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PETITIONER: D.   CAWASJI & CO., ETC.  ETC.

       Vs.

RESPONDENT: THE STATE OF MYSORE & ANR.

DATE OF JUDGMENT29/10/1974

BENCH: MATHEW, KUTTYIL KURIEN BENCH: MATHEW, KUTTYIL KURIEN ALAGIRISWAMI, A.

CITATION:  1975 AIR  813            1975 SCR  (2) 511  1975 SCC  (1) 636  CITATOR INFO :  R          1976 SC2243  (23)  RF         1990 SC 313  (20)  RF         1990 SC 772  (31)  RF         1991 SC1676  (72)

ACT: Constitution  of India, 1950-Art. 226-Payment of taxes  made under  mistake  of law-Period of limitation  when  commence- Jurisdiction of the High Court.

HEADNOTE: The  appellants  paid certain amounts to the  government  as excise  duty  and education cess for the  years  1951-52  to 1965-66  in  one  case and from 1951-52 to  1961-62  in  the other.  The High Court struck down the provisions of the re- levant  Acts as unconstitutional.  In writ petitions  before the  High  Court claiming refund, the  appellants  contended that  the  payments  in question were  made  by  then  under mistake  of  law; that the mistake was discovered  when  the High  Court struck down the provisions  as  unconstitutional and that the petitions were therefore in time.  But the High Court dismissed them on the ground of inordinate delay. Dismissing the appeals, HELD : Where a suit will lie to recover moneys paid under  a mistake of law, filim writ petition for refund of tax within the  period  of  limitation would lie.  For  filing  a  writ petition  to recover the money paid under a mistake  of  law the  starting point of limitation is from the date of  which the  judgment  declaring as void the  particular  law  under which the tax was paid was rendered.  Even in cases where it is  filed  within three years, the court has  a  discretion. have  in regard to the facts and circumstances of each  case not to entertain the application. [513H; 514A-B] State of Madhya Pradesh v. Bhailal Bhal and Others [1964]  6 S.C.R.   261  relied  on,  State  of  Kerala  v.   Aluminium Industries Ltd. (1965) 16 S.T.C. 689, referred to and Trilok Chand Motichand and Others v. H. B. Munshi, Commissioner  of Sales Tax, Bombay (1970) 25 S.T.C. 289 held inapplicable. In  the  instant case having regard to the  conduct  of  the appellants  in not claiming the amounts in the earlier  Writ petitions   without   any   justification,   there   is   no justification  in interfering with discretion  exercised  by

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the  High  Court  in dismissing  the  writ  petitions.   The appellants  did not pray for refund of the amounts  paid  by way  of cess for the years 1951-52 to 1965-66 and they  gave no reasons before the High Court in these petitions why they did  not  make  the prayer for refund of  the  amounts  paid during  the  years in question.   Avoiding  multiplicity  of unnecessary  legal  proceedings  should be the  aim  of  all courts.   The appellants should not be allowed to  split  up their  claim for refund and file writ petitions in a  piece- meal  fashion.  If the appellants could have, but  did  not, without any legal justification claim refund of the amounts, paid  during  the  years in question  in  the  earlier  writ petitions  there is no reason why they should be allowed  to claim the amounts by filing writ petitions again. [517B-C] In the second batch of appeals the reason why this Court did not go into the question of the validity of the Act was that relevant  materials were not placed before the court by  the appellant for successfully challenging its validity and they were therefor to blame themselves. [518141]

