M/S. SHREE BAIDYANATH AYURVED BHAWAN PVT. LTD.

A v.

STATE OF BIHAR AND ORS.

AUGUST 29, 1996

(S.P. BHARUCHA AND K.S. PARIPOORNAN, JJ.) B

Constitution of India, 1950: ·

Article 32, 226-Supreme Court's decision that certain aywvedic medicinal preparations not to be taxed under Excise Acts in force in the C

State~But to be taxed only in accordance with the provisions of the Toilet preparations (Excise Duties) Act-As regards claim for refund it was directed that the petitioners can take up the matter with the State Govemments in accordance with law-When one of the petitioners approached the State Govemment, its claim was rejected after 11 years without giving reasons therefore-77iereafter it filed Writ petition in the High Court and it held that D what the petitioner sought to obtain was only a money decree and it could not be allowed--f'etitioner was pennitted by the High Court to file a suit to recover the amoum-On appeal held : Respondent-State was obliged by the Supreme Court's order to refund to the writ petitioners the amounts collected from them in the f 01111 of levy that was held to be illegal-Not to have responded to the refund claim for 11 years and then to have rejected it without giving reason is to have acted disrespectfully to this Cowt--Even if the wiit petition was filed only for money it fell outside the ordinary stream of wlit petitions and the High Cowt should have ordered refwui-Respondent State's order refusing refund quashed-Respondent State to refund the amount with interest at 12% from 1.1.63 till payment of realisation.

Adhyaksha Mathur Babu's Sakti Oushadhalaya Dacca (P) Ltd. & Ors.

v. Union of India, [1963] 3 SCR 957; Salonah Tea Company Ltd. v. Superintendent of Taxes Nowgong & Ors. Etc.; [1908] 2 S<:; R 474 and Suganmul

v. State of Madhya Pradesh & Ors., AIR (1965) SC (1740) = (1965) 56 ITR G 84, relied on.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2043 of 1981.

.From the Judgment and Order dated 27.9.77 of the Patna High Court H 347

A in C.W.J.C. No. 1827 of 1974.

Yogeshwar Prasad, P.K. Bajaj, Dr. J.P. Singh and Ms. Rani Chhabra for the Appellant.

D. Goburdhan for the Respondents.

The following Order of the Court was delivered :

In Adhyakslw Mathur Babu's Sakti Oushadhalaya Dacca (P) Ltd. & Ors. v. Union of India, [1963) 3 SCR 957, the main question raised and argued in writ petitions under Article 32 of the Constitution was whether State Governments were entitled to tax three ayurvedic preparations, . namely, Mritasanjibani, Mritasanjibani Sudha and Mritasanjibani Sura,

under the Excise Acts in force in the respective States. A Constitution Bench of this Court came to the conclusion that the said medicinal preparations could not be taxed under the Excise Acts in force in the States D and that they could be taxed only in accordance with the provisions of the Medicinal and Toilet Preparations (Excise Duties) Act. This Court stated that it passed "no order as to the claim for refund for that is a matter which the petitioners can take up with the State Governments concerned according to law". The judgment was delivered on 7th September, 1962.

The appellants were one of the many writ petitioners before the Court. (Their Writ Petition was No. 354 of 1961). They were, therefore, thus empowered to take up with the respondent-State their claim for refund, and they did so on 17th October, 1962. It is the case of the respondent-State itself that it rejected the claim for refund on 29th November, 1973, and communicated the rejection to the appellant on 7th December, 1973. The letter of 7th December, 1973, gave no reasons for the rejection.

Thereupon, the appellant filed a writ petition in the High Court at G Patna to quash the order of the respondent-State refusing to refund and to direct the respondent-State to make the refund. The refund that was prayed for was for the period 20th August 1960, to 30th September, 1962, in the sum of Rs. 91,723.80. the principal contention in the counter-affidavit filed by the respondent-State and raised at the hearing was that the writ petition was not maintainable in that the claim for refund could not be H determined in the writ jurisdiction. The High Court found that the writ

SHREEBAIDYANA111AYURVED BHAWAN (P)LTD. v. STATE 349

petition, in essence, sought to obtain only a money decree and this could A not be allowed. The appellant. was permitted to file a suit to recover the amount of the refund that it claimed.

Our attention is drawn by learned counsel for the appellant to the judgment of this Court in Salonah Tea Company Ltd. v. Supelintendent of B Taxes Nowgong & Ors. Etc., [1988] 2 SCR 474. The appellants had filed a writ petition seeking refund of tax paid under mistake, relying upon a judgment of the High Court which had declared the assessment to be without jurisdiction. The question that arose for consideration was whether in a petition under Article 226 the Court should have directed refund. It was noted that the Courts had made a distinction between those cases C where a petitioner approached the High Court seeking only the relief of obtaining a refund and those where refund was sought as a relief consequential upon the striking down. of an order of assessment. Normally speaking, it was observed, in a society governed by the rule of law taxes should be paid by citizens as soon as they were due in accordance with D law. Equally, as a corollary, it followed that taxes collected without the authority, of the law from a citizen should be refunded because no State had the right to receive or retain monies realised from citizens without the authority of law. The Court referred to the judgment in Suganmal v. State of Madhya Pradesh & Ors., to which we shall presently advert, and found that, this Court having earlier come to the conclusion that the tax was E illegal, the money would be refundable on a petition under Article 226.

