1975 (11) TMI 156 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Entitlement to refund of sales tax paid under mistaken notion.
2. Validity and effect of assessments based on ultra vires provisions.
3. Applicability of Section 12 of the Bengal Finance (Sales Tax) Act, 1941.
4. Timeliness and laches in filing the refund claim.
5. Injunction against enforcing tax recovery certificates.

Issue-wise Detailed Analysis:

1. Entitlement to Refund of Sales Tax Paid Under Mistaken Notion:
The petitioner, a sanitary engineer, mistakenly registered as a dealer under the Bengal Finance (Sales Tax) Act, 1941, and paid Rs. 18,812.45 in sales tax from 1951 to 1958. Following the Supreme Court's decision in State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd., which declared Rule 2(ii)(c) of the Bengal Sales Tax Rules, 1941, ultra vires, the petitioner sought a refund. The court concluded that the petitioner was not a dealer and thus not liable to pay the tax, making the entire amount paid refundable.

2. Validity and Effect of Assessments Based on Ultra Vires Provisions:
The court noted that assessments made under Rule 2(ii)(c) were void ab initio due to the rule being ultra vires. The petitioner argued that the payments were made under void assessments, which do not need to be set aside to claim a refund. The court agreed, stating that void assessments are non est and do not require formal nullification.

3. Applicability of Section 12 of the Bengal Finance (Sales Tax) Act, 1941:
Section 12 of the Act deals with refunds for excess payments. The respondents argued that the tax paid by the petitioner was not "in excess of the amount due" under Section 12. The court disagreed, stating that if no tax was due, the entire amount paid is considered excess. However, Section 12 was deemed inapplicable because it requires an assessment order, which was non-existent due to the ultra vires nature of the rule.

4. Timeliness and Laches in Filing the Refund Claim:
The respondents contended that the petition was belated, given that the ultra vires ruling was made in 1958 and the petitioner knew about the mistaken payments by 1962 but filed the application in 1973. The court referenced the Supreme Court's stance in State of Kerala v. Aluminium Industries Ltd., noting that the duty to refund arises subject to limitation periods. However, the court found that the petitioner's continuous efforts to rectify the situation and the taxing authority's delays justified the timing of the claim.

5. Injunction Against Enforcing Tax Recovery Certificates:
The petitioner sought an injunction to prevent the enforcement of tax recovery certificates. The court granted this relief, recognizing that the petitioner was not liable for the taxes due to the void assessments. The court directed the respondents to refund the amounts paid and restrained them from enforcing the tax recovery certificates.

Conclusion:
The court ruled in favor of the petitioner, ordering the refund of the sales tax paid under the mistaken notion and restraining the respondents from enforcing the tax recovery certificates. The rule was made absolute, and no costs were awarded. A stay on the operation of the order was granted for six weeks. The petition was allowed, ensuring justice and adherence to legislative intent.