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PETITIONER: STATE OF OF MADHYA PRADESH

       Vs.

RESPONDENT: VYANKATLAL & ANR.

DATE OF JUDGMENT28/03/1985

BENCH: MISRA, R.B. (J) BENCH: MISRA, R.B. (J) FAZALALI, SYED MURTAZA

CITATION:  1985 AIR  901            1985 SCR  (3) 561  1985 SCC  (2) 544        1985 SCALE  (1)609  CITATOR INFO :  RF         1990 SC 313  (16)  RF         1991 SC1676  (65)

ACT:      Madhya Bharat  Essential  Supplies  (Temporary  Powers) Act 1948.      Supply     price  and   ex-factory     price-Difference between-Credited     to    Sugar  Fund-Refund  of-To    whom payable-Persons   not identified-Can  be  utilized  for  the purpose of the creation  of the Fund.

HEADNOTE:      Respondents   are owners  of  sugar  mill  situated  in erstwhile  Jaora  State which merged in the State of  Madhya Bharat.  After  the  merger,  the  Madhya  Bharat  Essential Supplies (Temporary  Powers)  Act,  1948 came into force. By a notification   dated   5th  September,  1949  the said Act included ’sugar’  in  the  list  of articles as an essential commodity. By  another notification  dated 5th    September, 1949 the  Government delegated its powers  to  the Director, Civil   Supplies   to issue  orders under   the   Act.   The Director of  Civil Supplies  by a  notification  dated  14th January, 1950  fixed ex-factory  prices for  different sugar factories, which  were to supply and despatch sugar of Grade E-27 at Rs. 32.400 per maund  F.O.R. destination. The supply price was  higher   than   ex-factory  price. The difference between the  supply price  and  the ex-factory  price was to be credited to Madhya Bharat  Government Sugar Fund.      On demand  by appellants,  the respondents  deposited a sum of Rs. 50,000 under protest in the said Sugar Fund.      The respondents  instituted a  suit for  the refund  of the amount   deposited  by them  towards Sugar  Fund and Rs. 10,000  towards interest. Tho suit was dismissed.      On   appeal,   the High  Court set  aside the  Judgment and Decree of the trial Court and decreed the suit.      Allowing the appeal of the State, ^      HELD: 1.  The respondents  had not  to pay  the  amount from their   coffers.  The burden  of paying  the amount  in question   was  transferred    by  the  respondents  to  the purchasers and,   therefore, they were not entitled to get a refund. Only  the persons  on  whom lay  the ultimate burden

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to pay the amount would be  entitled  to get a refund of the same.[568C] 562      2.   The   amount   deposited towards the Fund  was  to be utilised  for the  development of sugarcane. If it is not possible to   identify  the persons  on whom  had the burden been   placed   for payment  towards the Fund, the amount of the Fund  can be  utilised by the Government for the purpose for which the Fund was created, namely,  the  development of sugarcane. There  is no   question  of refunding  the amount to the  Respondents who  had not   eventually  paid   the  U amount towards  the Fund. Doing  so  would  virtually amount to allow the respondents unjust enrichment. [568D-E]      The Orient  Paper Mills  Ltd. v.. The State of Orissa & Ors. [1962]   I  SCR 549.  State of  Bombay  v.  The  United Motors   (India) Ltd.   [1953]   SCR  1096, Shiv Shankar Dal Mills etc.  v.   State   of Haryana   [1980]  1  SCR  1170., Newabganei Sugar  Mills v.   Union  of India & Ors. [1976] 1 SCR 803.,  Sales Tax Officer, Banaras & Ors. v. Kanhaiya Lal Mukundlal Saraf,  [1959] SCR  1350.,  M  s  Amar    Nath  Om Parkash &  Ors. v.  The State  of Punjab  & Ors.,  1984  (2) SCALE 796, relied upon.

