1986 (4) TMI 363 - SC - VAT and Sales Tax

Summary

Issues Involved:

1. Applicability of Indian Limitation Act to U.P. Sales Tax Act cases.
2. Consideration of limitation period under Article 96 of the Limitation Act for refund claims based on Section 72 of the Indian Contract Act.
3. Legality of refund of sales tax deposited by the Company for the year 1949-50.
4. Justification of entertaining the revision application after a significant lapse of time.

Summary:

Issue 1: Applicability of Indian Limitation Act to U.P. Sales Tax Act cases

The High Court decided that question No. 1 need not be answered. This decision was based on the precedent set in Commr. of Sales Tax. U.P. Lucknow v. Auraiya Chambers of Commerce, which was for the assessment year 1948-49.

Issue 2: Consideration of limitation period under Article 96 of the Limitation Act for refund claims based on Section 72 of the Indian Contract Act

The High Court answered question No. 2 in the negative, implying that the period of limitation under Article 96 of the Limitation Act could not be taken into consideration by the Sales Tax authorities in refusing to allow refund. The Supreme Court affirmed this view, noting that the tax was collected without authority of law, hence refundable to the assessee. The Court emphasized that Article 265 of the Constitution mandates no tax shall be levied or collected except by authority of law.

Issue 3: Legality of refund of sales tax deposited by the Company for the year 1949-50

The High Court answered question No. 3 in the affirmative, stating that the Additional Judge (Revisions) Sales Tax was legally justified in holding that the sums deposited by the Company towards sales tax for the year 1949-50 were refundable. The Supreme Court upheld this decision, noting that the tax was collected under a mistaken view of law, as determined by the Court's decision in Budh Prakash Jai Prakash's case [1955] 1 SCR 243. The Court also recognized the principle under Section 72 of the Indian Contract Act that money paid by mistake must be repaid.

Issue 4: Justification of entertaining the revision application after a significant lapse of time

The High Court answered question No. 4 in the affirmative, justifying the entertainment of the revision application despite the lapse of several years from the date of the assessment order. The Supreme Court agreed, stating that the application for refund was made within a reasonable time after the mistake was discovered, and there was no specific prohibition against the refund. The Court highlighted that procedural rules should not obstruct substantial justice.

Conclusion:

The Supreme Court affirmed the High Court's judgment, dismissing the appeals with costs. The Court emphasized the importance of fairness and justice in interpreting fiscal statutes and ensuring that taxes collected without authority of law are refunded to the rightful party.