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PETITIONER: STATE OF BOMBAY

       Vs.

RESPONDENT: M/S.  JAGMOHANDAS AND ANOTHER

DATE OF JUDGMENT: 19/10/1965

BENCH: SIKRI, S.M. BENCH: SIKRI, S.M. SUBBARAO, K. WANCHOO, K.N. RAMASWAMI, V.

CITATION:  1966 AIR 1412            1966 SCR  (2) 279

ACT: Bombay  Sales  Tax  Act,1946,  ss.  13,  20-Sales  of  goods effected  outside State-Advance Taxpaid-Suit for  refund  of tax-Limitation-Sections 13 and 20, if bar.

HEADNOTE: The respondents filed a suit for recovery of advance  sales- tax  paid  by  them in respect of  sale  of  goods  effected outside  the  State, which they claimed as covered  by  Art. 286(1) (a) of the Constitution before it was amended by  the Sixth  Amendment Act.  Though no orders of  assessments  had been  made by the sales-tax authorities, they had  paid  the tax  under a mistake of law.  They discovered their  mistake when the Governor of the State promulgated Bombay  Ordinance No. 2 of 1952.  The trial Court decreed the suit.  The  High Court confirmed the decree, rejecting ’the appellant-State’s contentions  that  the  suit  was  barred  by  the  law   of limitation, and that the suit was barred by s. 13 and s.  20 of the Bombay Sales Tax Act, 1946, later replaced by ss.  19 and 20 of the Bombay Sales Tax Act, 1952.  In appeal to this Coturt; HELD : (per Full Court) : The appeal must be dismissed. (i)  The  suits  were not barred by the law  of  limitation, since  the suits were filed within-the period prescribed  by art.  96  of the 1st Schedule of the  Limitation  Act  i.e., within three years from the date on which the mistake become known to the tax payers. [284 C-D; 285 B] State of Kerala v. Aluminimum Industries Ltd., Kundara, C.A. No.  720 of 1963.  Devided on April 21,  1965,  (unreported) followed. (ii) Section 20 did not expressly bar the suit. The  word ’assessment’ in s. 20 cannot be read to include  a mere  filing of return and payment by a  registered  dealer. The  word  ’assessment’ has reference  to  assessments  made under ss. 11 and 11A of the Bombay Sales Tax Act, 1946. [282 E] State  of  Tripura v. The Province of  East  Bengal,  [1951] S.C.R. 1 followed. (iii) Section 13 did not impliedly bar the suit. (Per Subba Rao, Wanchoo and Sikri, JJ.) Section 13 does  not

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contemplate  objections  being  entertained  regarding   the constitutional  validity  of  any  provision  of  the   Act. Assuming  that  an appeal would lie against  an  order  made under s. 13, the appeal would be only on the ground that the computation  made by the Sales-tax Officer is  erroneous  or not justified by the provisions of the Act. [283 E-G; 285 A- B] (Per  Shah  and Ramaswami, JJ.) An  objection  that  certain parts of the statute were ultra vires the legislature  could be  raised before the sales-tax authorities.   The  question whether a transaction which falls within the Explanation  to Art.  286(1)(a)  before it was amended by  the  Constitution (Sixth  Amendment) Act does not affect the  jurisdiction  of the   taxing  authority  :  it  is  merely  a  question   of interpretation of the contract, in the light of the statute, and the sales-tax authorities are entitled 280 to entertain the objection, if raised before them, that  the transaction  was not taxable because the State had no  power to legislate in respect of an Explanation sale.  But in this case,  that  stage was never reached,  the  tax-payers  were seeking refund of payments made under a mistake of law; they were not seeking to set aside any order of assessment.  [285 C-F] M/s.  Kamala Mills Ltd. v. State of Bombay, [1966] 1  S.C.R. 64