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals No@. 437, 451, 452-476 and 477-459 of 1974. Appeals by Special Leave from the Judgment & Order dated the 30th November, 1972 of the Mysore High Court in W-Ps.   Nos. 26662671,  2673-2681/68, 181, 196-199, 194-195,  200-204/67, 180, 182-193/67 and 2653-2665/68 respectively. -L319SupCI/75 512 R.   J.  Kolah, In CAs Nos. 450-451,453,468-471, 479-484  of 74   only)   A.  Jagannath  Shetty,  K.  J.  John,   J.   B. Dadaclhanji,  O.  C.  Mathur and Ravinder  Narain,  for  the appellants. B.   Sen (In CA.  No. 437/74) Chandrakant Raju, Advocate for Kamatka  (In  CA.   No. 477/74) and  M.  Veerappa,  for  the Respondents. The Judgment of the Court was delivered by 1. Civil Appeals Nos. 437-451 & 477-489 of 1974. MATHEW,  J.-The appellants filed writ petitions be-fore  the High  Court of Mysore under Article 226 of the  Constitution for a declaration that the Mysore Elementary Education  Act, 1941,  and  the amendments to it by  the  Mysore  Elementary Education (Amendment Act XII of 1955) Providing for levy and collection  of  Education Cess on items on  which  Education Cess  is being levied as prescribed in the schedules of  the respective  Acts  were beyond the competence of  the  Mysore State  Legislature  and for refund of the  Educational  Cess paid during 1951-52 to 1965-66 on shop rentals and tree  tax in respect of toddy and duty of excise in respect of  arrack and  special  liquor.   The High Court  dismissed  the  writ petitions  by  a  common  judgment  and  these  appeals  are directed against that judgment. The  High  Court of Mysore had, in D. Cawasji & Co.  v.  The State of Mysore and Others(1), struck down the provisions of the Mysore Elementary Education Act and the amendments to it on May 2, 1968.  That decision was affirmed by this Court in State  of  Mysore  and  Others  v.  D.  Cawasji  &  Co.  and Others(2).  Before  the decision of this Court,  the  Mysore Legislature had passed the Mysore Education Cess (Validation and  Levy)  Act, 1969 on September 10, 1969  validating  the levy  and  the collection of cess under the  Act.   But  the Validation  Act  was held to be invalid by the  Mysore  High Court.  The writ petitions were filed before the High  Court in  June  and  July, 1968, i.e. after the  decision  of  the

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Mysore High Court in D. Cawasji & Co. v. State of Mysore and Others(1) and before this Court rendered its judgment. The  contention of the appellants before the High Court  was that  the  payments of cess in question were  made  by  them under  a  mistake of law; that they discovered  the  mistake only  on May 2, 1968 when the High Court, by  its  judgment, declared  that the provisions of the Act and the  amendments thereto  were unconstitutional, and that, as they filed  the writ  petitions within three months’ of that  decision,  the writ petitions were within time. The  High  Court found that there was delay in  filling  the petitions  and, it was mainly for that reason that the  High Court dismissed . In State of Madhya Pradesh v. Bhailal Bhai and Others(1) Das Gupta,  J.  who delivered the judgment of the  Court,  while holding that (3)  [1964] 6 S. C. R. 261. 513 the  High Courts have power, for the purpose of  enforcement of  fundamental  rights and statutory to  give  consequental relief  by  ordering  repayment of  money  realised  by  the Government  without  the  authority of law,  said  that  the special  remedy provided in Article 226 is not  intended  to supersede  completely  the modes of obtaining relief  by  an action in a civil court or to deny defence legitimately open in such actions and that among the several matters which the High Courts rightly take into consideration in the  exercise of that discretion is the delay made by the aggrieved  party in  seeking this special remedy and the excuse there is  for ’it.   He further said that if a person comes to  the  court for  relief under Article 226 on the allegation that he  has been  assessed  to tax under a void legislation  and  having paid  it  under a mistake is entitled to get  it  back,  the court, if it finds that the assessment was void, being  made under  a void provision of law, and the payment was made  by mistake,  is  still  not bound to  exercise  its  discretion directing  repayment; and that whether repayment  should  be ordered  in  the exercise of this discretion win  depend  in each case on its own facts and circumstances and that it  is not easy nor is it desirable to lay a general rule.  He  was of  the view that if there has been unreasonable  delay  the court  ought  not ordinarily to lend its aid to a  party  by this  extraordinary remedy of mandamus.  On the question  of the  period of limitation within which the petition must  be filed, he observed that the period of limitation  prescribed for  recovery of money paid under a mistake of law is  three years from the date when the mistake is known and that  that period  may ordinarily be taken to be a reasonable  standard by  which delay in seeking remedy under Article 226  can  be measured.   He further said that the court may consider  the delay  unreasonable  even if it is less than the  period  of limitation  prescribed  for a civil action, but,  where  the delay  is  more than this period, it will almost  always  be proper for the court to hold that it is unreasonable. In  State of Kerala v. Aluminium Industries Ltd.(1) a  Bench of  seven  judges of this Court followed the view  taken  in State  of  Madhya  Pradesh v. Bhailal Bhai  (supra)  on  the question  of  the  period of  limitation  within  which  the petition has to be filed. Section 17(1)(c) of the Limitation Act, 1963, provides  that in  the case of a suit for relief on the ground of  mistake, the  period  of limitation does not begin to run  until  the plaintiff   has  discovered  the  mistake  or  could,   with reasonable  diligence,  have  discovered  it.   In  a   case where.payment  is made under a mistake of law as  contrasted

