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PETITIONER: STATE OF MADHYA PRADESH(NOW MAHARASHTRA)

       Vs.

RESPONDENT: HAJI HASAN DADA

DATE OF JUDGMENT: 02/12/1965

BENCH: SHAH, J.C. BENCH: SHAH, J.C. SUBBARAO, K. SIKRI, S.M.

CITATION:  1966 AIR  905            1966 SCR  (2) 854  CITATOR INFO :  RF         1986 SC1556  (24)

ACT: C.P.  and  Berar Sales-tax Act (21 of 1947),  s.  claim  for refund--When can be ordered.

HEADNOTE: The  respondent  was  assessed  to  tax  by  the   Assistant Commissioner of Sales-tax under the C.P. and Berar Sales-tax Act,  1947 on the turnover ,of his business and he paid  the tax.   After the order of assessment the Board  ,of  Revenue gave a ruling that dyeing charges were not taxable under the Act.  The respondent applied to the Assistant  Commissioner, under s. 13 before its amendment in 1953 for refund, on  the plea  that  the amount ,claimed represented  dyeing  charges included  in  his  turnover.   The  Assistant   Commissioner rejected  the application, but the Board of Revenue  ordered the case to be returned to the Commissioner for  examination of  the claim for refund on merits.  At the instance of  the State,  the Board referred to the High Court,  the  question whether  there was any bar to the examination on  merits  of claims  for refund under s. 13 as originally ,enacted.   The High  Court  held that there was no bar.In  appeal  to  this Court, HELD:The application for refund of tax was not ’maintainable under the section as originally framed. The  Assistant  Commissioner is, within the  limits  of  his jurisdiction   and  authority,  competent  to   decide   all questions  which arise before him; his orders are liable  to be  set aside in appeal or modified in revision.  But  under the Act, the Assistant Commissioner-who exercises the powers of the Commissioner-has no power to review his decision, and so long as his order is not set aside or modified,, a dealer cannot call upon him to ignore the previous order and  grant refund contrary to the plain direction of his order. [857 C, H] Commissioner of Income-tax v. Tribune Trust L.R. 74 I.A. 306 applied.

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JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  1007  of 1964. Appeal  by special leave from the judgment and  order  dated September 13, 1961, of the Bombay High Court (Nagpur  Bench) in Civil Reference No. 1 of 1961. T. V. R. Tatachari and B. R. G. K. Achar, for the appellant. The respondent did not appear. The Judgment of the Court was delivered by Shah, J. By order dated April 17, 1952, the respondent  Haji Hasan  Dada  was assessed by the Assistant  Commissioner  of Sales Tax, Nagpur Region, to pay tax under the Central Pro-                             855 vinces & Berar Sales Tax Act 21 of 1947 on the turnover from his  business  in yam for the period November  13,  1947  to November  1,  1948.  The respondent paid the amount  of  tax assessed on July 8, 1952.  Thereafter relying upon s. 13  of the C.P. & Berar Sales Tax Act, 1947 he applied on  November 20,  1952 to the Assistant Commissioner of Sales Tax for  an order  refunding  Rs.  873/10/-  on the  plea  that  in  the turnover of his business were included dyeing charges  which were not taxable under the Act, and which since the order of assessment  were  held  by the Board of Revenue  to  be  not taxable.    The   Assistant   Commissioner   rejected    the application, and the order was confirmed by the Commissioner of  Sales  Tax  in appeal.  The  Board  of  Revenue,  Madhya Pradesh,  however, set aside the order and ordered that  the case be returned to the Commissioner "for disposal afresh in the light of the legal principles explained in Sheikh Gauhar Sheikh Nazir of Balaghat v. The State(1)". During  the  pendency of the proceedings before  the  taxing authorities, s. 13 of the Act was amended with retrospective effect.   It is claimed by the State that under the  amended section the right to obtain refund in cases similar to those under examination was. taken away retrospectively. The State of Madhya Pradesh moved the Board of Revenuer  for a  reference under s. 23 of the Act to the High  Court,  and the Board of Revenue referred the following three  questions :               "1.  Is ruling 57 (in Sheikh  Gauhar’s  case-3               S.T.C. 331) good law ? In other words, was the               Board   right  in  holding  that   the   Privy               Council’s decision in Commissioner of  Income-               tax v. Tribune.  Trust (A.I.R. 1948 P.C.  102)               constituted  no  bar  to  the  examination  on               merits  of  claims for refund made  under  the               original  section 13 of the Sales Tax Act  XXI               of 1947 within the time-limit mentioned in  it               ?               2.    Has  section 24 of Act XX of  1953  been               validly enacted, in so far as it seeks to give               retrospective effect to the amended section 13               of   Act   XXI  of  1947-as  from   the   very               commencement of the latter on 1-6-47 ? and                3.If  the answer to question No. 2 is in  the               affirmative,  does sub-section (3) of the  new               section 13 constitute a bar to the examination               on merits of the claim for refund made by  the               assessee in the present case ?" (1) 3 S.T.C. 331. L8Sup.CI/66-8 856 The  High Court held that by s. 13 of the Act as  originally enacted,  the  respondent had "a valuable right to  ask  for refund of the amount of the tax paid by him in excess of the

