Case: G. S. Dugal and Company Private Limited Vs. State of Orissa

SHAH, J.1. Messrs G. S. Dugal & Co. Ltd. is a private limited company carrying on business as a building contractor. The company entered into certain works contracts with the State of Orissa for construction of buildings, dams and excavation of spillways etc. The company was registered as a dealer under the Orissa Sales Tax Act, 1947, from the quarters ending June 30, 1949. On the footing that the material used in the construction of buildings, dams etc. was sold to the State, the Sales Tax Officer, Cuttack, made a consolidated assessment on April 7, 1954, and directed the appellant to pay Rs. 1, 30, 000 as sales tax. This amount was realised by deducting it out of the outstanding bills of the company and not by taking any coercive process for recovery. Relying upon the judgment of the Madras High Court in Gannon Dunkerley & Co. v. The State of Madras ([1954] 5 S.T.C. 216.), the company, on July 27, 1954, preferred a petition before the High Court of Orissa under Article 226 of the Constitution praying for a writ in the nature of mandamus or any other direction restraining the State of Orissa from levying sales tax from the company in respect of the contracts for construction of buildings etc. in the State or "at least until the completion of the works under the contracts". In the petition no relief for refund of tax was claimed.2. The High Court by order dated April 21, 1958, following the decision of this Court in State of Madras v. Messrs Cannon Dunkerley & Co. Ltd. ([1959] S.C.R. 379; 9 S.T.C. 353.), which affirmed the decision of the Madras High Court in Gannon Dunkerley & Co. v. The State of Madras ([1954] 5 S.T.C. 216.), declared that the assessment of sales tax in respect of building or works contracts was not in accordance with law and directed that no steps by certificate proceedings or otherwise be taken against the company to realise sales tax in respect of those contracts. The High Court also proceeded to direct "That portion of the tax paid, refund of which is barred by limitation under section 14 of the Orissa Sales Tax Act, 1947, on the date of the filing of this application under Article 226 of the Constitution, shall not be refunded ............ That portion of the tax paid refund of which is not barred by limitation on the date of the filing of this application shall be refunded on proper application, according to law."It is common ground before this Court that tax under the Orissa Sales Tax Act was not leviable in respect of works contracts executed by the company. That was also conceded before the High Court, and an order declaring that assessment of sales tax in respect of building or works contract was invalid was made. This appeal filed with special leave is directed only against that direction relating to the refund of the amount of tax collected from the company under orders of assessment made more than 24 months before the date of the petition in the High Court.3. Section 14 of the Orissa Sales Tax Act provides :-"14. The Collector shall, in the prescribed manner, refund to a dealer applying in this behalf any amount of tax paid by such dealer in excess of the amount due from him under this Act, either by cash payment, or, at the option of the dealer, by deduction of such excess from the amount of tax due in respect of any other period :Provided that no claim to refund of any tax paid under this Act shall be allowed unless it is made within twenty-four months from the date on which the order of assessment was passed or within twelve months of the final order passed on appeal, revision, review or reference in respect of the order of assessment, whichever period is later."4. The High Court was of the opinion that the amount of tax due and paid under orders of assessment made within the period prescribed by the proviso was recoverable. But it has to be noted that a claim for refund was never made in the High Court by the company, and the High Court was not competent to pass that order. We are told at the Bar that a number of applications were filed before the High Court relying upon the judgment of the Madras High Court in Gannon Dunkerleys case ([1954] 5 S.T.C. 216.), and a stereotyped order was issued by the High Court which was transcribed in the proceedings in the diverse applications. The order relating to refund was, however, manifestly inappropriate in the present case, there being no claim for refund of tax.The consolidated order for assessment was passed on April 7, 1954. The application for the issue of writ restraining the State from levying sales tax in respect of a contract of construction of building was passed on July 27, 1954. No process for recovery of tax was adopted by the State since the date of the assessment, and the State sought merely to adjust liability for payment of sales tax against outstanding bills.5. Section 14 of the Act has no application to adjustments of account made by the State, without the assent of the company, and there is no evidence that the adjustments were assented to by the company. The company did claim a direction declaring that the State of Orissa was not entitled to levy sales tax in respect of building and works contracts executed by it. This relief the company is entitled to.

Decision reasoning: 0[ds]4. The High Court was of the opinion that the amount of tax due and paid under orders of assessment made within the period prescribed by the proviso was recoverable. But it has to be noted that a claim for refund was never made in the High Court by the company, and the High Court was not competent to pass that order. We are told at the Bar that a number of applications were filed before the High Court relying upon the judgment of the Madras High Court in Gannon Dunkerleys case ([1954] 5 S.T.C. 216.), and a stereotyped order was issued by the High Court which was transcribed in the proceedings in the diverse applications. The order relating to refund was, however, manifestly inappropriate in the present case, there being no claim for refund of tax.The consolidated order for assessment was passed on April 7, 1954. The application for the issue of writ restraining the State from levying sales tax in respect of a contract of construction of building was passed on July 27, 1954. No process for recovery of tax was adopted by the State since the date of the assessment, and the State sought merely to adjust liability for payment of sales tax against outstanding bills.5. Section 14 of the Act has no application to adjustments of account made by the State, without the assent of the company, and there is no evidence that the adjustments were assented to by the company. The company did claim a direction declaring that the State of Orissa was not entitled to levy sales tax in respect of building and works contracts executed by it. This relief the company is entitled to.