1970 (12) TMI 96 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the proviso to Rule 8 of the M.P. Sales Tax (Central) Rules, 1957.
2. Entitlement to refund of tax paid under a mistake of law.
3. Applicability of limitation for filing a suit or writ petition for refund.
4. Discretionary relief under Article 226 of the Constitution.

Issue-wise Detailed Analysis:

1. Validity of the proviso to Rule 8 of the M.P. Sales Tax (Central) Rules, 1957:
The petitioner, Caltex (India) Ltd., was assessed for the period from 1-1-1963 to 31-12-1963, and the Assistant Commissioner of Sales Tax rejected the concessional rate claim for sales amounting to Rs. 96,959/- made to M/s. G. Rai and Company, Jhansi. The rejection was based on the proviso to Rule 8, which stipulates that no single declaration shall cover more than one transaction of sale exceeding Rs. 5000/-. This rule was later challenged and held unenforceable by the M.P. High Court, following the Supreme Court's decision in State of Madras v. R. Nandlal and Co., which declared similar provisions in the Madras Sales Tax Rules as inconsistent with Section 13(1)(d) of the Central Sales Tax Act.

2. Entitlement to refund of tax paid under a mistake of law:
The petitioner argued that the tax was paid under a mistake of law, as the proviso to Rule 8 was later held invalid. Citing Section 72 of the Indian Contract Act, the petitioner claimed the right to recover money paid under a mistake of law. The Supreme Court in The State of Kerala v. Aluminium Industries Ltd. affirmed that money paid under a mistake of law is recoverable, and there is no estoppel when the mistake is common to both the assessee and the taxing authority.

3. Applicability of limitation for filing a suit or writ petition for refund:
The Government Advocate contended that the petitioner should have pursued remedies under the Sales Tax Act or filed a suit within three years of the tax payment. The court noted that under the Indian Limitation Act, 1908, and the new Limitation Act of 1963, the limitation period for relief from a mistake begins when the mistake is discovered. The petitioner filed the writ petition within three years of the Supreme Court's decision, which was when the mistake became known. Thus, the claim was within the limitation period.

4. Discretionary relief under Article 226 of the Constitution:
The court considered whether to exercise its discretion to grant relief under Article 226 despite the delay. It referenced the principle that unreasonable delay could bar relief, but in this case, the delay was within the permissible period. The court found that the petitioner's claim was justified as the tax was withheld without any authority of law. The court quashed the relevant part of the Assistant Commissioner's order and directed the respondents to refund the excess tax paid.

Conclusion:
The High Court quashed the part of the Assistant Commissioner of Sales Tax's order dated 30-10-1965, which rejected the concessional rate claim for sales of Rs. 96,959/- and assessed tax at 10%. The court directed the respondents to refund the excess tax paid by the petitioner. The writ petition was filed within the appropriate limitation period, and the court exercised its discretion to grant relief. The parties were ordered to bear their own costs, and the security amount was to be refunded to the petitioner.