1979 (9) TMI 187 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Entitlement to refund of sales tax paid under a mistaken notion of law.
2. Validity of assessments made under an ultra vires rule.
3. Finality of assessment orders not challenged in appeal.
4. Applicability of limitation period for claiming refunds.
5. Reasonableness of delay in making the refund claim.

Issue-wise Detailed Analysis:

1. Entitlement to Refund of Sales Tax Paid Under a Mistaken Notion of Law:
The respondent, a sanitary contractor, mistakenly registered as a dealer under the Bengal Finance (Sales Tax) Act, 1941, and paid sales tax from 1951 to 1958. After the Supreme Court decisions in Dukhineswar Sarkar and Brothers v. Commercial Tax Officer and State of Madras v. Gannon Dunkerley & Co., it was established that works contracts did not constitute a sale of goods and were beyond the State Legislature's competence to tax. Consequently, the respondent was not a dealer, and the tax paid was under a mistaken notion of law. The court held that the respondent was entitled to a refund as the tax was collected without jurisdiction.

2. Validity of Assessments Made Under an Ultra Vires Rule:
The assessments were made under rule 2(ii)(c) of the Bengal Sales Tax Rules, 1941, which was declared ultra vires by the Supreme Court. Therefore, the Commercial Tax Officer had no authority to assess or collect sales tax from the respondent. The court observed that the assessments were void ab initio, as the respondent was not a dealer within the meaning of the Act.

3. Finality of Assessment Orders Not Challenged in Appeal:
The appellants contended that since the respondent did not challenge the assessment orders in appeal, they became final and conclusive. The court rejected this argument, distinguishing between assessments that are illegal and those that are void. It held that a void assessment does not attain finality and can be challenged at any time. The court cited the Supreme Court's observation in Raja Jagdambika Pratap Narain Singh v. Central Board of Direct Taxes that an order passed without jurisdiction remains void despite not being appealed against.

4. Applicability of Limitation Period for Claiming Refunds:
The appellants argued that the claim for refund was barred by limitation under section 12(1) of the Bengal Finance (Sales Tax) Act, 1941, which requires claims to be made within twelve months from the date of assessment. The court held that section 12(1) applies only to dealers and not to persons who were not dealers under the Act. Since the respondent was not a dealer, section 12(1) and its proviso did not apply, and the claim was not barred by limitation.

5. Reasonableness of Delay in Making the Refund Claim:
The appellants argued that the respondent's claim was barred by the general principle that claims should be made within a reasonable time, typically within three years from the date of knowledge of the mistake. The court noted that the respondent had been diligent in seeking relief since learning of the mistake in 1962, making representations to the Commercial Tax Officer and eventually filing for a refund. The court emphasized that the State had a duty to refund the tax once the mistake was known. Given the continuous efforts by the respondent and the State's failure to act, the court found the delay reasonable and not a bar to the claim.

Conclusion:
The appeal was dismissed, and the respondent was entitled to a refund of the sales tax paid under a mistaken notion of law. The court held that the assessments made under the ultra vires rule were void, and the claim for a refund was not barred by limitation. The respondent was found to have acted diligently, and the delay in claiming the refund was deemed reasonable under the circumstances. Leave to appeal to the Supreme Court was disallowed, and the operation of the judgment was stayed for three weeks after the long vacation.