JUDGMENT: CIVIL  APPELLATE JURISDICTION : Civil Appeals Nos.  219  and 273 of 1964. Appeals from the judgment and decrees dated March 25/  26th, 1960 of the Bombay (New Gujarat) High Court in First Appeals Nos. 44 and 45 of 1959 respectively. S.   V.  Gupte, Solicitor-General, R. Ganapathy Iyer, M.  S. K.  Sastri,  R.  H. Dhebar and B. R. G. K.  Achar,  for  the appellant. G.   S. Pathak, M. M. Vakil, J. B. Dadachanji, O. C.  Mathur and Ravinder Narain, for the respondents. The  Judgment  of  Subba  Rao, Wanchoo  and  Sikri,  JJ  was delivered  ’by  Sikri,  J. Shah,  J.  delivered  a  separate concurring judgment on behalf of himself and Ramaswami J. Sikri,  J. These are two appeals on certificates granted  by the  High  Court of Bombay and raise the same  questions  of law.   It  is, therefore, only necessary to, give  facts  in Civil  Appeal No. 219 of 1964, which are as  follows.   M/s. Jagmohandas Masruwala, a registered dealer under the  Bombay Sales  Tax Act, 1946 (Bombay Act V of 1946)  filed  Original Suit No. 10 of 1956 against the State of Bombay for recovery of  Rs. 31,852/8/3 which they had paid as advance  sales-tax on  various  dates when submitting returns  for  the  period January 26, 1950 to March 31, 1951, and interest thereon  at 4%, viz., Rs. 3,998.  The suit was filed on the  allegations that  the amount was paid as advance tax in respect of  sale of goods effected outside the State of Bombay.  These  sales were   taxable  under  the  Bombay  Sales  Tax   Act,   1946 (hereinafter  referred  to  as, the Act).   It  was  further alleged that the Act be, came void by virtue of art.  286(1) (a) of the Constitution on January 26, 1950, and this amount was  paid  under a mistake of law and that the  mistake  was discovered  when the Governor of Bombay  promulgated  Bombay Ordinance No. 2 of 1952. The  State of Bombay raised various ’Pleas, but we are  con- cemed with two : (1) that the suit was barred by ss. 13  and

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20  of the Bombay Sales Tax Act, 1946, and ss. 19 and 29  of the  Bombay Sales Tax Act, 1952; and (2) that the  suit  was barred by 281 limitation.  The Second Joint Civil Judge, Senior  Division, Surat,  held  that  the  suit  was  not  barred  under   the statutory.provisions  above mentioned and that it was  filed within  limitation.   He passed a decree in  favour  of  the plaintiff  for a sum of Rs. 35,850/8/3 with future  interest from the date of the suit at 4% per annum on Rs. 31,852/8/3, together with the cost of the suit. The  State  of Bombay appealed to the, High Court.   It  was urged  before the High Court, as has been urged  before  us, that  the  Act  was a complete code and  the  issue  of  law relating  to  nonmaintainability of the suit  was,  for  all practical  purposes, answered by the conclusions reached  by their  Lordships of the Privy Council in Raleigh  Investment Co. Ltd. v. Governor-General in Council(1), in examining the provisions  of  s. 67 of the Income-tax Act which  are  very similar  to those of s. 20 of the Sales Tax Act, 1946.   The High  Court held that the present case must be  governed  by the opinion expressed by this Court in The State of  Tripura v.  The  Province  of East Bengal(1).  On  the  question  of limitation,  the High Court held that the case  fell  within the  purview  of  art.  96 of the  Limitation  Act  and  the terminus  quo  of  that article is the  date  on  which  the mistake  becomes  known  to  the  plaintiff.   It  expressed agreement  with  the  Court below that the  mistake  of  law became  known  to the plaintiff on a date which  brings  the siuit within the period prescribed by the Law of Limitation. The  High  Court further held that the trial  Court  was  in error  in allowing interest as damages.  In the result,  the High  Court varied the decree by omitting the directions  as regards  the payment of interest as damages.  but  otherwise affirmed  the  decree.  Having obtained the  certificate  of fitness from the Bombay High Court, the State of Bombay  has now come up on appeal to this Court The  learned  Solicitor-General  has raised  two  points  on behalf  of  the  appellant First that the  suit  was  either expressly barred by s. 20 of the Bombay Sales Tax Act, 1946, or  was  impliedly barred by virtue of s. 13 of  the  Bombay Sales  Tax  Act, 1946; and (2) that the suit was  barred  by limitation. We are unable to appreciate how s. 20  expressly bars  the suit.  It is admitted that no assessment has  been made  under  the Act and the plaintiff has not in  his  suit called into question any assessment or order made under  the Act.   In our opinion, this part of the argument is  covered by the decision of this Court in the Tripura case, and the High Court was right in so holding. (1)  (1947) 74 I.A. 50. (2) (19511 S.C.R. 1. 282 The learned Solicitor-General then attempted to  distinguish the  Tripura  case by saying that there was- in  the  Bengal Agricultural.  Income Tax Act, 1944, no section like  S.  13 and no reliance was placed by this Court in that case on the existence of adequate machinery as was done by this Court in Kamala  Mills case(-).  In effect he seemed to suggest  that the  Tripura case(1) was inconsistent with the  decision  of this  Court  in  Kamala Mills case(,-).  We  are  unable  to accede  to this contention.  The judgment of Fazl  Ali,  J., who  dissented in the Tripura case, clearly shows  that  the ’Court was fully aware of the existence of the machinery  in the  Act  enabling  an assessee  to  challenge  an  eventual assessment.   But this Court, in spite of the  existence  of

