1965 (4) TMI 93 - SC - VAT and Sales Tax

Whether the sales with respect to which sales tax amounting to Rs. 54,375-5-0 was levied were outside the State and were therefore exempt under Article 286(1)(a) of the Constitution as it then was? - Held that - Appeal allowed case remitted. The proper course for the disposal of this appeal is to call for a finding from the Sales Tax Officer on the question. It is also necessary to call for a finding on the question whether the writ petition was within three years of the date on which the mistake first became known to the respondent so that a suit on that date for refund would not be barred under Article 96 of the Limitation Act, 1908. The papers will be sent to the Agricultural Income-tax and Rural Sales Tax Officer, Quilon, for findings on these two questions. The Sales Tax Officer should submit his findings within three months of the receipt of the order by him. It will be open to the respondent to give evidence to substantiate its case on both these points. After findings on these questions are received, the appeal will be listed before any Constitution Bench as early as possible for final disposal.

Summary

Issues:
Refund of sales tax collected by the State of Kerala from the respondent. Whether the sales tax levied on the respondent was exempt under Article 286(1)(a) of the Constitution. Estoppel from claiming refund due to voluntary payment of tax. Duty of the State to refund tax paid under a mistake of law. Proper course of action for the disposal of the appeal.

Analysis:
The judgment delivered by the Supreme Court of India pertains to an appeal regarding the refund of sales tax collected by the State of Kerala from the respondent. The respondent had claimed a refund of Rs. 80,048-13-6 for two periods, contending that the sales on which the tax was levied were exempt under Article 286(1)(a) of the Constitution. However, the present appeal focused on the refund of Rs. 54,375-5-0, as granted by the High Court, with the remaining claim being dismissed and not appealed further, thus finalizing it.

The circumstances leading to the imposition of sales tax involved the respondent inadvertently not claiming exemption for sales made to the State of Punjab, resulting in the payment of over Rs. 71,000 towards sales tax. Upon realizing the mistake, the respondent approached the Sales Tax Officer seeking a refund, which eventually led to the filing of a writ petition in the High Court. The High Court, while rejecting the appellant's contention of estoppel, issued a mandamus to the State Government to determine the refund claim based on the levy being contrary to Article 286(1)(a) of the Constitution and paid by mistake.

The Supreme Court emphasized that money paid under a mistake of law falls under the purview of section 72 of the Contract Act, and in cases of a common mistake of law, there is no estoppel. The Court highlighted the duty of the State to refund tax levied by mistake of law unless restricted by relevant sales tax laws. Refund claims must be made within the limitation period, typically three years from the date the mistake is discovered. Despite the State's refusal to investigate and refund, the High Court's order was deemed appropriate based on the circumstances.

The Court decided to remit the case for further findings by the Sales Tax Officer on whether the sales in question were exempt under Article 286(1)(a) of the Constitution and whether the writ petition was filed within the limitation period. The respondent was granted the opportunity to present evidence to support their case. Once the findings are received, the appeal will be listed before a Constitution Bench for final disposal, ensuring a fair and thorough examination of the issues at hand.