1987 (7) TMI 329 - HC - Central Excise

Summary

Issues Involved:

1. Legality of Octroi Levy by Municipality
2. Maintainability of Suit for Refund under Section 72 of the Indian Contract Act
3. Pleading and Proof Requirements under Section 72
4. Impact of Passing on Tax Burden to Consumers
5. Vires of Gujarat Act 6/78 and Ordinance 7/77

Summary:

1. Legality of Octroi Levy by Municipality:
The plaintiff (Dhrangadhra Chemical Works) alleged that the defendant (Dhrangadhra Municipality) had no authority to levy or recover octroi from the plaintiff, and such action was illegal and ultra vires. The trial court found that the defendant had no authority to recover octroi at an enhanced rate from the plaintiff, deeming the collection illegal and void.

2. Maintainability of Suit for Refund under Section 72 of the Indian Contract Act:
The defendant contended that the suit did not disclose any cause of action under Section 72 of the Indian Contract Act, as the plaintiff failed to plead and prove the basic ingredients required under this section. The court held that the suit was essentially for the refund of octroi dues, and it had to be shown that the payment was made under mistake or coercion, which was neither pleaded nor proved by the plaintiff.

3. Pleading and Proof Requirements under Section 72:
The court emphasized that for a suit under Section 72 to be maintainable, the plaintiff must plead and prove that the money was paid under mistake or coercion and that the plaintiff would suffer legal injury if the amount is not refunded. The plaintiff did not plead that it had suffered any legal injury or that it had not passed on the burden of the octroi to consumers.

4. Impact of Passing on Tax Burden to Consumers:
The court noted that if the burden of the tax is passed on to the consumers, the plaintiff cannot claim refund as it would result in unjust enrichment. The plaintiff did not plead or prove that it had borne the burden of the octroi, leading to the conclusion that the suit did not disclose any cause of action under Section 72.

5. Vires of Gujarat Act 6/78 and Ordinance 7/77:
The plaintiff challenged the vires of Gujarat Act 6/78 and Ordinance 7/77, which sought to validate the levy of octroi by the defendant. The court held that this challenge became academic as the suit was dismissed on the ground of non-maintainability under Section 72, and thus, did not pronounce on the vires of the said Act and Ordinance.

Conclusion:
The court set aside the decree of the trial court and dismissed the suit for refund of octroi dues, holding that the plaintiff failed to plead and prove the necessary ingredients under Section 72 of the Indian Contract Act. Consequently, the cross-objections by the plaintiff and the Special Civil Application challenging the vires of Gujarat Act 6/78 were also dismissed.