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TMI Blog1959 (12) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... sh which was formely Madhya Bharat) as importers of tobacco and as such are registered as dealers under the Act. By Notification No. 59/7-S. R.-55(5) dated the 24th October, 1953, issued by the Government under section 5 of the Act, sales tax is chargeable on "leaves of tobacco, manufactured tobacco, and tobacco used for smoking, eating and for snuff " sold by an importer at the rate of Rs. 6-4-0 per cent. and on "tobacco chura used for bidi manufacturing" sold by an importer at the rate of Rs. 1-9-0 per cent. During the period relating to the assessment years from 1950 to 1956, the petitioners sold imported as well as locally grown-that is in Madhya Bharat-tobacco of the above description. The sales tax authority assessed them to sales tax for these assessment years on the basis of taxable turnover determined after deducting from their turnover the sale of "domestic tobacco" and recovered the tax accordingly. 4.. On 17th January, 1956, a Division Bench of the Madhya Bharat High Court held in Mohammad Siddiq v. The State of Madhya BharatA.I.R. 1950 M.B. 214. that the sales tax levied under the Act on pugrees made of handloom cotton cloth imported within the State of Madhya Bharat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adequate legal remedy this Court could not refuse to make an appropriate direction for the enforcement of the assessee's fundamental right, which was violated on account of the imposition of an wholly illegal tax, and for the refund of the tax amount illegally recovered from the petitioner in his case. Shri Sanghi, learned counsel for the petitioner in M.P. No. 144 of 1958, in supplementing the arguments of Shri Chitale, after referring to several cases, emphasised that if the imposition of sales tax was illegal and ultra vires the Constitution, then the remedy of a suit or an application for refund was not available to the assessee for whom he was appearing or to any other petitioner and that the only remedy that the petitioners could resort to for the protection of their fundamental right was under Article 226 of the Constitution. Learned counsel appearing for the petitioners in other cases adopted the arguments of Sarvashri Chitale and Sanghi. 6.. In reply, learned Advocate-General put in the forefront of his arguments the contention that Article 304(a) was not concerned with taxes on sales or purchases of goods; that it referred to taxes on imported goods in the act of import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence whether an order for refund was made in these proceedings or in a suit that the petitioners might file for that purpose. 7.. On these contentions, the three points that arise for decision are: (i) whether the levy of sales tax on sales by an importer of tobacco imported into Madhya Bharat was repugnant to Article 304(a); (ii) whether, if the imposition was illegal, the petitioners are entitled to recover back the amount of tax paid by them; (iii) and whether for claiming back the refund of the amount the petitioners must resort to the remedies available under the ordinary law, or whether they can invoke Article 226 of the Constitution. 8.. On the first question it is necessary to refer to Article 304(a) of the Constitution, which says: "Notwithstanding anything in Article 301 or Article 303, the Legislature of a State may by law(a) impose on goods imported from other States any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced; and (b) ... ... ... ... " The plain meaning of this provision is that a State may impose any tax on goods imported from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while Article 286 deals with the restrictions as to imposition of tax on sales or purchases of goods. Support was also sought in the observation of Venkatarama Ayyar, J., in Bengal Immunity Co. Ltd. v. State of Bihar(2), that under Article 304 (a) the tax is levied on the goods whereas under Article 286(2) it is levied on the transactions of buying and selling. As we read those observations, it appears to us that by those observations the learned Judges stated and emphasized that the provisions of Article 286 could not be construed with reference to the provisions of Article 304(a). We do not read those observations as holding that a discriminatory sales tax on goods imported from other States is outside the purview of Article 304(a) of the Constitution. That would have been an impossible finding on the clear language of Article 304(a) of the Constitution. 9.. This brings us to the question whether under the notification dated 24th October, 1953, sales tax was chargeable under the relevant entries only on sales of imported tobacco. The sales tax was charged under entry No. 5 of Schedule III and entry No. 3 of Schedule V of the notification. Those entries, which are in Hindi, when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dhya Bharat, is included in the definition of "importer of goods". It cannot be read as meaning that a dealer in Madhya Bharat acquiring locally for sale goods manufactured or produced in that State from a resident or nonresident person in Madhya Bharat is an importer of those goods. In connection with the question whether the impugned imposition of tax offended Article 304(a) of the Constitution, the material point to be considered is whether under the relevant entries sales tax was chargeable on sales of tobacco produced in the former State of Madhya Bharat, and not as to the persons connoted by the above definition of "importer of goods". In our opinion, there is nothing in the relevant entries or in the definition of "importer of goods" to persuade us to hold that under those entries sales tax was charged even on the sales of domestic tobacco. That apart, the taxing authorities themselves did not construe the entries so as to enable them to tax sales by any dealer or importer of locally grown tobacco. Therefore, even if it be said that the provision imposing tax on sales of tobacco was on the face of it fair and not discriminatory in appearance, yet if in its actual working, ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the taxing authority