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with a mistake of fact, generally the mistake becomes  known to the party only when a court makes a declaration as to the invalidity   of  the  law.   Though  a  party  could,   with reasonable diligence, discover a mistake of fact even before a  court makes a pronouncement, it is seldom that  a  person can,  even with reasonable diligence, discover a mistake  of law before a judgment adjudging the validity of the law. Therefore,  where  a suit will lie to  recover  moneys  paid under  a mistake of law, a writ petition for refund  of  tax within the period of (1) (1965) 16 S.T.C. 689. 514 limitation prescribed i.e. within 3 year of the knowledge of the  take, would also lie.  For a writ petition  to  recover the  money paid under a mistake of law, this Court has  said that  the starting point of limitation is from the  date  on which  the  judgment declaring as void. the  particular  law under  which  the tax was paid was rendered, as  that  would normaly  be the date on which the mistake becomes  known  to the  party.   If  any writ petition is  filed  beyond  three years’ after that date, it will almost always be proper  for the  court to consider that it is unreasonable to  entertain that petition though, even in cases where it is filed within three  years, the court has a discretion, having  regard  to the  facts and circumstances of each case. not to  entertain the application. We are aware that the result of this view would be to enable a  person  to  recover the amount paid  as  tax  even  after several  years of the date of payment, if some  other  party would  successfully challenge the validity of the law  under which the payment was made and if only a suit     or    writ petition  is  filed for refund by the  person  within  three years     from the date of declaration of the invalidity  of the law.  That might     both  be inexpedient and unjust  so far as the State is concerned. A    tax  is  intended  for immediate  expenditure  for  the common good and it would be unjust to require its  repayment after it has been in whole or in part expended, which  would often  be  the  case, if the Buis or  application  could  be brought at any time within three years of a court  declaring the  law  under  which it was paid to be invalid,  be  it  a hundered years’ after the date of payment.  Nor is there any provision  under which the court deny refund of tax even  if the  person who paid it has collected it from his  customers and has no subsisting liability or intention to refund it to them, or, for any reason, it is impracticable to do so. In the U.S.A., it is generally held that in the absence of a statute  to  the contrary, taxes voluntarily  paid  under  a mistake  of  law  with full knowledge  of  facts  cannot  be recovered back while taxes paid under a mistake of fact  may ordinarily  be  recovered back (see Corpus  Juris  Secundum, vol.  84, p. 637).  Although s. 72 of the Contract  Act  has been held to cover cases of payment of money under a mistake of  law,  as  the State stands in  a  peculiar  position  in respect  of  taxes paid to it, there are  perhaps  practical reasons for the law according a different treatment both  in the matter of the heads under which they could be  recovered and the period of limitation for the recovery. The  task of writing legislation to protect the interest  of the  nation is committed to Parliament and the  legislatures of the States.  We are refering to this aspect only to alert the attention to the present state of law. Now, the High Court relied on the decision of this Court  in Titokchand   Motichand   and  Others  v.   H.   B.   Munshi, Commissioner of Sales Tax, Bombay(1) for its conclusion that

