Case: U.P.Pollution Control Board  Vs. M/S. Kanoria Industrial Ltd

In all these cases the controversy raised relates to the claim of refund of the amount paid by the respondents as water cess under the provisions of the Water (Prevention and Control of Pollution) Cess Act, 1977 (for short `the Act). Briefly stated, the facts leading to the filing of these petitions are : The respondents are the owners of industrial units manufacturing sugar from sugarcane and liquor/alcohol from molasses, a by-product. On demand made by the State Government under the provisions of the Act they were required to pay water cess. They protested agasint the demand principally contending that sugar industry and distillery were not industries covered by Entry No. 15 of Schedule I of the Act and consequently they were neither liable to submit any return nor to make any payment of water cess; when their protests were not accepted and the demand persisted for payment of water cess the respondents paid the amount under protest. Some of them filed writ petitions Nos. 3558 of 1980, 494 of 1980 and 17646 of 1986. The writ petitions came to be dismissed. Thereafter, special leave petitions were filed before this Court, which were disposed by judgment in M/s. Saraswati Sugar Mills v. Haryana State Board and others, 1992(1) SCC 418, reversing the decision of the High Court and holding that the sugar manufacturing industries did not fall within Entry 15 of Schedule I of the Act. 2. After the said judgment ws rendered by this Court representations were made to the Board and the Cess Officer/Assessing Authority of the Board for refund of the amounts illegally and without the authority of law realized by them as water cess. Despite several representations there was nos response from the Board and its authorities. Hence the writ petitions were filed consequent upon law declared by this Court in Saraswati Sugar Mills case (supra) seeking a mandamus to the petitioners to refund the amount collected from them as cess with interest @ 18% per annum. In the writ petitions it was contended that the writ petitioners themselves have paid the amount as water cess under protest and they had not passed on the liability to the customers. 3. The petitioners contested the claim made by the respondents before the High Court. They filed the counter affidavit in the High Court, in short taking the stand that the respondents were not entitled to refund of any amount from the Board for the reasons that after collection, the amount has been paid to the State Government, which in turn had paid the amount to the Government of India; referring to the representations of the respondents it was stated that a reference had been made to the State Government in the matter an their reply was awaited; after the judgment in M/s. Saraswati Sugar Mills case (supra) Entry 15 of Schedule I of the Act was amended with effect from 2.1.1992 covering sugar industries and distilleries and making them liable to pay water cess under the amended provisions of Entry 15 of Schedule I of the Act. In these petitions, we are not concerned with the said amended Entry and the levy and collection of cess from 2.1.1992. The High Court, after considering the rival submissions and relying few judgments of this Court, disposed of the writ petitions directing the petitioners to refund the sums realized from the respondents as water cess after verification of the amount stated to have been paid by them within the given them. Hence the petitioners have filed these special leave petitions.

Court's reasoning:
We are, therefore, of the opinion that the Division Bench was in error in the view it took. Where there is no question of under enrichment, in respect of money collected or retained, refund, to which citizen is entitled, must be made in a situation like this." (emphasis supplied) 10. This case fully supports the submissions made on behalf of the respondents. 11. Similar view was taken by this Court in Salonah Tea Company Ltd. Etc., v. The Superintendent of Taxes, Nowgon, and others, etc., AIR 1990 SC 772 . Para 6 of the said judgment reads :- "6.The only question that falls for consideration here is whether in an application under Article 226 of the Constitution the Court should have directed refund.It is the case of the appellant that it was after the judgment in the case of Loong Soong Tea Estate the cause of action arose. That judgment was passed in July 1973. It appears thus that the High Court ws in error in coming 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 refund were sought as a consequential relief after striking down of the 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 realized from citizens without the authority of law." (emphasis supplied) 12. In the para extracted above, in a similar situation as arising in the present cases relating to the very question of refund, while answering the said question affirmatively, this Court pointed out that the courts have made distinction between those cases were a claimant approached a High Court seeking relief of obtaining refund only and those where refund was sought as a consequential relief after striking down of the order of assessment etc. In these cases also the claims made for refund in the writ petitions were consequent upon declaration of law made by this Court. Hence, High Court committed no error in entertaining the writ petition.In Sales Tax Officer, New Delhi v. East India Hotels Ltd. And another, (1998)9 SCC 662 , the appellant authority charged sales tax on the sales