Case: Salonah Tea Company Ltd Vs. Superintendent Of Taxes Nowgong &amp; Ors. Etc

In 1954, the Assam Taxation (on Goods Carried by Roads or Inland Waterways) Act was first enacted. This court struck down the Act as ultra vires the Constitution of India (see Atiabari Tea Co. Ltd. v. State of Assam, AIR 1961 SC 2321. On April 6, 1961, a new Act was passed which received the assent of the President. The High Court again struck down the Act declaring it ultra vires the Constitution on August 1, 1963. On December 13, 1963, in Khyerbari Tea Co. Ltd. v. State of Assam [1964] 5 SCR 975 , in a challenge to the Act under article 32 of the Constitution, this court held the Act to be intra vires. On December 19, 1966, judgment was passed in Civil Rule No. 190 of 1965. On April 1, 1968, the appeals preferred by the State of Assam against the High Court order dated December 13, 1963, were allowed on the basis of the declaration of the Act to be intra vires the Constitution. Thereafter, notices were issued by the Superintendent of Taxes, Nowgong, requiring the appellant under section 7(2) of the Act to submit returns for the period ending June 30, 1961, September 30, 1961, December 31, 1961, and March 31, 1962. Returns were duly filed. Assessment orders were passed under section 9(3) of the said Act. On July 10, 1973, the High Court passed the judgment in Loong Soong Tea Estate (Civil Rule No. 1005 of 1969) declaring the assessment as without jurisdiction. It is the case of the appellant-petitioner that in view of the above judgment, the appellant came to know about the mistake in paying the tax as per assessment order and also that the appellant became entitled to refund of the amount paid. The present writ petition was filed in November, 1973, before the High Court of Assam. Thereafter, in June, 1976, the learned single judge of the High Court referred the matter to a larger Bench. The Division Bench on June 14, 1979, passed the judgment setting aside the orders and notices of demand but refused relief of refund claimed by the appellant Aggrieved thereby, the appellant has preferred the present appeals. The appellant-petitioner claimed in all these petitions that the assessments were illegal and prayed that directions be given to the respondents to refund the tax collected in pursuance of those ordersThe Legislature of Assam passed the Act, as mentioned hereinbefore, in 1954 called the Assam Taxation (on Goods Carried by Roads or Inland Waterways) Act, 1954, which purported to levy tax on manufactured tea and jute carried by road and inland waterways. The Act was declared ultra vires the Constitution by this court in Atiabari case, AIR 1961 SC 232 , on the ground that the previous sanction of the President was not taken. Thereafter, the Legislature passed the Act which received the assent of the President on April 6, 1961. The validity of the Act was also challenged and the High Court declared that Act to be ultra vires on August 1, 1963. Against the judgment and order passed by the High Court, the State of Assam and other respondents preferred appeals before this court. In the meantime, M/s. Khyerbari Tea Co. Ltd. challenged the provisions of the Act directly before this court by filing an application under article 32 of the Constitution and this court, in its judgment dated December 13, 1963, held the Act to be intra vires. Following the aforesaid decision of this court, the appeals filed by the State of Assam and others against the judgment of the High Court were allowed by this court on April 1, 1968. It was after this decision that the respondents required the appellant by a notice under section 7(2) of the Act issued on July 8, 1968, to submit returns for the four periods mentioned hereinbefore. Due to penal consequences mentioned in the said notices in the event of failure to file returns and pay the taxes, the appellant filed the returns on July 11, 1968, and paid the various taxes

Reasoning: It appears thus that the High Court was in error in coining to the conclusion that it was possible for the appellant to know about the legality of the tax sought to be imposed as early as 1963, when the Act in question was declared ultra vires as mentioned hereinbefore. Thereafter, the taxes were paid in 1968. Therefore, the claim in November, 1973, was belated. We are unable to agree with this conclusion. As mentioned hereinbefore, the question that arises in this case is whether the court should direct refund of the amount in question. Courts have made a distinction between those cases where a claimant approaches a High Court seeking relief of obtaining refund only and those where refund is sought as consequential relief after striking down of an order of assessment, etc. Normally speaking, in a society governed by rule of law, taxes should be paid by citizens as soon as they are due in accordance with law. Equally, as a corollary of