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TMI Blog1992 (11) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... rmission for adjustment. There was also another Government order clarifying the earlier Government order. For the period May, 1976 to March, 1977, permission was accorded to the petitioner to adjust the taxes in terms of those three Government orders. For the subsequent period also the petitioner made similar applications for permission to adjust the taxes, which remained unattended to by the authorities. However, for the period 1st April, 1978 to 31st December, 1979, tax was demanded from the petitioner, which was challenged by it by filing W.P. No. 3476 of 1980. Again, there was another demand for payment of Rs. 1.07 crores being the tax for the period from 15th April, 1976 to 31st March, 1978 and 1st January, 1980 to 14th March, 1981; demand notice was dated 19th November, 1986, which the petitioner challenged by filing the present writ petition on 13th January, 1987. The petitioner sought stay of the demand and the learned single Judge, after hearing the State Government granted stay only to the extent of Rs. 47 lakhs. Petitioner approached the Appellate Bench by filing W.A. No. 379 of 1987. The writ appeal was partly allowed; it was ordered that the petitioner shall pay Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the period is over, nothing can be done'. The answer to this is in the words of Lord Denning: 'Now I know that a public authority cannot be estopped from doing its public duty, but I do think it can be estopped from relying on a technicality and this is a technicality (See Wells v. Minister of Housing and Local Government [1967] 1 WLR 1000 at 1007)." At page 245, the Supreme Court concluded: "There was no other disentitling circumstance which would justify the refusal of the permission. The appellant did not have prior permission because it was withheld by the Revenue without any justification. The High Court took the view that after the period to which the adjustment related had expired no permission could at all be granted. A permission of this nature was a technical requirement and could be issued making it operative from the time it was applied for." Demand notices were quashed with a direction to accord permission for the adjustments effected by the petitioner. 4.. In the light of the above decision, it is undisputed that the present impugned demand also is liable to be set aside and the petitioner would be entitled to the restitution of the sum of Rs. 45 lakhs p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llegality, if any, arose only after the Supreme Court held the issuance of demands as illegal, on 2nd August, 1991 (the date of the decision in [1991] 83 STC 234). Alternatively it was contended that, the fact that the demand notices were upheld by this Court earlier is a strong indication that the authorities acted bona fide and therefore, the State should not be burdened with the interest on the amount collected by the State. The Act nowhere provides for payment of interest in such a case and at the most, interest may have to be paid only for the period after the expiry of 90 days from the date of petitioner sought refund, consequent on the decision of the Supreme Court. The learned Government Advocate pointed out that in the earlier appeal before the Supreme Court, the Supreme Court had specifically permitted the State to issue demand notices and collect the tax, and therefore the demand notice issued cannot be considered as illegal under any circumstances. 10.. A few more facts require to be noted, before considering the main question. The decision of the Supreme Court pertained to the earlier period, though the question involved was the same. However, the State did not com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner, on the basis of their understanding of the legal position, which is now found to be erroneous. 11.. As to why interest is normally allowed in favour of a person who had to part with his money and to what extent the court has the power to direct payment of interest are now required to be considered. 12.. Vijay Textile v. Union of India [1979] ELT (J) 181 is a decision of the Gujarat High Court. At page 193, the Bench held: "It must be emphasized that these amounts which we are directing to be refunded, were collected by the excise authorities without the authority of law and were illegal levies. The Central Government had used of these amounts during this period of three years and correspondingly the petitioner concerned was kept out of the use of these amounts during the said period. It is therefore just and proper that the respondents should pay interest at twelve per cent per annum (which is the proper rate looking to the conditions in the money market) from the dates of the collection of the said amounts directed to be refunded till the date of actual repayment." 13.. In Atul Products Ltd. v. Union of India [1986] 26 ELT 298, a learned Judge of the Calcut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs by the petitioner, in the instant case, is under the orders of this Court and therefore, necessarily, the payment is in the nature of a deposit to be adjusted depending upon the ultimate outcome of the writ petition; and in lieu of the security for the due performance of the obligation to meet the demand notice issued by the respondents. It was also contended that, equitable jurisdiction, is a jurisdiction recognised by usage having the force of law and therefore section 4(1) also would be attracted. We find considerable force in this contention. There is no reason to understand that while enacting Interest Act, 1978, the Parliament intended to deprive the court exercising an equitable jurisdiction, the power to award interest, which, it had earlier. 18.. In Commissioner of Income-tax v. Deepchand Kishanlal [1990] 183 ITR 299 this Court while construing the provisions of the Income-tax Act, 1961, held at page 309, that interest is compensatory in nature and a person deprived of the use of his money, is normally entitled to be compensated for it, by way of interest. 19.. It cannot be denied that writ jurisdiction is an equitable jurisdiction; the width of this jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resolved in favour of the petitioner; in other words, the petitioner was not at all liable to pay the said sum of Rs. 45 lakhs and the demand of the respondents was unauthorised and the only sanction for it to recover Rs. 45 lakhs was the judicial order. The court could necessarily make an order to compensate the petitioner who was deprived of the benefit of the said sum, while, all these years, the respondents had the benefit of it. 23.. Mr. Dattu, relied on a decision of the Andhra Pradesh High Court in Mothey Gangaraju v. State of Andhra Pradesh [1965] 16 STC 205; the appellant therein had earlier filed a suit for declaration that levy and collection of sales, tax from him was illegal and obtained a declaratory decree. The State refunded the illegally collected tax with interest at 6 per cent per annum from the date of decree. Thereafter assessee filed the second suit claiming interest from the date of collection of the tax by the State. The High Court held that no equitable grounds existed in the said case to decree the suit for interest. On facts this case is clearly distinguishable. We have some reservation on the question of maintainability of the second suit, in view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. This plea ignores the nature of the interest payable. If it is payable by way of penalty, certainly, the court could accept this plea of the respondents, so that the State may not be penalised. But, interest is payable, not because, the respondents were guilty of any misconduct; it is not to be paid only, because the statutory authorities failed to give due effect to the exemption notifications issued under section 8A of the Act, though the action of the authorities in the instant case delayed the carrying out of the legislative policy of granting exemption to the petitioner. Interest is to be paid to compensate the petitioner who was deprived of the user of its money; it was prevented from enjoying the benefit of its funds all these years, which requires to be compensated, in equity. Therefore, the fact that the respondents must have used the money for public welfare is entirely irrelevant; for the purpose of discharging its sovereign functions, the State has to levy appropriate taxes and collect them; even a forced loan to meet the public expenditure is impermissible. 26.. We are of the view that, the petitioner was deprived of the beneficial user of its funds to the extent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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