JUDGMENT:      CIVIL   APPELLATE JURISDICTION:  Civil Appeal  No.  149 of 1971.      On   appeal by  Certificate  from  the  Judgment    and Decree dated   28.4.69  of the  Madhya Pradesh High Court in First  Appeal No. 14 of 1963.      H. K.Puri for the Appellant.      UR.Lalit, S.K.  Gambhir, Ashok Mahajan and S.  Kirplani for the Respondents.      The Judgment of the Court was delivered by      MISRA     J.  The  present  appeal  by  certificate  is directed against  the judgment deted 28th April, 1969 of the High Court  of Madha Pradesh, Indore Bench.      The  facts  leading  to  this  appeal  are  brief.  The respondents are  the owners of Jaora Sugar Mills situated at Jaora in the earlier  State  of Madhya Bharat. The erstwhile State  of  Jaora merged in the State of Madhya Bharat. After the merger  the Madhya  Bharat Essential Supplies (Temporary Powers) Act,  1948 came   into force.  By a notification No. 5163/XXX (49)  dated 5th   September,  1949    the    Madhya Bharat Government in exercise  of  the  Powers vested  under the said Act included ’sugar’ in the list of  articles as an essential commodity- By another notification l No. 563 5166/XXX(49)   dated the  5th September,  1949  ’the  Madhya Bharat    Government   delegated  its powers to issue orders under   the   said Act  in favour  of  the  Director,  Civil Supplies, Madhya  Bharat.    In  exercise    of  the  powers conferred on  him under  the   Madhya Bharat  Sugar  Control Order,  1949   the  Director  of  Civil  Supplies  issued  a notification   No.  1.  C.S. 15/50 dated the  14th  January, 1950  fixing     ex-factory   prices  for   different  sugar factories. Under   the said notification all sugar factories in Madhya  Bharat were   to  supply   and despatch  sugar of Grade E-27  at Rs. 32.4.0 per  maund F.O.R. destination. The supply price  was a little higher than the ex-factory price. The difference  between the  supply price and the ex-factory price was  to be credited of Madhya Bharat  Government Sugar Fund.      The     appellant   made   several   demands   on   the

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respondents, the  proprietors of  the Jaora  Sugar Mills, to credit such   difference   in  the account  of Madhya Bharat Government Sugar   Fund    and  the  respondents  ultimately deposited Rs 50000 under protest.      On the  10th September, 1953 the respondents instituted a suit   in  the court of Fifth Additional  District  judge, Indore against  the erstwhile State of Madhya Bharat for the refund   of the  sum of Rs. 50,000 which the respondents had deposited    towards  Sugar  Fund  and  Rs.  10,000  towards interest at  the rate  of 6 per cent per annum from the date of deposit  of the  aforesaid   sum of  Rs. 50,000. The suit continued against  the newly formed  State of Madhya Pradesh as provided by law.      The grievance  of the  respondent in  the main was that the change   and  modification made  by  the  Madhya  Bharat Government   in the   definition  of  essential  commodities given in  the Act   by  including  sugar therein was against the law,  that the  Director   of Civil   Supplies   had  no authority before  6th September,   1949   to issue the Sugar Control order, 1949 which had been issued on  5th September, 1949;   that the State Government or the  Director  of Civil Supplies, Madhya  Bharat had  no power under  the  Essential Supplies (Temporary  Powers) Act and the Sugar Control Order to impose   a   levy  styled as  ’Sugar Fund’ and to recover the  same; that the levy and collection of tax/impost styled as ’Sugar  Fund’ by  the Director  of Civil  Supplies  being violative of Art. 265  OF the  Constitution, was illegal and invalid; that the  provisions of  Sugar  Control Order, 1949 did not empower  the  Director  of Civil Supplies to fix any price 564 other than  ex-factory wholesale or retail price or to fix a price which   be   called  supply price  or  to  impose  and collect   levy   as ’Sugar   Fund’;  that is was illegal and unconstitutional  for  the Director of Civil Supplies to fix different ex-factory prices for different sugar mills in the same State;  that it  was illegal   and  unconstitutional to collect money  through certain mills for creating Sugar Fund when   other factories in the same State were being exempted from   doing so  that there  was clear   discrimination   in fixing ex-factory  price of sugar in respect of respondents’ mill lower  than ex-factory  price fixed  for; certain other mills in  the State without there being a rational basis for the same;  and that  the   levy   and collection  of certain money from    the    respondents  being    without    lawful authority and  without   legislative   competence, the State was bond to refund the same.      The   State resisted  the  claim  of  the    plaintiff- respondents   and refuted  the allegation on the points. The trial   court decided  all the issues against the plaintiffs and consequently  it dismissed   the  suit. On appeal by the plaintiffs the   High   Court  set aside  the  judgment  and decree of  the trial court and  decreed the  suit for refund of Rs. 50,000 deposited by plaintiffs  under protest and Rs. 10,000 as  interest thereon calculated at the rate of  6 per cent from  the date  of suit  till realisation.   The   High Court  repelled the contention of the State that the  impost was not   intended to augment general revenues  of the State but   was meant   for  a special purpose, i.e., for creating a   fund    which  could  be  utilised  for  augmenting  the production of  sugarcane   in the  State  so that the supply of sugar  might be  increased.  The High Court observed that legislative competence  was necessary  for such   imposition irrespective of  the fact  whether the  impost  was intended to augment  general revenues  of the State or for a  special