thereof prior to the judgment of this Court in Northern India Caterers (India) Ltd. v. Lt. Governor, Delhi, 1978(4) SCC 36. A fresh assessment order was passed thereafter on the basis of the revised return filed by the first respondent. Ultimately an order was passed holding that the first respondent had made application for refund of the excess amount paid within the permissible period. When no action was taken for long period, a writ petition was filed praying for writ of mandamus directing the authority to refund the amount with interest thereon. The High Court allowed the writ petition finding that no further consideration was required and that the defence of unjust enrichment was no maintainable. On the facts of the case, this Court allowed the appeal and directed the Sales Tax authorities to hear the first respondent on the refund application and dispose of the same within a given time. It appears that other cases referred to above were not brought to the notice of this Court. Thus we find that the aid case governs its on facts. 22. Hence we reject the contentions advanced on behalf of the petitioner as to the maintainability of the writ petition. 23. This Court in M/s. Dehri Rohtas Light Railway Company Ltd. v. District Board, Bhajpur and others, 1992(2) SCC 598, dealing with a case where demand was made for refund is somewhat similar circumstances on the question of delay and laches, in para 13, has stated thus :- "The rule which says that the Court may not enquire into belated and stale claim is not a rule of law but a rule of practice based on sound and proper exercise of discretion. Each case must depend upon its own facts. It will all depend on what the breach of the fundamental right and the remedy claimed are and how delay arose. The principle on which the relief to the party on the grounds of laches or delay is denied is that the rights which have accrued to others by reason of the delay in filing the petition should not be allowed to be disturbed unless there is a reasonable explanation for the delay. The real test to determine delay in such cases is that the petitioner should come to the writ court before a parallel right is created and that the lapse of time is not attributable to any laches or negligence. The test is not to physical running of time. Where the circumstances justifying the conduct exists, the illegality which is manifest cannot be sustained on the sole ground of laches." 24. The argument that the relief should be denied to the respondents on the ground of delay and laches in approaching the High Court by filing writ petitions claiming refund is equally unsustainable. The claims for refund were made by the respondents within a reasonable time after the judgment was rendered by this Court in Saraswati Sugar Mill case aforementioned. The respondents have paid water cess under protest. The collection of water cess in view of law laid down by this Court ws clearly illegal and without authority of law. It is also not the case that where the rights are created in third parties on account of delay, if any, in approaching the court and that by entertaining the writ petitions rights of third parties are prejudiced. In this view there was no question of delay and laches on the part of the respondents on the facts found and circumstance stated. 25. The respondents had specifically pleaded that they did not pass on the liability of the water cess on their customers; it appears this contention was not denied by the petitioners before the High Court. On the other hand the only plea taken by the petitioners was that money had been passed to the Central Government under Section 8 of the Act. It was brought to the notice of the Court by the respondents that 65% of the sugar was sold by the respondents through public distribution system under the Essential Commodities Act. Hence there was no question of unjust enrichment also in these cases. 26. The stand of the petitioners that the respondents were not entitled for refund on the ground that the amount of cess collected was passed on to the State Government, which in turn gave it to the Central Government and the Central Government has appropriated the same by passing on money back to various State Pollution Control Boards does not help them. Before the High Court, they only stated that they made reference to the Government in regard to the claim made by the respondents for refund and they were waiting for response. It was also not made out by the petitioners as to how they had difficulties in making the refund to the respondents. It may also be kept in view that immediately after the notice were issued demanding water cess they were challenged. Even in some cases interim order were also passed in the High Court; the amount of water cess was paid under protest. So, in this situation when finally this Court held that the very collection of water cess was without the authority of law, the claim of the respondents for refund cannot be denied merely on the ground that the petitioners passed on the money to the State Government and in turn the money was sent to the Central Government and later the Central Govt. appropriated the same by passing it back to the various State Pollution Control Boards. 27. The High Court in our view having taken all aspects into consideration was right in allowing the claim of the respondents made for refund in the writ petitions. We do not see any good ground or valid reason to interfere with the judgments and orders of the High Court impugned in these petitions.