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1966 Supreme(Cal) 190
HIGH COURT OF CALCUTTA
Bijayesh Mukherji
UNION OF INDIA - Appellant
Versus
LAL CHAND AND SONS - Respondent
Civil Revn. 5010 Of 1963
Decided On : SEPTEMBER 20, 1966
NONI COOMAR CHAKRAVARTI, PRABODH KUMAR DAS GUPTA, SACHINDRAMOHAN GHOSH
A mistake of law that leads to the formation of a contract does not make the payment under the contract refundable under Section 72 of the Contract Act 1872.
Headnote:
CONTRACT - PAYMENT OF SALES TAX - MISTAKE OF LAW - SECTION 72 OF THE CONTRACT ACT 1872 - APPLICABILITY - REFUND OF MONEY PAID BY MISTAKE.
Fact of the Case:
The Government of India supplied materials to two printers, Messrs Lal Chand and Sons and Sree Saraswaty Press Ltd., for printing various forms. The printers submitted their bills for the jobs done, and the Government paid them in full. Later, it was discovered that the payment of sales tax on the amount billed was made by mistake, as the job work done by the printers was not subject to sales tax under the Bengal Finance (Sales-Tax) Act, 1941. The printers were asked to refund the amount, but they refused, claiming that they had acted as collectors on behalf of the State Government and would refund the amount only if the Sales-Tax Commissioner agreed to refund it to them.
Finding of the Court:
The Court held that the payment of sales tax was not subject to the Bengal Finance (Sales-Tax) Act, 1941, and therefore, the printers were not liable to pay it. The Court also held that the subsequent payment of sales tax on the basis of a supplementary contract was not unauthorized under Section 175, Sub-section (3), of the Government of India Act 1935, as it was duly authorized on behalf of the then Government of India. The Court further held that Section 72 of the Contract Act 1872, which deals with the refund of money paid by mistake, was not applicable in this case as the mistake of law (Sales Tax Act) led to the formation of the contract, and therefore, the payment was not made under a mistake of law.
Issues: 1. Whether the payment of sales tax was subject to the Bengal Finance (Sales-Tax) Act, 1941? 2. Whether the subsequent payment of sales tax on the basis of a supplementary contract was unauthorized under Section 175, Sub-section (3), of the Government of India Act 1935? 3. Whether Section 72 of the Contract Act 1872 was applicable in this case?
Ratio Decidendi: 1. The Court held that the payment of sales tax was not subject to the Bengal Finance (Sales-Tax) Act, 1941, as the job work done by the printers was not a sale within the definition of sale in Section 2, Clause (g) of the Act. 2. The Court held that the subsequent payment of sales tax on the basis of a supplementary contract was not unauthorized under Section 175, Sub-section (3), of the Government of India Act 1935, as it was duly authorized on behalf of the then Government of India. 3. The Court held that Section 72 of the Contract Act 1872 was not applicable in this case as the mistake of law (Sales Tax Act) led to the formation of the contract, and therefore, the payment was not made under a mistake of law.
Final Decision: The Court dismissed the revision petitions filed by the Union of India and upheld the decrees of the Small Causes Court setting aside the decrees recorded against the printers.
( 1 ) MESSRS Lal Chand and Sons and Sree Saraswaty Press Ltd. , printers both, printed various forms, in execution of orders to that end by the Government of India, which had supplied the necessary materials for printing. Orders executed, Messrs Lal Chand and Sons submitted their bills, for the jobs done, between March 26, 1942, and February 26, 1943, forsree Saraswaly Press Ltd. also submitted their bills, for the jobs done, between April 11, 1942, and March 10. 1943. Payment was made in full on the bills submitted by both.
( 2 ) THEREFORE. Messrs Lal Chand and Sons submitted three bills dated March 15, 1943, forby way of sales-tax on the amount billed for and paid. So did Sree Saraswaty Press Ltd. , but on March 12, 1943, the date their bill bears, claiming Rs. 1,709--15 as--9 pies, on account of sales-tax, on the amount billed for and paid.
( 3 ) B. K. Roy, the Manager of the Forms and Press, Central Forms Store, Calcutta, Government of India, passed for payment of the bills presented so. What was thus passed for was paid.
( 4 ) SOME twelve years later, that is to say on or about February 19, 1955, it was discovered that through mistake such payment was made on account of sales-tax. Mistake--because, amongst other things, the job work done by the two printers on the basis of materials supplied by the Government of India was no sale within the definition of sale in Section 2, Clause (g) of the Bengal Finance (Sales-Tax) Act, 6 of 1941, and, therefore, not subject to the levy of sales-tax under Section 4 thereof.
( 5 ) RESULT : the printers were called upon to refund the amount given them by mistake. But refund they would not. The stand they took was : 'we had to, and did, pay the amount as sales-tax on demand by the sales-tax department. And we reimbursed ourselves of the amount from you, acting merely as collectors on behalf of the then Slate Government. ' Sree Saraswaty Press Ltd. went a little more : 'should the Sales-tax Commissioner agree to refund us the money, we on our part, shall refund the amount to you gladly. '
( 6 ) SUCH clash of views led the Union of India to institute two suits--one against each --in the Court of Small Causes of Calcutta for recovery of the amount paid to each by mistake.
( 7 ) THE suit against Messrs Lal Chand and Sons was decreed by a learned judge of the Small Causes Court on February 29, 1960. And the suit against the other was decreed by another learned judge of the same Court on December 5, 1962. The foundation of each decree was payment of money by mistake within Section 72 of the Contract Act 10 of 1872 and the consequential liability of each payee to repay it,
( 8 ) SECTION 38 of the Presidency Small Cause Courts Act, 15 of 1882, was invoked by each of the two unsuccessful printers for setting aside the decrees recorded against them. And the decrees were set aside by the Full Bench, differently constituted on each occasion,--one against Messrs Lal Chand and Sons on July 12, 1961, and the other against Sree Saraswaty Press Ltd. on September 12, 1963. The ground on which such reversal rests is absence of a mistake within Section 72 of the Contract Act 1872.
( 9 ) THIS is why the Union of India has come up to this Court in revision.
( 10 ) THAT the transactions of the type these two litigations reveal were not subject to the sales-tax at the relevant time is not in the realm of controversy. Indeed, on this basic proposition, we are all agreed--Mr. Noni Coomar Chakray-arti appearing for the petitioner. Union of India, Mr. Prabodh Kumar Das Gupta appearing for the opposite party : Sree Saraswaty Press Ltd. , and I.
( 11 ) THE controversy is about the contract for payment of the amount for sales-tax having been an unauthorized one, violated as such a contract has Section 175, Sub-section (3), of the Government of India Act 1935 (25 and 26 Geo. 5 Ch. 42 ). The controversy is also about Section 72 of the Contract Act 1872 doing any duty in all circumstances her
