1970 (7) TMI 76 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Applicability of the Indian Limitation Act to cases under the U.P. Sales Tax Act.
2. Consideration of the period of limitation under Article 96 of the Limitation Act for refund claims based on Section 72 of the Indian Contract Act.
3. Legal justification for the refund of sums deposited towards sales tax for the year 1948-49.
4. Justification for entertaining the revision application after several years from the date of the assessment order.

Detailed Analysis:

Issue 1: Applicability of the Indian Limitation Act to cases under the U.P. Sales Tax Act
The first question was framed in the abstract without relevance to the facts of the present case, and therefore, need not be answered.

Issue 2: Consideration of the period of limitation under Article 96 of the Limitation Act for refund claims based on Section 72 of the Indian Contract Act
The court examined whether Article 96 of the First Schedule to the Indian Limitation Act could be applied to ascertain the period of limitation for refund applications based on Section 72 of the Indian Contract Act. The U.P. Sales Tax Act contains several provisions for refunding tax to the dealer, including sections 9(5), 10(5), 11(8), and 29, which all proceed on the principle that an amount paid by a dealer in excess of the amount due must be refunded. Section 72 of the Indian Contract Act states: "A person to whom money has been paid or anything delivered by mistake or under coercion, must repay or return it." The court concluded that the principle codified in Section 72 is embodied in the provisions of the U.P. Sales Tax Act.

However, the court noted that if the assessment order determining the tax liability remains effective and undisturbed, the sales tax authorities cannot grant a refund of the tax assessed. The court referred to the Supreme Court's observation in State of Madhya Pradesh v. Haji Hasan Dada, which stated that an order of assessment must be given full effect until it is set aside by appropriate proceedings under the Act. Since the assessment in question was based on a provision that was ultra vires, the assessment order was treated as a nullity. The court ruled that Article 96 of the Limitation Act applies to suits only and does not apply to proceedings under the U.P. Sales Tax Act. Therefore, the second question was answered in the negative.

Issue 3: Legal justification for the refund of sums deposited towards sales tax for the year 1948-49
The court examined whether the Additional Judge (Revisions) was justified in holding that the sums deposited by the dealer towards sales tax for the year 1948-49 were refundable. The court acknowledged that the amount paid in respect of forward contract transactions was not constitutionally permissible, and therefore, the dealer's claim for a refund was well-founded. The court also noted that the Additional Judge (Revisions) held that Article 96 of the Limitation Act did not apply, and Section 29 of the U.P. Sales Tax Act was not attracted as it came into force on 1st April 1959, while the right to claim a refund had accrued much earlier.

The court concluded that Section 29 of the U.P. Sales Tax Act does not apply to the facts of the present case, as it contemplates cases where the payment is made under the Act. The payments in question were made pursuant to a liability arising from provisions that were constitutionally invalid. Therefore, the Additional Judge (Revisions) was wrong in directing a refund, and the third question was answered in the negative.

Issue 4: Justification for entertaining the revision application after several years from the date of the assessment order
The court considered whether the Additional Judge (Revisions) was justified in entertaining the revision application after the lapse of several years from the date of the assessment order. The court noted that the date of the assessment order was irrelevant for determining whether the revision application was within time. The revision application was directed against the order dated 19th May 1960, rejecting the refund application. The period of limitation for filing a revision application is one year from the date of service of the order complained of, and the revision application was filed within this period. Therefore, the fourth question was answered in the affirmative.

Conclusion:
The court answered the questions referred as follows:
- Question No. (1): Need not be answered.
- Question No. (2): In the negative.
- Question No. (3): In the negative.
- Question No. (4): In the affirmative.

The assessee was entitled to its costs, assessed at Rs. 100. The reference was answered accordingly.