the said statement of law, it follows that taxes collected without the authority of law as in this case from a citizen should be refunded, because no State has the right to receive or to retain taxes or monies realised from citizens without the authority ofHigh Court, in the instant case, after analysing the various decisions came to the conclusion that where a petitioner approached the High Court with the sole prayer of claiming refund of money by a writ of mandamus, the same was normally not granted but where the refund was prayed for as a consequential relief, the same was normally entertained if there was no obstruction or if there was no triable issue like that of limitation. We agree that normally in a case where tax or money has been realised without the authority of law, the same should be refunded and in an application under article 226 of the Constitution, the court has power to direct the refund unless there has been avoidable laches on the part of the petitioner which indicate either the abandonment of his claims or which is of such nature for which there is no probable explanation or which will cause any injury either to the respondent or to any third party. In is true that in some cases the period of three years is normally taken as period beyond which the court should not grant relief but that is not an inflexible rule. It depends upon the facts of each case. In this case, however, the High Court refused to grant the relief on the ground that when the section was declared ultra vires originally, that was the time when refund should have been claimed. But it appears to us, it is only when Loong Soongs case (Civil Rule No. 1005 of 1969, decided on July 10, 1973-Gauhati High Court) was decided by the High Court in 1973 that the appellant became aware of his crystal clear right of having the assessment declared ultra vires and in that view of the matter, in October, 1973, -after the judgment was delivered in July, 1973, the appellant came to know that there was a mistake in paying the tax and the appellant was entitled to refund of the amount paid. That was the time when the appellant came to know of it. Within a month thereafter in November, 1973, the present petition was filed. There was no unexplained delay. There was no fact indicated to the High Court from which it could be inferred that the appellant had either abandoned his claims or the respondent had changed his position in such a way that granting relief of refund would cause either injury to the respondent or anybody else. On the other hand, refunding the amount as a consequence of declaring the assessment to be bad and recovery to be illegal will be in consonance with justice, equity and good conscience. We are, therefore, of the view that the view of the High Court in this matter cannot be sustainedChandra Bhushan v. Deputy Director of Consolidation, U.P. (Regional) [1967] 2 SCR 286 , was a case where this court observed that the High Court erred in exalting a rule of practice into a rule of limitation and rejecting the petition of the appellant for refund without considering whether the appellant was guilty of laches or undue delay. Shah J., delivering the judgment of the court, observed that the primary question in each case is whether the applicant had been guilty of laches or unduethat view of the matter, in the facts of this case, we are of the opinion that the money was refundable to the appellant. The appellant had proceeded diligently. There is nothing to indicate that had the appellant been more diligent, the appellant could have discovered the constitutional inhibition in 1966. The position is not clear even if there is any triable issue. The position becomes clearer only after the decision in Loong Soongs case (Civil Rule No. 1005 of 1969, decided on July 10, 1973-Gauhati High Court) as mentionedattention was drawn on behalf of the respondents that under section 16 of the Act, an appeal lay in the prescribed manner within thirty days from the date of service of any order of assessment but the challenge to the assessment on the ground that the assessment was bad could not be made in an appeal under the Act, because the right to appeal being a creature of the Act, if the Act is ultra vires, that right would not enure to the benefit of theright has been granted by the High Court and the High Court has not refused the setting aside on the ground of delay. It would be inconsistent for the High Court to refuse to grant consequential relief after setting aside the assessment. If the realisation was without the authority of law and that was declined by the High Court by the judgment in this case which claimed also the consequential relief, that relief must automatically follow and the High Court was wrong in taking the view that a triable issue of limitation arises in this case. In the absence of any averment to the contrary, the averment of