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relief for refund cannot be (1)  (1970) 25 S.T.C. 289. 515 granted  in  the  proceeding and that  the  appellants  must resort to the ordinary remedy of suits. In Tilokch Motichand case, the petitioners before this court had  realised several amounts from their  customers  outside Bombay cot account of sales tax.  The Sales Tax Officer,  by his  order  dated March 17, 1958, forfeited the  same  under s.21(4)  of  the Bombay Sales Tax Act, 1953.  On  March  28, 1958,  the  petitioners filed a writ petition  in  the  High Court  of Bombay seeking a writ of mandamus restraining  the Sales  Tax Officer from recovering the amount from  them  on the  ground that s. 21(4) was ultra vires the powers of  the State  Legislature  and  that the order  of  forfeiture  was violative of Articles 19(1) (f) and 265 of the Constitution. On  November 28, 1958, the writ petition was dismissed by  a learned  Single  Judge on the ground that  the  petitioners, having  defrauded  other persons, were not entitled  to  any relief.   The  appeal filed against the said  order  by  the petitioners  was  dismissed on July 13,  1959.   Before  the appeal  was dismissed, the Collector of Bombay attached  the petitioners’ properties and the petitioners paid the  amount to the Collector of Bombay between August 3, 1959 and August 8, 1960.  In Kantilal Babulal & Bros. v. H. C. Patel(1)  de- cided  on  September  29, 1967, this Court  struck  down  s. 12A(4)  of  the Bombay Sales Tax Act, 1946 as  violative  of Article  19(1)(f).  The petitioners thereupon filed  a  writ petition under Article 32 of the Constitution on February 9, 1968, claiming refund of the amount paid by them under s. 72 of  the  Indian Contract Act, 1872 on the ground  that  they paid  the amount under a mistake of law and that  they  dis- covered  the mistake only when this Court struck down s.  12 (A) (4) of the Bombay Sales Tax Act, 1946.  The  petitioners also  alleged  that they paid the amount  to  the  collector under  coercion and they were entitled to recover the  same. The  contention of the, petitioners was, for the grounds  on which  this Court struck down s. 12A(4) of the Bombay  Sales Tax  Act, 1946, s.21(4) of the Bombay Sales Tax  Act,  1953, was  also  liable  to  be struck  down.   It  was  in  these circumstances  that this Court had to consider the  question whether the petitioners were entitled to the relief  claimed By  a  majority of the Court it was decided that  there  was inordinate clay in filing the petition and there- fore it should be dismissed.  Hidayatullah, C.J. observed :               "His (the petitioner’s) contention is that the               ground on which his petition was dismissed was               different and the ground on which the  statute               was  struck down was not within his  knowledge               and therefore he did not know of it and pursue               it  in this Court.  To that I answer that  law               will presume that he knew the exact ground  of               unconstitutionality.  Everybody is presumed to               know the law.  It was his duty to have               brought  the  matter  before  this  Court  for               consideration.   In any event, having set  the               machinery of law in motion, be cannot  abandon               it  to resume it after a number of years,  be-               cause another person more adventurous than him               in   his   turn  got  the   statute   declared               unconstitutional,   and  got  a  favour   able               decision..... I. agree with the opinion of  my               brethren               (1)   [1968] 1 S.C.R. 735.               Bachawat  and  Mitter, jj. that  there  is  no

