payment has been made by mistake must in law repay it [Para 13
(3) Constitution of India - Art. 226-power of the High Court - may order refund of money as a consequential relief - limitations on this power - High Court not fettered by Limitation Act - claim made beyond the prescribed period of limitation - prayer for refund should be refused as delayed - unreasonable delay - what is.
The jurisdiction conferred by Art.226 is in very wide terms. The High Courts have power for the purposes of enforcement of fundamental lights and statutory rights to give consequential relief by ordering repayment of money realised by the Government without authority of law. AIR 1962 SC 928 & 1959 SCR 1350 referred to. [para 15
Where a person comes to the Court for relief under Art. 226 on the allegation that he has been assessed to tax under a void legislation and having paid it under a mistake is entitled to get it back, the Court, if it finds that the assessment was void, being made under a void provision of law, and the payment was made by mistake, is still not bound to exercise its discretion directing repayment. Whether repayment should be ordered in the exercise of this discretion will depend in each case on its own facts and circumstances. It is not easy nor is it desirable to lay down any rule for universal application. 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 facia 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. In both these kinds of cases it will be sound use of discretion to leave the party to seek his remedy by the ordinary mode of action in a civil Court and to refuse to exercise in his favour extraordinary remedy under Art. 226 of the Constitution [Para 16
The provisions of Limitation Act do not as such apply to the granting of relief under Art. 226 It appears to us however that the maximum period fixed by the legislature as the time within which the relief by a suit in a civil Court must be brought may ordinarily be taken to be a reasonable standard by which delay in seeking remedy under Art. 226 can be measured. The Court may consider the delay unreasonable even If it is less than the period of limitation prescribed for a civil action for the remedy but where the delay is more than this period, it will almost always be proper for the Court to hold that it is unreasonable. (Para 20
(4) Constitution of India – Art. 226 – controversial facts – cannot be decided in writ cases. (para 20
Judgment
DAS GUPTA, J. : These 31 appeals by the State of Madhya Pradesh are against the orders made by the High Court of Madhya Pradesh in 31 applications under Art. 226 of the Constitution by dealers in tobacco. All these petitioners carried on business in Madhya Bharat which later became part of the State of Madhya Pradesh. They were assessed to sales tax on their sales of tobacco in accordance with the notification issued by the State Government in exercise of powers under S. 5 of the State Sales Tax Act and large amounts were collected by the Madhya Bharat Government and later by the Madhya Pradesh Government. The petitioners contended that the taxing provision under which the tax was assessed and collected from them was unconstitutional as it infringed Art. 301 of the Constitution and did not come within the special provisions of Art. 304 (a). Accordingly they prayed for appropriate writs or orders for refund of all the taxes that has been collected from them. In resisting these applications the Madhya Pradesh Government contended, first, that the taxing provisions did not offend Art. 301 of the Constitution and that in any case, they satisfied the requirements of Art. 304 (a). It was further contended that even if the taxing provision was unconstitutional and the assessment and collection of tax had been without any legal authority the petitioners were not entitled to the order for refund prayed for.
2. The High Court was of opinion on a consideration of the notification under which the tax was assessed that it imposed a tax only on imported tobacco and not on home grown tobacco and so it did not come within the special provisions of Art. 304 (a) of the Constitution and consequently the infringement of Art. 301 of the Constitution which resulted from the imposition of a tax on import of goods made the provisions void in law. The prayer for refund was allowed in the applications out of which C. A. Nos. 362-377, C. A. Nos. 861-867 of 1962 and C. A. No. 25 of 1963 have arisen. The prayer was rejected in the remaining applications.
3. In the present appeals the State of Madhya Pradesh challenges the correctness of the High Court s decision that the taxing provisions was unconstitutional and void and also the orders for refund made in some of the petitions mentioned above.
4. The liability to pay tax arose under S. 3 of the Madhya Bharat Sales Tax Act. This Act came into force from the 1st day of May 1950. As originally enacted it provided that (a) every dealer who imports goods into Madhya Bharat shall be liable to pay tax on his taxable turnover in respect of sales or supplies of goods effected from the 1st day of May 1950 if his total turnover in the previous year in respect of sales or supplies of goods exceeded Rs. 5,000/-; (b) similarly every manufacturer or processor whose turnover in the previous year exceeded Rs. 5,000/- was made liable to pay tax on his taxable turnover in respect of sales or supplies of goods effected from the 1st day of May 1950; (c) every other dealer was made liable to pay tax on his taxable turnover in respect of sales or supplies of goods effected from the 1st day of May 1950 if the total turnover in the previous year exceeded Rs. 12,000/-. By later amendments the word "processor" was deleted from cl. (b) of the section and the meaning of the words "any other" in cl. (c) was made clearer by substituting the words "any goods of a dealer not falling in cl. (a) or cl. (b)". There was also an amendment in 1950 making it clear that the taxable turnover on which the tax liability arose was in respect of sales or supplies of goods effected in Madhya Bharat.
5. Section 5 of the Act provides that the tax payable by a dealer shall be at a single point and shall not be less than Rs. 1/9/- per cent or more than 6 1/4 per cent of the taxable turnover, as notified from time to time by the Government by publication in the Official Gazette. This is subject to a proviso that the Government may in respect of a spe
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