1992 (4) TMI 266 - HC - VAT / Sales Tax

Summary

Issues Involved:

1. Authorization to institute the suit.
2. Nature of the payment made by the plaintiff to the defendant.
3. Entitlement to refund post-judgment by the Supreme Court.
4. Liability for interest and litigation expenses.
5. Limitation period for the suit and claims.
6. Entitlement to costs and interest.

Issue-wise Detailed Analysis:

1. Authorization to Institute the Suit:

The court examined whether the suit was properly instituted by an authorized person on behalf of the plaintiff. The testimony of Shri Narinder K. Bhatnagar, supported by the Memorandum Article of Association and the Board's Resolution, confirmed his authority to sign, verify, and institute the suit. There was no cross-examination or rebuttal against this evidence, leading to a decision in favor of the plaintiff.

2. Nature of the Payment Made by the Plaintiff to the Defendant:

The plaintiff claimed that the sums paid to the defendant were deposits made in trust, with the understanding that they would be refunded if the tax imposition was quashed. The defendant acknowledged the conditions set by the plaintiff regarding the reimbursement of sales tax and penalties, which were confirmed through various letters exchanged between the parties. The court found that the defendant acted as an agent of the plaintiff and was compelled to pay the sales tax under legal compulsion, thus supporting the plaintiff's claim that the payment was made in trust.

3. Entitlement to Refund Post-Judgment by the Supreme Court:

The Supreme Court upheld the Madras High Court's decision that the supply of gunny bags did not amount to a sale, thus no sales tax was leviable. The court held that the plaintiff was entitled to a refund of the amount paid to the defendant, as the defendant was acting on behalf of the plaintiff. The defendant's role was limited to supplying cement under the Cement Control Order, and the plaintiff was deemed the principal liable for the sales tax, which was ultimately quashed.

4. Liability for Interest and Litigation Expenses:

The court considered whether the defendant was entitled to interest and litigation expenses incurred while contesting the sales tax liability. It was determined that the defendant, acting under legal compulsion, was entitled to reimbursement for interest and litigation expenses as per Sections 69 and 70 of the Contract Act. The defendant was deemed a person interested in making the payment to avoid prosecution, and thus entitled to compensation for the expenses incurred.

5. Limitation Period for the Suit and Claims:

The court addressed the issue of whether the suit was barred by time. It was found that the defendant had been consistently claiming reimbursement and interest since the receipt of the show cause notice, supported by documentary evidence. The court concluded that the plaintiff's claim was within the limitation period, as the defendant's acknowledgment of liability extended the period of limitation.

6. Entitlement to Costs and Interest:

The court ruled that the plaintiff was entitled to interest on the amount due after adjusting for interest and litigation expenses incurred by the defendant. The plaintiff was awarded interest at the rate of 12 percent from the date of the Supreme Court judgment. Additionally, the plaintiff was entitled to proportionate costs on the amount due from the defendant.

Conclusion:

The court decreed that the plaintiff was entitled to a refund of Rs. 2,08,985.43 with interest at the rate of 12 percent from November 22, 1972, until realization, along with proportionate costs. The defendant was entitled to adjust the interest and litigation expenses incurred from the total amount initially paid by the plaintiff.