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1985 Supreme(AP) 461
Andhra Pradesh High Court
Judges : B.P.JEEVAN REDDY, P.KODANDA RAMAYYA
N.V.Ramaiah - Appellant
Versus
State OF A.P. - Respondent
Decided On : 11-29-85
A mistake of law made by a person is not a ground for claiming refund of tax paid by him, unless the mistake is one that could not have been discovered by the person by exercising due diligence.
Headnote:
Whether the plaintiffs are entitled to claim refund of gallonage fee paid by them under a mistake of law. Whether the suits are barred by limitation.
Fact of the Case:
The plaintiffs were manufacturers of French polish and methylated spirit. They purchased denatured spirit from the Government and paid gallonage fee at the appropriate rate. After a judgment of the High Court declaring the levy and collection of gallonage fee to be illegal, the plaintiffs filed suits for recovery of the gallonage fee paid by them.
Finding of the Court:
The High Court held that the plaintiffs were entitled to claim refund of the gallonage fee paid by them during the three-year period prior to the judgment of the High Court, but their claim for refund of the gallonage fee paid prior to that period was barred by limitation.
Issues: Whether the plaintiffs are entitled to claim refund of gallonage fee paid by them under a mistake of law. Whether the suits are barred by limitation.
Ratio Decidendi: The Supreme Court held that the plaintiffs were not entitled to claim refund of the gallonage fee paid by them. The Court held that the levy and collection of gallonage fee was not illegal, but the High Court had held that the collection of the fee was illegal as the services were not commensurate to the fee charged. The Court held that the mistake of law made by the plaintiffs was one that could have been discovered by them by due diligence on each occasion when they made the payments. The Court also held that the suits were barred by limitation as they were not filed within three years from the date of the payment.
Final Decision: The appeals were dismissed.
( 1 ) THE Hyderabad Denatured Spirit Rules, 1955 and the Andhra Pradesh Denatured Spirit Rules, 1971, which repealed the Hyderabad Rules, levied gallonage fee at the rate of Re. 1/- per gallon on the denatured spirit purchased by licensees from the Government Distilleries. Denatured spirit is used as a raw material in the manufacture of several products. A person, M/s. Syntho-Pharm, represented by its partner Sri A. P. Waghray, challenged the said levy on the ground, inter alia, that the State was not rendering any services whatsoever in lieu of the said fee and, therefore, the levy was bad. The writ petition filed by him was allowed by a Bench of this Court, which declared the levy to be bad inasmuch as the State failed to produce any material whatsoever to show that it was rendering some or other service in lieu of the said fee. The declaration granted by the Court is to the following effect:"we are, therefore, constrained to hold that the imposition of the Gallonage Fee of the nature and dimension of that fixed by the Denatured Spirit Rules of Hyderabad and Andhra Pradesh is invalid. A writ will, therefore, issue to the respondents to restrain them from collecting Gallonage Fees on denatured spirit at the rate of one rupee per gallon. The petitioner had also prayed for refund of the Gallonage Fee collected from him from March 1966 onwards. We see no justification for granting a refund of the Gallonage Fee paid by him prior to 1969 as he had done so without any protest. The petitioner is, however, entitled to a refund of the Gallonage Fee paid from 1969 onwards. A direction to that effect will issue. The writ petition is accordingly allowed. . . . . . . . . ".
( 2 ) THE said writ petition was filed in 1969, and the decision was rendered on 6-3-1972; it is reported in M/s. Syntho Pharm v. Commissioner of Excise (1972) 2 Andh WR 260. The plaintiffs/appellants herein were not parties to the said writ petition, nor had they filed any similar writ petition. After the judgment of the Bench aforesaid, however, they instituted the present suits for recovery of the gallonage fee paid by them. Since the facts in all the three appeals are identical, it would be sufficient if we state the facts in A. S. No. 510/1977, arising from O. S, No. 83 of 1975 on the file of the Additional Subordinate Judge, Vijayawada.
( 3 ) O. S. 83/1975 was filed on 4-3-1975, i. e. , practically on the last day of the three-year period commencing from the date of the Bench judgment reported in (1972) 2 Andh WR 260, aforesaid. The plaintiff asked for refund in a sum of Rs. 2,12,679. 22 Ps. made up of two items, viz. , Rs. 1,80,234. 22 Ps. being the gallonage fee paid by him during the period 1961-62 to 1972-73, and another sum of Rs. 32,445/- being interest on the said amount from 6-3-1972 to 4-3-1975. The plaintiff also asked for interest from the date of suit till the date of realisation. The plaintiff s case is based on the following averments :- the plaintiff is a manufacturer of French polish; he also deals in methylated spirit; he was granted a licence under the relevant Rules enabling him to purchase denatured spirit; he has been purchasing various quantities of denatured spirit from the Government from the year 1961-62 onwards and has been paying the gallonage fee at the appropriate rate; after the aforesaid Bench judgment, the plaintiff made a representation on 7-10-1973 requesting the Excise Commissioner, Andhra Pradesh, Hyderabad to refund the gallonage fee collected from him, in view of the said judgment; though the plaintiff sent several reminders to the Commissioner, as well as to other Excise authorities, they took no action in pursuance thereof; the judgment of the High Court makes it clear that the levy and collection of the said fee is illegal; the plaintiff paid the same under a bona fide mistake and is, therefore, entitled to its refund along with interest at the rate of 6% per annum; the cause of action for claiming the ref