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that  machinery, gave effect to the plain words of s. 65  of the  Bengal  Agricultural Income Tax Act,  1944.   There  is nothing  in the Kamala Mills case(1) which  is  inconsistent with  the  Tripura  case(2).  Further  Mr.  Pathak,  learned counsel  for  the  respondent, pointed out  that  a  section similar to. s. 13 existed in the Bengal Agricultural  Income Tax Act, 1944. Another  point raised by the learned  Solicitor-General  was that When a registered dealer files a return and  calculates and pays tax on the basis of the return, he in effect  makes a  self-assessment and, therefore, brings himself within  S. 20 of the Act.  We are unable to read the word  ’assessment’ in S. 20 to include a mere filing of return and payment by a registered  dealer.  In our opinion, the  word  ’assessment’ has reference to assessments made under ss. 1 1 and 1 1 A of the Bombay Sales Tax Act, 1946.  Therefore, we must overrule the contention of the learned Solicitor-General that ’S.  20 expressly bars the present suit. Coming  now  to the argument that S. 13 impliedly  bars  the suit, it is necessary to set out s. 13 of the Act.   Section 13 reads as follows :               "The  Commissioner  shall, in  the  prescribed               manner, refund to a registered 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               (1) [1966] 1 S.C.R. 64.               (2) [1951] S.C.R. 1.               283               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, or reference in respect  of               the  order of assessment, whichever period  is               later.               Provided  further  that  the  Collector  shall               first apply the excess paid in respect of  any               period  towards the recovery of any amount  in               respect  of which a notice  under  sub-section               (4)  of  section 12 may have been  issued  and               shall  then refund the balance  remaining,  if               any- The first part of the section imposes a statutory obligation on  the Commissioner to refund any amount of tax paid  by  a registered dealer in excess of the amount due from him under this  Act.  ’Me, first proviso prescribes the period  within which  the  registered’ dealer can apply  for  refund.   The period  is  24 months from the date on which  the  order  of assessment is passed or within 12 months of the final  order passed  on  appeal in respect of the  order  of  assessment, whichever  period is later.  It is apparent that the  dealer cannot apply for refund under s. 13 till an order of assess- ment  is  passed.  The prescribed form also shows  the  same thing.  The scheme of s. 13 appears to be that the Sales Tax Officer  would make first an order of assessment, arrive  at the  amount of tax due according to the order and then  work out  the excess, if any, paid by the dealer and refund  that money.   It  seems  to us that s. 13  does  not  contemplate objections  being entertained regarding  the  constitutional

