1987 (12) TMI 3 - SC - VAT and Sales Tax

Tax collected without the authority of law. Indeed, the appellant had to pay the tax in view of the notices which were without jurisdiction - assessment was made was without jurisdiction. In the premises, it is manifest that the respondents had no authority to retain the money collected without the authority of law and as such the money was liable to be refunded - in an application under article 226 of the Constitution, the court should have directed refund.

Issues Involved:
1. Validity of the Assam Taxation (on Goods Carried by Roads or Inland Waterways) Act.
2. Jurisdiction of the assessment orders under the Act.
3. Entitlement to a refund of taxes paid under the Act.
4. Applicability of limitation and laches in seeking refund under Article 226.

Detailed Analysis:

1. Validity of the Assam Taxation (on Goods Carried by Roads or Inland Waterways) Act:
The Assam Taxation (on Goods Carried by Roads or Inland Waterways) Act, 1954, was initially struck down by the Supreme Court as ultra vires the Constitution in the Atiabari Tea Co. Ltd. v. State of Assam case (AIR 1961 SC 232). Subsequently, a new Act was passed on April 6, 1961, and was again declared ultra vires by the High Court on August 1, 1963. However, the Supreme Court in Khyerbari Tea Co. Ltd. v. State of Assam [1964] 5 SCR 975 declared the Act intra vires. This led to the State of Assam issuing notices under section 7(2) of the Act for tax returns.

2. Jurisdiction of the Assessment Orders:
The High Court in Loong Soong Tea Estate (Civil Rule No. 1005 of 1969) declared the assessment orders without jurisdiction. The Supreme Court noted that the tax was collected without the authority of law, and the assessment under section 9(3) of the Act was without jurisdiction. Thus, the respondents had no authority to retain the money collected without the authority of law.

3. Entitlement to Refund:
The appellant claimed that the assessments were illegal and sought a refund of the taxes paid. The High Court initially set aside the orders and notices of demand but refused the refund. The Supreme Court emphasized that taxes collected without the authority of law should be refunded. The High Court's refusal to grant refund was based on the belief that the appellant should have known about the illegality of the tax as early as 1963. However, the Supreme Court disagreed, stating that the appellant became aware of their right to a refund only after the 1973 judgment in Loong Soong's case.

4. Applicability of Limitation and Laches:
The Supreme Court discussed the principles of limitation and laches in the context of Article 226. It referred to Suganmal v. State of Madhya Pradesh [1965] 16 STC 398, which held that a writ solely for refund is not ordinarily maintainable. However, where refund is sought as a consequential relief, it can be entertained unless there is an obstruction like limitation. The court noted that the claim for refund was not barred by limitation as the appellant filed the petition within a reasonable time after becoming aware of the right to a refund.

The court also referred to State of Madhya Pradesh v. Bhailal Bhai [1964] 15 STC 450, which stated that the period of limitation for a civil suit can be a reasonable standard for delay in seeking remedy under Article 226. The Supreme Court found that the appellant's petition was within the three-year limitation period from the date of discovering the mistake, as per Article 113 of the Limitation Act, 1963.

Conclusion:
The Supreme Court set aside the High Court's judgment to the extent it refused the refund of the tax illegally realized. The court directed the refund of the tax, emphasizing that the appellant had proceeded diligently and there was no unexplained delay. The appeals were allowed, and each party was ordered to bear its own costs.

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