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amount lawfully due" and that "the right to obtain a  refund being  a  substantive right given to the respondent  by  the statute  and  not being a matter of  mere  procedure",  this right   could  not  be  taken  away  except  by  clear   and unambiguous words, and S. 13 as amended was not  legislation which  satisfied  that  test.  The  High  Court  accordingly answered the questions as follows :               "1.  Ruling  No. 57 is good law, and,  in  our               opinion, the Board was right.               2.    Section  24 of Act XX of 1953  has  been               validly enacted.               3.    The new section 13 sub-section (3), does               not bar an examination on merits of the  claim               for   refund   made  on  20-11-1952   by   the               assessee." With special leave, the State of Maharashtra, upon whom  the rights  of  the  State of Madhya Pradesh  have  devolved  by virtue of the States Reorganisation Act, 1956, has  appealed to this ,.Court. We  are  of the view that the first question alone  need  be answered  in  this appeal, and on the answer we  propose  to record the claim made by the respondent must stand rejected. Section  13  of the Act, as originally  enacted,  and  which applied during the ,year of assessment, read as follows :               "The  Commissioner  shall, in  the  prescribed               manner and 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, refund to  a  registered               dealer  applying in this behalf any amount  of               tax  or penalty paid by such dealer in  excess               of the amount due from him under this Act.               Provided  that  no claim for refund  shall  be               allowed unless it is made within twelve months               from the date on which the order of assessment               with  or without penalty was passed or  within               six  months from the date on which  the  final               order is passed on appeal, revision, review or               reference   in   respect  of  the   order   of               assessment with or without penalty." The  amendment  to  S. 13 by Act XX of 1953  need  not,  for reasons already set out, be considered. 857 Section  13, in terms authorised the Commissioner  to  grant refund  to a registered dealer applying in that  behalf,  of any  amount of tax or penalty paid by such dealer in  excess of  the  amount  due from him under the  Act.   The  section implies that refund may be granted only of the amount  which is  not  lawfully  due,  and whether  a  certain  amount  is lawfully  due  or not, must be determined by  the  Assistant Commissioner  in  making  the order  of  assessment  or  re- assessment.   The  order of the  Assistant  Commissioner  is undoubtedly  not  final : it is liable to be  set  aside  in appeal  or  modified  in a revision  application  under  the provisions  of the Act.  But so long as the order passed  by the Assistant Commissioner is not so set aside or  modified, a dealer cannot call upon him to ignore the previous  order, and  grant  refund contrary to the plain  direction  of  the order. There  is abundant authority for the view that until  it  is set  aside  by appropriate proceedings under the  Act  which authorises the levy of tax, full effect must be given to  an order  of  assessment, even if it be later  found  that  the order  was  erroneous in law : e.g. Commissioner  of  Income Tax, Punjab, North-West Frontier and Delhi Provinces, Lahore

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v.  Tribune Trust, Lahore(1).  In that case the Trust  which had  been  in  previous years assessed  to,  and  had  paid, income-tax,  claimed  in respect of its assessment  for  the year  1932-33 that it was exempt from taxation.   In  appeal which was carried to the Judicial Committee, the  contention was  upheld.  Before the judgment of the Judicial  Committee was  pronounced, assessments to income-tax were made on  the Trust  for the years 1933-34 to 1938-39.  After the  Board’s decision,  the Trust applied to the Commissioner of  Income- tax  for an order for refund of income-tax.  The High  Court of  Lahore held in a reference under s. 66(3) of the  Indian Income-tax Act that the assessments made for the years 1933- 34 to 1938-39 "were a nullity", and that the Trust could not be  denied the relief.  The Judicial Committee reversed  the order of the High Court and held that the assessments  which were  duly  made  by the Income-tax Officer  in  the  proper exercise  of his duty were validly made and  were  effective until they were set aside. The Assistant Commissioner appointed under the Act is within the  limits of his jurisdiction and authority  competent  to decide  all  the  questions which arise  before  him  :  his orders, it is true, are liable to be set aside in appeal  or modified in revision as provided by the Act.  But under  the Act  the Assistant Commissioner who exercises the powers  of the Commissioner-has no power to (1)  L.R. 74 I.A. 306. 858 review  his  decision, nor is he authorised  to  ignore  his previous order, and to pass an order for refund inconsistent with  his  previous order which has not been  set  aside  by appropriate proceedings. It  is  somewhat unfortunate that a later  decision  of  the Bombay  High  Court  in State of  Bombay  v.  Purushottamdas Dwarkadas Patel(1)-a case arising under S. 13 of the  Bombay Sales  Tax  Act, 1946-which decided the  identical  question which arose in this appeal, was not brought to the notice of the High Court.  In that case it was held by the High  Court that  an application for refund of sales tax paid  under  an order  of assessment cannot be entertained by the Sales  Tax Officer on the plea that the order was made on an  erroneous view  of  the  law,  unless  the  order  was  set  aside  in appropriate  proceedings by way of appeal or revision.   The Court  in  that case in a reference made  under  the  Bombay Sales  Tax  Act  disapproved of the view  of  the  Board  of Revenue  which had in arriving at its decision followed  the precedent in Sheikh Gauhar Sheikh Nazir’s case (2). Application   for   refund  of  tax  was,   therefore,   not maintainable under s. 13 of the C.P. & Berar Sales Tax  Act, 1947 as originally framed. The  appeal must therefore be allowed.  The parties to  bear their own costs in this Court and in the High Court. Appeal allowed. (1)  8  S.T.C. 379.                                   (2)  3 S.T.C. 331. 859