1961 (10) TMI 72 - SC - Indian Laws

Whether the assessment of sales tax was not in accordance with law and directed that no steps, either by certificate proceedings or otherwise should be taken to realise the arrears of sales tax in respect of those contracts and refund of tax paid, if recovery thereof was not barred under S.14 of the Orissa Sales Tax Act 1947 on the date of the filing of the application? Held that - The appellants have not filed any civil suit for a decree for refund of tax unlawfully collected from them. This appeal arises out of a proceeding filed in the High Court substantially to compel the Collector to carry out his statutory obligations under s. 14 of the Act. The High Court normally does not entertain a petition under Art. 226 of the constitution to enforce a civil liability arising out of a breach of contract or a tort to pay and amount of money due to the claimant and leaves it to the aggrieved party to agitate the question in a civil suit filed for that purpose. But an order for payment of money may sometimes be made in a petition under Art. 226 of the constitution against the State or against an officer of the State to enforce a statutory obligation. The petition in the present case is for enforcement of the liability of the Collector imposed by statute to refund a-tax illegally collected and it was maintainable but it can only be allowed subject to the restrictions which have been imposed by the Legislature. It is not open to the claimant to rely upon the statutory right and to ignore the restrictions subject to which the right is made enforceable. We are therefore of the opinion that the High Court was right in restricting the order of refund in the petition under Art. 226 of the constitution

Summary

Issues:
1. Assessment of sales tax on works contracts.
2. Legality of assessment and refund claim.
3. Validity of Section 14 of the Orissa Sales Tax Act, 1947.
4. Jurisdiction of High Court in enforcing refund.

Analysis:

Assessment of sales tax on works contracts:
The case involved Messrs. Burmah Construction Company being assessed to tax under the Orissa Sales Tax Act for the transfer of materials used in construction projects. The appellant paid substantial amounts as tax and penalties for various quarters. The High Court declared the assessment of sales tax on works contracts as not in accordance with the law, directing refund of tax paid if not barred under the Act.

Legality of assessment and refund claim:
The appellant challenged the High Court's order partially barring the refund claim under Section 14 of the Orissa Sales Tax Act. The appellant contended that the portion of tax paid beyond the limitation period should also be refundable. The Court noted that the Act imposes restrictions on refund claims, requiring applications within specified time limits from the date of assessment or appeal.

Validity of Section 14 of the Orissa Sales Tax Act, 1947:
Section 14 of the Orissa Sales Tax Act, 1947, imposes an obligation on the Collector to refund excess tax paid by a dealer, subject to specific conditions and time limits. The Court upheld the validity of Section 14, stating that the legislature was competent to legislate on matters related to refund of improperly collected tax as ancillary to the primary tax legislation.

Jurisdiction of High Court in enforcing refund:
The High Court's jurisdiction to enforce refund of tax unlawfully collected was discussed. The Court clarified that while the High Court can order refund to enforce statutory obligations, claimants must adhere to the restrictions imposed by the legislature. The Court modified the refund order, allowing refund only for tax paid within 24 months of the petition filing date.

In conclusion, the appeal challenging the High Court's order on refund claim was dismissed, upholding the restrictions imposed by Section 14 of the Orissa Sales Tax Act. The Court directed refund of tax paid within the specified time limit, dismissing the claim for the balance of tax paid. The judgment affirms the statutory framework governing refund claims and the jurisdiction of the High Court in enforcing such claims within legal boundaries.