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             question  here of a mistake of  law  entitling               the  petitioner  to  invoke  analogy  of   the               Article in the Limitation Act .... ". Bachawat,  J. said that the payment made by the  petitioners were made not under any mistake of-law and, therefore,  they cannot  claim any relief on the ground of mistake.   Mitter, J.  was  of the view that after the decision of  the  Bombay High Court, the petitioners did not willingly pay the amount forfeited,  but that they made the payment after  attachment of their properties and, therefore, the amounts were  really paid  under  coercion  and the period  of  limitation  would normally run from the date of the payment. We  are  not quite sure that if the maxim that  everyone  is presumed to know the law is applied, there will be any  case of payment under a mistake of law unless that presumption is rebutted  in  the  first instance, for,  the  moment  it  is assumed  that  everyone is presumed to know the law,  it  is clear  that no one can make a mistake as to the law.  It  is sometimes  said that every man is presumed to know the  law, but  this is only a slovenly way of stating the  truth  that ignorance of the law is not in general an excuse(1).  "There is  no presumption in this country that every  person  knows the law; it would be contrary to common sense and reason  if it were SO"(2). Be  that  as it may, the High Court deduced  the  conclusion from  the  decision in Tilokchand Motichand’s  (supra)  case that  the question whether a declaration by a court  that  a law is unconstitutional and therefore void would not  always furnish  the  starting point of limitation for  a  suit  for recovery  of  the amount paid under that law  and  that  the question  must  be decided on the facts of each  case.   The Court further said that the parties should seek relief under Article  226 as expeditiously as possible. and even  if  the ordinary  remedy  by  way  of  a  suit  is  not  barred   by limitation,  it will be proper exercise of discretion  under Article  226 of the Constitution to decline to interfere  in cases  where  the persons approach the court  after  several years, in the absence of special and sufficient grounds. If  one  thing  is  clear from  the  judgments  rendered  in Tilokchand Motichand’s case (supra) by the Judges who formed the  majority,  it  is  this : they  did  not  consider  the payments  made by the petitioners a.% payments made under  a mistake of law.  Therefore, we, do not see the relevance  of that case for the decision of the case here. But,  that  however, is not the end of the matter.   In  the earlier  writ petitions which culminated in the decision  in D.  Cawasji & Co. v. The State of Mysore and Others  (supra) the  appellant  did pray for refund of the amounts  paid  by them under the Act and the High Court considered the  prayer for  refund  in each of the writ petitions and  allowed  the prayer  in some petitions and rejected it in the  others  on the  ground  of delay.  The Court observed that  these  writ petitioners  whose  prayers had been rejected  would  be  at liberty to institute suits (1) See   erick  Pollock, "Jurisprudence and Legal  Essays", p. 89. (2)  Soo Maule, J. in Martindale v. Falkner ( 1846)  2  C.D. 706, 719. 517 or  other proceeding. We are not sure that, in the  context, the  High Court meant, by ’other proceedings’,  applications in the nature of proceeds under Article 226, when it is seen that the Court refused to entertain the relief for refund on the ground of delay in the proceedings under Article 226 and that  in some cases the Court directed the parties  to  file