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validity of any payment made by the dealer.  The  Solicitor- General contended that an appeal would lie against an  order made under s. 13.  Assuming that it is so, the appeal  would be only on the ground that the computation made by the Sales Tax Officer is erroneous and not on the ground that the  tax paid by the dealer was not constitutionally payable at  all, under  the  Act.  Therefore, if s. 13 is understood  in  the manner  mentioned  above,  it  seems clear  to  us  that  no machinery  is  provided  in  s.  13  for  dealing  with  the objection  that the money paid was paid by virtue of a  void provision of the Act. Further,  we have held in Mls.  K. S. Venkatararnan  v.  The State of Madras(1) that the Sales Tax authorities created by the  Madras  General  Sales Tax Act  are  not  competent  to entertain questions as to the ultra vires of a provision  of the  Act.   Similarly the Commissioner appointed  under  the Bombay Sales Tax Act (1)  [1966]2 S.C.R. 229. 284 would not be competent to go into the question whether s.  6 of  the  Act under which the  transactions  were  apparently taxable, was ultra vires or not. Therefore, in our opinion, s. 13 of the Act does not  create all implied bar and the High Court is right in holding  that the Suit was competent. This  Court has recently held that art. 96 applies to  suits like  the  present.  [See  State  of  Kerala  v.   Aluminium Industries Ltd. Kunda(1). The  only  point that remains is regarding the date  of  the knowledge  of the plaintiff.  Both Courts below  have  found that  the plaintiff came to know of the mistake on  December 22,  1952,  the  date  of  the  promulgation  of  Governor’s ordinance.   This  is a concurrent finding of fact  and  the learned  Solicitor-General has not shown us any good  ground for disturbing this concurrent finding of fact. Accordingly, agreeing with the High Court, we hold that  the suit is not barred.  In the result the appeals fail and  are dismissed with costs.  One hearing fee. Shah,  J. These appeals arise out of suits filed by the  two respondents  for recovery of sums of money paid by  them  as advance  sales-tax under a mistake of law.  The  suits  were decreed  by  the Court of First Instance and  the  decisions were confirmed in appeals by the High Court of Judicature at Bombay. There  were  no  orders of assessment  made  by  the  taxing -authorities, but the tax-payers being of the view that  the tax  on their turnover was payable submitted  returns  under the  Bombay ’Sales Tax Act, 1946 and paid advance tax.   The sales  were  in  respect of goods  consigned  to  purchasers outside the State of Bombay and for consumption outside  the State.  These sales were apparently covered by the terms  of Art.  2  8 6 ( 1 ) (a) before it was amended  by  the  Sixth Amendment  Act  and could not to be taxed  under  a  statute enacted  by a State.  The tax-payers claimed that ,they  had discovered  their  mistake  when  the  Governor  of   Bombay promulgated  Bombay  Ordinance  No.  2  of  1952  after  the decision  of  the  Bombay High Court in  The  United  Motors (India) Ltd. v. The State of Bombay(1).  The trial Court and the  High Court have rejected the contention raised  by  the State.  that the suits were barred by ss. 13 and 20  of  the Bombay Sales Tax Act, 1946, which were later replaced by ss. 19 and 20 of the Bombay Sales, (1)  C.A. 720 of 1963 Decided on April 21, 1963 (Unreported) (2)  (1952) 55 Bom.  L.R. 246. 28 5

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Tax Act, 1952, and that the suits were barred by the law  of limitation. We  agree with the judgment of our brother Sikri,  J.,  that the suits were not barred either expressly by the provisions of s. 20 or impliedly by s. 13 of the Bombay Sales Tax  Act, 1946.  We also agree with him that the suits were not barred by the law of limitation, since the suits were filed  within the period prescribed by Art. 96 of the 1st Schedule of  the Limitation  Act  i.e., within three years from the  date  on which  the mistake became known to the tax-payers.   We  are unable, however, to agree with the observations that  before the sales-tax authorities an objection that certain parts of the  statute were ultra vires the Legislature could  not  be raised.  As held by this Court in M/s.  Kamala Mills Ltd. v. The  State of Bombay(1) the question whether  a  transaction which  falls  within the Explanation to Art. 2 8 6  (1)  (a) before it was amended by the Constitution (Sixth  Amendment) Act does not affect the jurisdiction of the taxing authority : it is merely a question of interpretation of the  contract in  the light of the statute and the  sales-tax  authorities are  entitled  to entertain the objection, if it  be  raised before  them, that the transaction was not  taxable  because the  State  had  no  power to legislate  in  respect  of  an Explanation  sale.  But in this case, that stage  was  never reached.  The taxpayers in the belief that they were  liable to pay tax paid advance tax before any orders of  assessment were  made.  Thereafter realising that they had committed  a mistake  filed suits for refund.  Thereby they were  seeking to obtain orders of refund of payments made under a  mistake of  law  : they were not seeking to set aside any  order  of assessment. We agree therefore that the appeals should be dismissed with costs. Appeals dismissed. (1) [1966] 1 S.C.R. 64. 286