Case: Gill and Company Private Limited Vs. Commercial Tax Officer, Hyderabad Iii, and Another

MITTER, J. 1. These appeals by special leave against orders of the High Court of Andhra Pradesh arise out of eight writ petitions numbering 300 of 1967 to 307 of 1967 for the issue of writs of certiorari and mandamus in respect of assessments made under the Andhra Pradesh General Sales Tax Act for the years 1959-60, 1960-61, 1961-62 and 1963-64 in respect of purchase and sale of cotton. It appears from the special leave petition that the appellant purchased cotton in the State of Andhra Pradesh at various centres and used to sell the same in the course of inter-State trade or commerce being registered as a dealer both under the Central Sales Tax Act, 1956, and under the Andhra Pradesh General Sales Tax Act, 1957. The appellants case further was that being the last dealer who had bought the cotton in the State of Andhra Pradesh it had paid purchase tax under the State Act for the assessment years mentioned and as the cotton was sold in the course of inter-State trade, the appellant applied for and received refund of the purchase tax in accordance with the proviso to section 6 of the State Act. By several assessment orders dated July 28, 1960, July 6, 1961, July 26, 1962, and November 25, 1964, for the assessment years 1959-60, 1960-61, 1961-62 and 1963-64 respectively under the Central Act, the Commercial Tax Officer, Barkatpura, Hyderabad-3, assessed to sales tax the sales of cotton made by the appellant in the course of inter-State trade or commerce in respect whereof the appellant had obtained refunds under the proviso to section 6 of the State Act. The appellant claims not to have been aware that such inter-State sales were not taxable under the Central Act and under a misapprehension and mistake of law paid taxes amounting to Rs. 21, 921.04, for the year 1959-60, Rs. 29, 331.73 for the year 1960-61, Rs. 21, 574.38 for the year 1961-62 and Rs. 50, 767.44 for the year 1963-64. The appellant claims to have discovered the said mistake in the course of proceedings for assessment for the year 1962-63. It is alleged that the discovery was made through the help of its attorneys who had pointed out to the appellant that the levy of tax under the Central Act was illegal in view of the decision of this Court in The State of Mysore v. Yaddalam Lakshminarasimhiah Setty and Sons ([1965] 2 S.C.R. 129; 16 S.T.C. 231). This discovery is alleged to have been made in January, 1967. The appellant further claims to have called upon the respondents to cancel the orders of assessment and refund the amount of the taxes which had been recovered illegally but the respondents failed and neglected to do so.The High Court of Andhra Pradesh dismissed the writ petitions when they came up for admission, mainly on the ground that the petitions for the grant of the extraordinary remedy could not be admitted after the lapse of a long period. The High Court was also of the view that the question of time when the mistake was discovered was a question of fact which had to be enquired into and as the appellant had a remedy open to it by way of a suit in a court of law, which was a more convenient and effective remedy the same should be pursued by it. A group of civil miscellaneous petitions numbering 129 to 136 of 1967 presented before the High Court for grant of leave to appeal to this Court was rejected on the ground that the cases were not fit for the exercise of the discretion of the High Court "having regard to the fact that the orders became final nearly 5 to 6 years earlier." 2. In our opinion, the High Court was not justified in disposing of the writ petitions in the above manner. Of course the High Court had a discretion under Article 226 of the Constitution to refuse to admit the petitions if it thought that they were frivolous or that they had been presented after the lapse of a period for which there was no justification. It had however to examine the question as to whether the appellant had paid the taxes under a mistake of law as also when the appellant came to discover its mistake. The taxing authorities could not very well be asked to quash the assessment orders already made by them. It is now well settled by this Court in The State of Kerala v. Aluminium Industries ([1965] 16 S.T.C. 689) that: "In such a case where tax is levied by mistake of law it is ordinarily the duty of the State subject to any provision in the law relating to sales tax .... to refund the tax. If refund is not made, remedy through court is open subject to the same restrictions and also to the period of limitation (see Article 96 of the Limitation Act, 1908), namely, three years from the date when the mistake had become known to the person who has made the payment by mistake (see State of Madhya Pradesh v. Bhailal Bhai ([1964] 15 S.T.C. 450)."The Court further pointed out that it was the duty of the State to investigate the facts when the mistake was brought to its notice and to make a refund if mistake was proved and the claim was made within the period of limitation. 3.In State of Madhya Pradesh v. Bhailal Bhai ([1964] 15 S.T.C. 450), this Court held that "the High Courts have power for the purpose of enforcement of fundamental rights and statutory rights to give consequential relief by ordering repayment of money realised by the Government without the authority of law." It was further pointed out in that case that the High Courts had to take into consideration in the exercise of that discretion the delay, if any, made by the aggrieved party in seeking this special remedy and also the nature of controversy of facts or law to be decided as regards the availability of consequential relief. It was observed that "Whether repayment should be ordered in the exercise of this discretion will depend in each case on its own facts and circumstances .... 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 facie 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." 4. The High Court did not examine the merits of the case at all as it could not before admitting the petitions and hearing the Sales Tax Authorities against the cases urged in the writ petitions. Whether the case of the appellant was true, namely, that it discovered the mistake only in January, 1967, and that the assessments were illegal were all matters which the High Court had to examine after affidavits had been filed. It was open to the High Court to give a hearing to the parties on these questions and then come to its conclusion as to whether it would not use its discretion under Article 226 of the Constitution. But the petitions could not be rejected summarily as was done by the High Court in these cases.Eight of the appeals arise out of the rejection of the writ petitions and eight others out of refusal to grant special leave to appeal to this Court. We allow the appeals against the orders rejecting the writ petitions and direct the High Court to admit the writ petitions and hear the matters out in the normal way. Since we have granted special leave against the orders rejecting the writ petitions, it is not necessary to consider whether the High Court erred in refusing to certify the appeals under Article 133.

Decision reasoning: 1[ds]2. In our opinion, the High Court was not justified in disposing of the writ petitions in the above manner. Of course the High Court had a discretion under Article 226 of the Constitution to refuse to admit the petitions if it thought that they were frivolous or that they had been presented after the lapse of a period for which there was no justification. It had however to examine the question as to whether the appellant had paid the taxes under a mistake of law as also when the appellant came to discover its mistake. The taxing authorities could not very well be asked to quash the assessment orders already made by them4. The High Court did not examine the merits of the case at all as it could not before admitting the petitions and hearing the Sales Tax Authorities against the cases urged in the writ petitions. Whether the case of the appellant was true, namely, that it discovered the mistake only in January, 1967, and that the assessments were illegal were all matters which the High Court had to examine after affidavits had been filed. It was open to the High Court to give a hearing to the parties on these questions and then come to its conclusion as to whether it would not use its discretion under Article 226 of the Constitution. But the petitions could not be rejected summarily as was done by the High Court in these cases.Eight of the appeals arise out of the rejection of the writ petitions and eight others out of refusal to grant special leave to appeal to this Court. We allow the appeals against the orders rejecting the writ petitions and direct the High Court to admit the writ petitions and hear the matters out in the normal way. Since we have granted special leave against the orders rejecting the writ petitions, it is not necessary to consider whether the High Court erred in refusing to certify the appeals under Article 133.