to refund the amount to the assessee was issued. The learned single Judge of the Allahabad High Court took the view that the payment of illegal tax by the assessee was a payment under mistake and that, therefore, under section 72 of the Contract Act the taxing authority was bound to refund the moneys unlawfully received by it from the assessee on account of sales tax. When the matter went up before the Supreme Court, the main question that was canvassed was whether section 72 of the Contract Act applied. It was held by the Supreme Court that the term "mistake" in section 72 of the Contract Act has been used without any qualification or limitation whatever and comprises within its scope a mistake of law as well as of fact and that where it is once established that the payment, even though it be of a tax, has been made by a party labouring under a mistake of law, the party is entitled to recover the same and the party receiving the same is bound to repay or return it. The effect of the decision of the Supreme Court is that payment by the assessee of a tax, which is subsequently declared to be ultra vires, must be regarded as a payment made under mistake and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the fact that the learned Advocate-General did not oppose the prayer of the petitioners for refund, when he said that if the levy of the tax was ultra vires the Constitution and the petitioners were entitled to be repaid the amount of tax already collected from them, then it did not make any difference whether an order of refund was made in these proceedings or in a suit. In the case of Messrs Mullaji Jamaluddin and Co.[1958] 9 S.T.C. 499; A.I.R. 1958 M.P. 220., the Full Bench, while holding that the recovery of sales tax under the C.P. and Berar Sales Tax Act, 1947, from the assessee before them in respect of certain transactions in which goods were sent outside the State of C.P. and Berar for delivery to consumers offended Article 286(1) of the Constitution and was invalidly collected, issued a direction for the refund of the tax amount to the assessee. The Full Bench decision is sufficient to grant the petitioners' prayer for a direction for the refund of the tax amount illegally collected from them. But as learned counsel for the petitioners sought to fortify their elaborate arguments on this point by several decisions of the Supreme Court, it would but be proper to not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes of assessment under a provision which was said to be ultra vires was a wrongful act which was actionable. It, however, seems to us that in principle no real distinction can be drawn between a suit for a declaration that any of the provisions relating to assessment are ultra vires and for an injunction restraining the taxing authority from making assessment and a suit for the same declaration and seeking the relief of repayment of the tax already paid. It is possible to argue on the basis of the Supreme Court's decision in The State of Tripura v. The Province of East Bengal[1951] S.C.R. 1; 19 I.T.R. 132. that the petitioners before us could have filed a suit for the relief they are seeking here. It was further said that no application for refund could be made under section 21 of the Act as the claim for refund of the tax amount declared to be illegal and ultra vires the Constitution was not a claim for a refund of "any excess amount" recovered over and above a permissible limit. It must be said that this contention is not one which can be rejected outright as lacking in substance altogether. It may come up for consideration later on on a proper occasion and we prefer to expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it restraining the taxing authorities from imposing or authorizing the imposition of the impugned tax. In those cases, the question whether when an illegal tax had already been collected from the assessees, a writ for the refund of the tax amount could be issued under Article 32 or Article 226 of the Constitution did not arise for consideration. In The Sales Tax Officer Banaras v. Kanhaiya Lal(1), on which strong reliance was placed by the learned counsel for the petitioners, an objection was no doubt taken before the Supreme Court by the Additional Solicitor-General appearing for the sales tax authority that the assessee should have followed the procedure laid down in the U.P. Sales Tax Act for claiming a refund of the tax amount already collected from him the levy of which had been declared by the Allahabad High Court and the Supreme Court as ultra vires, and that this, not having been done, the assessee was debarred from claiming back the amount in a writ petition under Article 226 of the Constitution. The objection was overruled by the Supreme Court on the ground that no such contention had been raised by the State Advocate-General before the High Court and the whole matter had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under Article 226 of the Constitution would be confronted with the argument that the Court could in exercise of its discretion refuse him the relief prayed for. He went on to say: "The remedy is purely discretionary and no Court in those circumstances would exercise its discretion in his favour........Even then he might merely obtain a relief declaring the legislation ultra vires the Constitution and the Court would not grant him any consequential relief. For that relief he would have to approach the regular courts of law, when all questions of law, apart from the mere constitutionality of the provision would be considered by the Court on a contest between the parties, e.g., estoppel, acquiescence, limitation and the like." It is, perhaps, because the considerations pointed out in the cases just referred to above are not present here that the learned AdvocateGeneral did not contend seriously that the appropriate remedy of the petitioners for recovery of money lay in a suit. The decision in Wazir Chand v. The State of Himachal PradeshA.I.R. 1954 S.C. 415. is not in point here as it related to the return of certain goods which had been illegally seized. 16.. Reference was also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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