the appellant in the petition that they came to know only after the Loong Soongs case (Civil Rule No. 1005 of 1969 decided on July 10, 1973-Gauhati High Court) must be accepted. The High Court was wrong in contending that they should have been more diligent. After all, the discretion must be fair and equitable. In the facts of this case, we are of the opinion that the High Court was in error in the approach it took. We, therefore, set aside the judgment and order of the High Court and direct refund of the tax illegally realised by theappeals are allowed. We set aside the judgment and order to the extent that it refused refund of the tax illegally realised. In the facts of this case, the parties will pay and bear their own8. I agree with the order proposed by my learned brother but would like to add a word of reservationIn view of the judgment of this court in Superintendent of Taxes v. Onkarmal Nathmal Trust [1975] Supp SCR 365, there can be no doubt that the assessments on the appellants were illegal and that the taxes demanded on the basis thereof had been collected without the authority of law from the appellants. The appellants contention is that they had paid the taxes under a mistake of law and are entitled to seek refund thereof. It is difficult to see how the High Court could have allowed the appellants prayer for quashing the assessments but refused the prayer for the refund of the illegally collected taxes. The appeals have, therefore, to beCounsel for the respondents, however, places strong reliance on the following observations of a Constitution Bench of this court in State of Madhya Pradesh v. Bhailal Bhai [1964] 15 STC 450 ; [1964] 6 SCRThough the provisions of the Limitation Act do not, as such, apply to the granting of relief under article 226, the maximum period fixed by the Legislature as the time within which the relief by a suit in a civil court must be claimed may ordinarily be taken to be a reasonable standard by which delay in seeking remedy under article 226 could be measured ......... Where the delay is more than that period, it will almost always be proper for the court to hold that it is unreasonable.He also relies on Cawasji and Co. v. State of Mysore [1975] 2 SCR 511  and draws our attention to the decision in Vallabh Glass Works v. Union of India [1984] 3 SCR 180 , where the claim for refund in respect of period beyond three years was rejected. He contends, on the strength of the above decisions, that the High Court rightly rejected the appellants claim forOn the other hand, it is contended for the appellants that a writ petition seeking refund of taxes collected without the authority of law cannot be rejected on the ground of limitation or delay unless such delay can be said to amount to laches or has caused some irreparable prejudice to the opposite party or some other like forceful reason exists. Counsel refers in this context to Venkateswaran v. Ramchand [1962] 1 SCR 753 , Chandra Bhushan v. Deputy Director of Consolidation [1967] 2 SCR 286 , Trilokchand Motichand v. Munshi, Commissioner of Sales Tax [1970] 25 STC 289 (SC); [1969] 2 SCR 824 , Ramachandra Shankar Deodhar v. State of Maharashtra [1974] 2 SCR 216 , Joginder Nath v. Union of India [1975] 2 SCR 553 , Shiv Shanker Dal Mills v. State of Haryana [1980] SCR 1170 and State of M.P. v. Nandlal Jaiswal, AIR 1987 SC 251 , and contends that these decisions have qualified the observations of Das Gupta J. in Bhailal Bhais case [1964] 15 STC 450 (SC); [1964] 6 SCR 261As pointed out by my learned brother, in the present case, the appellants averment that they realised their mistake only when they came to know about the decision in Loong Soong Tea Estates case in July, 1973 (Civil Rule No. 1005 of 1969 decided on July 10,High Court) stands uncontroverted. There is nothing on record either to show that the appellants had realised their mistake even earlier, at about the time when the writ petition in Loong Soong Tea Estates case (Civil Rule No. 1005 of 1969 decided on July 10,High Court) was filed or at the time when the earlier decision of 1966 referred to in Loong Soong Tea Estates case (Civil Rule No. 1005 of 1969 decided on July 10,High Court) judgment was rendered. On this finding of fact, the writ petitions filed by the appellants in November, 1973, were filed within the period of limitation prescribed in article 113 read with section 23 ofthe Limitation Act, 1963. Thus, the petitions were within time even by the test enunciated in Bhailal Bhais case [1964] 15 STC 450 (SC); [1964] 6 SCRI think, therefore, that, for the purposes of the present case, it is unnecessary to consider the larger question whether the bar of limitation should be considered as fatal to a writ petition as to a suit for recovery or whether it is only a relevant but not a conclusive factor that should be taken into account by the court in exercising its discretion