In Sugamnal v. State of Madhya Pradesh & Ors., AIR (1965) SC 1740 1965 (56) ITR 84, a Constitution Bench applied its mind to the precise question and held that though the High Courts had the power to pass any appropriate order in the exercise of powers conferred under Article 226, a writ petition solely praying for the issue of a writ of mandamus directing the State to refund monies was not ordinaril:1 maintainable for the reason that a claim for such refund could be made ina suit against the authority which had illegally collected the money as a tax. The Court held :

" .... that no petition for the issue of a writ of mandamus will be nonnally entertained for the purpose of merely ordering a refund of money to the retum of which the petitioner claims a right".

(Emphasis supplied) H

A It was reiterated :

" ...... that nonnally petitions solely praying for the refund of money against the State by a writ of mandamus are not to be entertained.

The aggrieved party has the right on going to the civil Court for claiming the amount and it is open to the State to raise all possible defences to claim, defences which cannot, in most cases, be appropriately raised and considered in the exercise of writ jurisdiction".

(Emphasis supplied)

It would appear that in the case of Adhyaksha Mathur Babu Sakti Oushadhalaya Dacca (P) Ltd., this Court expected that high Constitutional authorities such as State Governments would honour a decision of the Supreme Court and take the remedial action the decision clearly contemplated, namely of refund to the parties from whom they had collected D the levy which was found to be illegal. The expectation, in so far as it related to this case, was belied.

Within a month and about 10 days of the judgment of this Court, i.e., on 17th October, 1962, the appellants asked the respondent-State to make the refund. It took the respondent-State 11 years to reject the claim. The letter of the respondent-State to the appellants dated 7th December, 1973, so stating is on record, and it does not give any reason whatsoever for the rejection. The writ petition that was filed by the appellants was not limited to seeking the refund. It also sought the quashing of the order of the State Government rejecting the claim for refund. We, therefore, cannot agree with the High Court that the writ petition was principally for the refund.

Having regard to the fact that the order of the respondent-State rejecting the claim for refund gave no reasons for its rejection, there was much to be said about its validity.

G But we proceed upon the basis that the writ petition was only to claim the refund.

It cannot be forgotten that this Court had held the levy in respect of which the refund was claimed to be bad in law. This Court's judgment clearly contemplated consequential refund but made no order in, that H behalf, leaving it to the writ petitioners to approach their State Govern-

' SHREEBAIDYANATHAYURVEDBHAWAN(P)LTD.v. STATE 351

ments. The refund application made by the appellants accordingly was A rejected, and that without giving any reasons. Even in the counter filed by the respondent-State to the writ petition, it is difficult to read any defence other than the defence that the writ petition was not maintainable and that it was barred by limitation and a reiteration of the stand which had been rejected by this Court. The writ petition was filed within two months of this B Court's decision; it '.was well within time. A reiteration of what had been rejected by this Court carried the case of the respondent-State on the writ petition no further. The only case, in reality, was that the appellants should be relegated to a civil suit. No defence upon facts being disclosed, the object was to buy time. c The writ petition was not a run-of-the-mill case. It was a case where the respondent-State had not acted as this Court had expected a high constitutional authority to act, in furtherance of the order of this Court.

That is something that this Court cannot accept. The respondent-State was obliged by this Court's order to refund to the writ petitioners, including the appellants, the amounts collected from them in the form of the levy D that was held to be illegal. If there was good reason in law for rejecting the refund claim, it should have been stated. Not to have responded to the appellants' refund claim for 11 years and then to have turned it down without reason is to have acted disrespectfully to this Court. Even assum~ ing, therefore, that this was a writ petition only for money, the writ petition E fell outside the ordinary stream of writ petitions and, acting upon it, the High Court should have ordered the refund.

The appeal is allowed. The order under appeal is set aside. The writ petition filed by the appellants before the High Court at Patna is allowed.

The respondent-State's order dated 7th December, 1973, refusing refund is quashed. The respondent-State is ordered to pay to the appellants the sum of Rs. 91, 723.80. with interest thereon at the rate of 12 per cent per annum from 1st 1ant1ary, 1963, until payment or realisation.

The respondent-State shall pay to the appellants the costs of the G appeal quantified at Rs. 25,000 (Rupees Twenty five thousand).

G.N.

Appeal allowed.