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purpose, i.e.,  for  creating  a  fund  for  augmenting  the production of  sugar. It  further held  that Art. 277 of the Constitution  only  saves such taxes, cesses or  fees  which immediately before the commencement of the Constitution were being  lawfully  levied  by  the  Government  of  any  State notwithstanding that   those taxes,  duties, cesses  or fees are mentioned  in the  Union   List. But in the instant case levy of  ’Sugar Fund’ was imposed by means of an order which was published  for the  first time  in the    Madhya  Bharat Government Gazette  dated 28th  January, 1950 two days after the Constitution came into force.      The   High Court  proceeded further  to hold  that  the power Conferred  on  the Director of Civil Supplies did  not authorise him 565 to fix different prices in his discretion in different parts of Madhya   Bharat  under s.  5 of  the Sugar  Control Order which in  the case  of some mills was higher than ex-factory price. The  fixing of  supply price  higher than  ex-factory price had nothing to do with the enforcement of the order as it does  not deal  with licensing,  ex-factory  sale  price, movement or  distribution of  sugar. Nor  did ss.  11 and 12 justify the Director of Civil Supplies recovering additional Amount apart from ex-factory price from the purchasers.      Thus, in  the opinion  of the  High Court the State had levied and  collected under  the purported  legal  authority certain money  from the  plaintiffs  for  which  it  had  no legislative competence  to do  and therefore  the State must restore the  same to  the persons from whom it was collected and cannot  keep the  same on the ground that plaintiffs too have been  wrongly allowed  to collect, and that the persons who could  claim the same were the corresponding purchasers. The High  Court omitted  to decide  the question whether the particular  purchasers   can  recover   hereafter  from  the plaintiffs whatever  they had collected in excess of the ex- factory sale  price on  the  ground  that  it  need  not  be determined in this case.      Feeling aggrieved  the State  has come up in appeal. It vainly tried  to support  its stand that the recovery of Rs. 50,000 from  the respondents was perfectly lawful and proper and there  was no  discrimination as contemplated by Art. 14 of the Constitution.      On  the  question  of  refund  of  the  amount  to  the plaintiffs respondents  reliance was  placed on  The  Orient Paper Mills  Ltd. v.  The State of Orissa & Ors (1). In that case the  appellants who  were registered  dealers under the Orissa Sales  Tax Act,  1947 used  to collect sales tax from the purchasers  on all  sales effected  by  them,  including sales to  dealers in other States. They very assessed to and paid tax  on their turnover which included sales outside the State of  Orissa. After  the decision of this Court in State of Bombay  v. The  United Motors(India) Ltd (2). the dealers applied under  s.14 of the Act for refund of tax paid on the ground that  sales outside  the State were not taxable under cl. (l)(a) of Art. 286 of (1) [1962]1 SCR 549. (2) [1953] SCR 1069 566 the Constitution  read  with  the  Explanation.  Refund  was refused by  the Sales  Tax  Authorities  and  the  Board  of Revenue. The High Court, however, ordered refund of tax paid for certain  period  but  refused  it  in  regard  to  other periods. The  Orissa Sales  Tax Act was, however, amended in 1958 with  retrospective effect  incorporating  s.14A  which provided that  refund could  be claimed  only by  the person