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representations  before Government.  Be that as it  may,  in the earlier writ petitions, the appellants did not pray  for refund  of  the amounts paid by way of cess  for  the  years 1951-52 to 1965-66 and they gave no reasons before the  High Court  in  these writ petitions why they did  not  make  the prayer  for refund of the amounts paid during the  years  in question.    Avoiding  multiplicity  of  unnecessary   legal proceedings should be an aim of all courts.  Therefore, the, appellants could not be allowed to split up their claim  for refund  and file writ petitions on this piece-meal  fashion. If the appellants could have, but did not, without any legal justification, claim- refund of the amounts paid during  the years in question, in the earlier writ petitions, we see  no reason  why  the appellants should be allowed to  claim  the amounts   by   filing   writ  petitions   again.    In   the circumstances of this case, having regard to the conduct  of the appellants in not claiming these amounts in the  earlier writ petitions without any justification, we do not think we would  be  justified  in  interesting  with  the  discretion exercised by the High Court in dismissing the writ petitions which  were  filed  only for the purpose  of  obtaining  the refund and directing them resort to the remedy of suits. We dismiss the appeals but make no order as to costs. 11 Civil Appeals Nos. 452-476 of 1974 The appellants filed writ petitions before the High Court of Mysore challenging the levy of health cess under the  Mysore Health Cess Act, 1951 (hereinafter referred to as the  ’1951 Act’) for the reason that the Act is outside the legislative competence  of  the  Mysore Legislature as well  as  on  the ground  that levy of health cess under the 1951 Act on  shop rentals and tree tax items in respect of toddy and arrack is ultra  wires sub-section (1) of s. 3 of the 1951 Act and  s. 9(1)  and  (2)  read with the  schedule  to  the  Elementary Education  Act,  1951.  They also prayed  for  quashing  the conditions in the annual notification for sale of excise and claimed  refund of the health cess on shop rentals and  tree tax  in  respect of toddy and arrack paid by  them  for  the years 1951-52 to 1961-62. Before the High Court, a Preliminary objection raised by the learned  Advocate General on behalf of the State  of  Mysore that  since  the writ petitions were filed more  than  three years  after  the payments were made, the court  should  not entertain them.  The High Court sustained the objection  and dismissed  the writ petitions.  These appeals  are  directed against that order. The 1951 Act under which the health cess was collected  from the appellant was in force in the State till it was repealed and   re-enacted  by  the  Mysore  Health  Cess  Act,   1962 (hereinafter referred to as the ’1962 Act’) with effect from April  1,  1962.  M/s.  D. Cawasji & Co. and  several  other excise contractors challenged the validity of levy 518 and collection of health cess under the 1951 Act as well  as under  the  1962 Act filing writ petitions before  the  High Court  of Mysore They were disposed of by a common  judgment [see  Surm Buth & Co. v. The Deputy Commissioner (Excise)  & Another(1).   By  the judgment, the High Court  struck  down explanation to clause, (1) of Schedule A to the 1962 Act but rejected  all other prayers.  That decision  was  challenged before  this  Court and this Court, by  its  judgment  dated September  26,  1966  (see Shinde Brothers  v.  Deputy  Com- missioner(2)  declared  that  the State  of  Mysore  had  no competence to levy and collect health cess under the  Mysore Health  Cess Act, 1962, on shop rent and directed refund  of health  cess illegally collected under the Health Cess  Act,

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1962.   And as regards the prayer for declaration  that  the levy  of health cess under the 1951 Act was illegal and  for refund  of  the cess collected under that  Act,  this  Court declined  to go into that question; the Court however,  said that  "the petitioners will, however, be at liberty to  file suits, if so advised, to recover the amounts alleged to have been paid by them under the Health Cess Act, 1951". Within two months of the disposal of appeals by this  Court, the  appellants filed writ petitions before the  High  Court challenging  the  validity of the 1951 Act and  praying  for refund  of health cess collected under the 1951 Act for  the period  from 1951-52 to 1961-62.  The High Court  held  that there was inordinate delay in filing the writ _petitions and dismissed  them  on that ground without  entering  into  the merits of the petitions. The  appellants contended that the High Court went wrong  in domissing  the writ petitions on the ground that  there  was inordinate  delay in filing them.  It may be  recalled  that the  1951 Act had been repealed in 1962 and that the  refund was claimed in respect of the amounts paid before 1962 under the  1951 Act.  Merely because this Court has said that  the appellants can challenge the validity of Act, it they are so advised,  by  a  suit. it would not  follow  that  they  can challenge its validity in writ petition without encountering legitimate pleas available to the respondent.  If there  was inordinate  delay  is filing the writ petitions,  there  was nothing  in the judgment of ’Court which prevented the  High Court  in  dismissing them on that ground.  The  reason  why this  Court did not go into the question of the validity  of the  1951 Act was that relevant materials were  not,  placed before  the Court by the appellants.  When this  Court  said the ’the appellants, if so advised, were at liberty to  file suit  for  the  relief  claimed, it cannot  be  taken  as  a sanction to the appellants by the .Court for approaching the High Court for relief under Article 226 (1) (1966) 1 Mysore Law Journal 554. (2)  A.I.R. 1967 S.C, 1512. 519 without  regard  to  the question of  delay  in  filing  the petitions.   The  appellants,  as they  did  not  place  the relevant  materials  before  this  Court  for   successfully challenging  the  validity  of the 1951 Act,  are  to  blame themselves.   The appellants were directed by this Court  to Ale suits, if they were so advised. In these circumstances, we do not think that the High  Court went wrong in dismissing the writ petitions on the ground of inordinate delay.  We dismiss the appeals, but make no order as to costs. P.B.R.                                               Appeals dismissed. 520