1964 (11) TMI 7 - SC - VAT and Sales Tax

Whether a petition under article 226 of the Constitution praying solely for the refund of money alleged to have been illegally collected by the State as tax, is maintainable under article 226? Whether a writ of mandamus, if a case for its issue is made out, can be issued under article 226 for the refund of taxes collected prior to the coming into force of the Constitution, though the final assessment was made subsequent to January 26, 1950, and was later set aside by the appellate authority? Held that - Normally petitions solely praying for the refund of money against the State by a writ of mandamus are not to be entertained. The aggrieved party has the right of going to the civil court for claiming the amount and it is open to the State to raise all possible defences to the claim, defences which cannot, in most cases, be appropriately raised and considered in the exercise of writ jurisdiction. The appellant has not made out any case for the issue of a writ of mandamus for the said purpose, thus the High Court rightly refused the writ of mandamus for the recovery of the sum of ₹ 62,809-5-2 alleged to have been realised by the respondent between 1944 and 1948. Appeal dismissed.

Issues Involved:
1. Maintainability of a petition under Article 226 of the Constitution solely for the refund of money alleged to have been illegally collected by the State as tax.
2. Issuance of a writ of mandamus under Article 226 for the refund of taxes collected prior to the coming into force of the Constitution.

Issue-wise Detailed Analysis:

1. Maintainability of a Petition under Article 226 for Refund of Money:
The court examined whether a petition under Article 226 of the Constitution, solely for the refund of money alleged to have been illegally collected by the State as tax, is maintainable. The court opined that while High Courts have the power to pass appropriate orders under Article 226, a petition solely for the issue of a writ of mandamus directing the State to refund money is not ordinarily maintainable. The rationale is that a claim for such a refund can always be made in a suit against the authority that collected the money illegally. The court distinguished cases where petitions challenged the validity of the assessment and sought consequential relief for the return of the tax illegally collected from those solely seeking a refund. The court emphasized that the principle justifying consequential orders directing the refund of amounts illegally realized should not be extended to cases seeking only a refund of money. The court referred to the case of Sri Satya Narain Singh v. District Engineer, P.W.D., where it was held that relief could be claimed only in a suit and not in a proceeding under Article 226. The court also cited Burmah Construction Co. v. State of Orissa, where it was stated that the High Court normally does not entertain a petition under Article 226 to enforce a civil liability arising out of a breach of contract or tort to pay an amount of money due to the claimant, leaving it to the aggrieved party to file a civil suit. The court concluded that normally, petitions solely praying for the refund of money against the State by a writ of mandamus are not to be entertained.

2. Issuance of a Writ of Mandamus for Refund of Taxes Collected Prior to the Constitution:
The court considered whether a writ of mandamus could be issued under Article 226 for the refund of taxes collected prior to the Constitution's coming into force. The court held that the appellant had not made out a case for the issue of a writ of mandamus for this purpose. The court referred to the case of State of Madhya Pradesh v. Bhailal Bhai, where it was held that the High Court had the power to give consequential relief by ordering repayment of money realized by the Government without the authority of law. However, the court noted that the special remedy provided in Article 226 is discretionary and not intended to supersede completely the modes of obtaining relief by an action in a civil court. The court emphasized that factors such as delay in seeking the remedy and the nature of the controversy of facts and law must be considered. The court also referred to Sohan Lal v. Union of India, which laid down that proceedings by way of a writ were not appropriate where the decision would amount to a decree declaring a party's title and ordering restoration of possession. The court noted that the appellant's claim for refund did not arise under any statutory law but under section 72 of the Contract Act, which would be a point for decision in a regular suit and not in proceedings under Article 226. The court concluded that the High Court rightly refused the writ of mandamus for the recovery of the sum realized by the respondent between 1944 and 1948.

Conclusion:
The appeal was dismissed, and the parties were ordered to bear their own costs. The court held that petitions solely praying for the refund of money against the State by a writ of mandamus are not normally maintainable, and the appellant had not made out a case for the issue of a writ of mandamus for the refund of taxes collected prior to the Constitution's coming into force.

← Previous Next →