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from whom the dealer had realised the amount by way of sales tax or  otherwise. On  these facts it was held by this Court that under s.14A of the Act incorporated by the Orissa Sales Tax (Amendment) Act, 1958 refund of tax which the dealer was not liable  to pay  could be claimed by the person from whom the dealer  had actually realised it whether as sales tax or otherwise and not by the dealer.      In Shiv  Shankar Dal Mills etc. v. State of Haryana (1) the appellants  and  the  petitioners  who  had  paid  under mistake the  excess sums  demanded a direction to the effect that these amounts be refunded. It, however, transpired that many of  the traders  had themselves  recovered  the  excess percentage from the next purchasers. It was held that to the extent the  traders had  paid out  of their  own, they  were entitled to  keep them,  but not  where  they  had  in  turn collected from  elsewhere. In Newabganj Sugar Mills v. Union of India  & Ors  (a). this  Court  in  a  similar  situation devised a  new procedure  to deal with a new situation where equity demanded  redistribution but procedural expensiveness and cumbersomeness  effectively thwarted  legal  action.  It directed the  Registrar of  the High  Court to  receive  and dispose of  claims from  the ultimate  consumers for  excess price paid on proper proof, out of the security money.      In Sales  Tax Officer,  Banaras &  Ors. v. Kanhaiya Lal Mukundlal  Saraf(3   the  levy   of  sales  tax  on  forward transaction was  held to  be ultra  vires. The  respondents, therefore, applied  for a  refund of  the amounts  paid by a petition under  Art. 226  of the  Constitution. This  Court, however, took  the view  that the term ’mistake’ under s. 72 of the  Indian Contract  Act comprises  within its  scope  a mistake of  law as well as a mistake of fact and that, under that section a party is entitled to recover (1) [1980] 1 S.C.R. 1177. (2) [1976] 1 S.C.R. 803. (3) [1959] S.C.R. 1350. 567 money paid  by mistake  or  under  coercion  and  if  it  is established that  the payment,  even though  it be of a tax, has been made by the party labouring under a mistake of law, the party receiving the money is bound to repay or return it though it might have been paid voluntarily subject, however, to questions of estoppel, waiver, limitation or the like.      Recently this  Court in M/s Amar Nath Om Parkash & Ors. v, The  State of  Punjab &  Ors (1).  had  the  occasion  to consider the  question of refund to the dealers in a similar situation and it observed:           ’...We do  not see how a mere declaration that the      levy and  collection of  fee  in  excess  of  Rs.2  per      hundred would  automatically vest  in  the  dealer  the      right to  get at  the excess amount when in fact he did      not bear  the burden  of it  and  when  the  moral  and      equitable owner  of it  was the consumer-public to whom      the burden had been passed on.           The primary  purpose of  sec. 23A  is seen  on the      face of  it; it  prevents the  refund of license lee by      the market  committee  to  dealers,  who  have  already      passed on  the burden of such fee to the next purchaser      of the  agricultural produce  and who  went to unjustly      enrich themselves  by obtaining  the  refund  from  the      market committes.  S.  23A  in  truth,  recognises  the      consumer-public who  have borne  the ultimate burden as      the persons  who have  really paid  the amount  and  so      entitled to  refund of  any excess  fee  collected  and      therefore directs  the  market  committee  representing      their interests  to retain  the amount. It has to be in

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    this form because it would, in practice, be a difficult      and futile  exercise to attempt to trace the individual      purchasers and consumer who ultimately bore the burden.      It is  really a law returning to the public what it has      taken from  the public,  by enabling  the  commitee  to      utilise the  amount for  the  performance  of  services      required of  it under  the  Act.  Instead  of  allowing      middlemen to profiteer by illgotten (1) [1984] 2 SCALE 769. 568      gains, the  legislature has devised a procedure to undo      the wrong  that has  been done by the excessive levy by      allowing the  committees to  retain the  amount  to  be      utilised hereafter  for the benefit of the very persons      for  whose   benefit  the   marketing  legislation  was      enacted."      The principles  laid down  in the  aforesaid cases were based on  the specific provisions in those Acts but the same principles can safely be applied to the facts of the present case inasmuch  as in  the present  case also the respondents had not  to pay the amount from their coffers. The burden of paying  the  amount  in  question  was  transferred  by  the respondents to  the purchasers and, therefore, they were not entitled to  get a  refund. Only the persons on whom lay the ultimate burden to pay the amount would be entitled to get a refund of  the same.  The amount  deposited towards the Fund was to  be utilised  for the development of sugarcane. If it is not  possible to  identify the  persons on  whom had  the burden been  placed for payment towards the Fund, the amount of the  Fund can  be utilised  by  the  Government  for  the purpose for  which the Fund Was created, namely, development of sugarcane.  There is  no question of refunding the amount to the  respondents who  had not  eventually paid the amount towards the  Fund. Doing  so would virtually amount to allow the respondents unjust enrichment.      For the  foregoing discussion  the appeal must succeed. It is accordingly allowed and the judgment and decree of the High Court  for the  refund of  the amount  of Rs.50,000 and interest thereon  is set  aside. In the circumstances of the case the parties shall bear their own costs. A.P.J.                                       Appeal allowed. 569