D. Cawasji & Co. Vs. The State of
Mysore & ANR [1974] INSC 216 (29 October 1974)
MATHEW, KUTTYIL KURIEN MATHEW, KUTTYIL KURIEN
ALAGIRISWAMI, A.
CITATION: 1975 AIR 813 1975 SCR (2) 511 1975
SCC (1) 636
CITATOR INFO :
R 1976 SC2243 (23) RF 1990 SC 313 (20) RF
1990 SC 772 (31) RF 1991 SC1676 (72)
ACT:
Constitution of India, 1950-Art. 226-Payment
of taxes made under mistake of law-Period of limitation when commenceJurisdiction
of the High Court.
HEADNOTE:
The appellants paid certain amounts to the
government as excise duty and education cess for the years 1951-52 to 1965-66
in one case and from 1951-52 to 1961-62 in the other. The High Court struck
down the provisions of the relevant Acts as unconstitutional. In writ petitions
before the High Court claiming refund, the appellants contended that the
payments in question were made by then under mistake of law; that the mistake
was discovered when the High Court struck down the provisions as
unconstitutional and that the petitions were therefore in time. But the High
Court dismissed them on the ground of inordinate delay.
Dismissing the appeals,
HELD : Where a suit will lie to recover
moneys paid under a mistake of law, filim writ petition for refund of tax
within the period of limitation would lie. For filing a writ petition to
recover the money paid under a mistake of law the starting point of limitation
is from the date of which the judgment declaring as void the particular law
under which the tax was paid was rendered. Even in cases where it is filed within
three years, the court has a discretion.
have in regard to the facts and circumstances
of each case not to entertain the application. [513H; 514A-B] State of Madhya
Pradesh v. Bhailal Bhal and Others [1964] 6 S.C.R. 261 relied on, State of
Kerala v. Aluminium Industries Ltd. (1965) 16 S.T.C. 689, referred to and
Trilok Chand Motichand and Others v. H. B. Munshi, Commissioner of Sales Tax,
Bombay (1970) 25 S.T.C. 289 held inapplicable.
In the instant case having regard to the
conduct of the appellants in not claiming the amounts in the earlier Writ
petitions without any justification, there is no justification in interfering
with discretion exercised by the High Court in dismissing the writ petitions.
The appellants did not pray for refund of the amounts paid by way of cess for
the years 1951-52 to 1965-66 and they gave no reasons before the High Court in
these petitions why they did not make the prayer for refund of the amounts paid
during the years in question. Avoiding multiplicity of unnecessary legal proceedings
should be the aim of all courts. The appellants should not be allowed to split
up their claim for refund and file writ petitions in a piecemeal fashion. If
the appellants could have, but did not, without any legal justification claim
refund of the amounts, paid during the years in question in the earlier writ
petitions there is no reason why they should be allowed to claim the amounts by
filing writ petitions again. [517B-C] In the second batch of appeals the reason
why this Court did not go into the question of the validity of the Act was that
relevant materials were not placed before the court by the appellant for
successfully challenging its validity and they were therefor to blame
themselves. [518141]
CIVIL APPELLATE JURISDICTION : Civil Appeals
No@. 437, 451, 452-476 and 477-459 of 1974.
Appeals by Special Leave from the Judgment
& Order dated the 30th November, 1972 of the Mysore High Court in W-Ps.
Nos.
26662671, 2673-2681/68, 181, 196-199,
194-195, 200-204/67, 180, 182-193/67 and 2653-2665/68 respectively.
-L319SupCI/75 512 R. J. Kolah, In CAs Nos. 450-451,453,468-471, 479-484 of 74
only) A. Jagannath Shetty, K. J. John, J. B.
Dadaclhanji, O. C. Mathur and Ravinder
Narain, for the appellants.
B. Sen (In CA. No. 437/74) Chandrakant Raju,
Advocate for Kamatka (In CA. No. 477/74) and M. Veerappa, for the Respondents.
The Judgment of the Court was delivered by 1.
Civil Appeals Nos. 437-451 & 477-489 of 1974.
MATHEW, J.-The appellants filed writ
petitions before the High Court of Mysore under Article 226 of the Constitution
for a declaration that the Mysore Elementary Education Act, 1941, and the
amendments to it by the Mysore Elementary Education (Amendment Act XII of 1955)
Providing for levy and collection of Education Cess on items on which Education
Cess is being levied as prescribed in the schedules of the respective Acts were
beyond the competence of the Mysore State Legislature and for refund of the
Educational Cess paid during 1951-52 to 1965-66 on shop rentals and tree tax in
respect of toddy and duty of excise in respect of arrack and special liquor.
The High Court dismissed the writ petitions by a common judgment and these
appeals are directed against that judgment.
The High Court of Mysore had, in D. Cawasji
& Co. v. The State of Mysore and Others(1), struck down the provisions of
the Mysore Elementary Education Act and the amendments to it on May 2, 1968.
That decision was affirmed by this Court in State of Mysore and Others v. D.
Cawasji & Co. and Others(2). Before the decision of this Court, the Mysore
Legislature had passed the Mysore Education Cess (Validation and Levy) Act,
1969 on September 10, 1969 validating the levy and the collection of cess under
the Act. But the Validation Act was held to be invalid by the Mysore High Court.
The writ petitions were filed before the High Court in June and July, 1968,
i.e. after the decision of the Mysore High Court in D. Cawasji & Co. v.
State of Mysore and Others(1) and before this Court rendered its judgment.
The contention of the appellants before the
High Court was that the payments of cess in question were made by them under a
mistake of law; that they discovered the mistake only on May 2, 1968 when the
High Court, by its judgment, declared that the provisions of the Act and the
amendments thereto were unconstitutional, and that, as they filed the writ
petitions within three months' of that decision, the writ petitions were within
time.
The High Court found that there was delay in
filling the petitions and, it was mainly for that reason that the High Court
dismissed .
In State of Madhya Pradesh v. Bhailal Bhai
and Others(1) Das Gupta, J. who delivered the judgment of the Court, while
holding that (3) [1964] 6 S. C. R. 261.
513 the High Courts have power, for the
purpose of enforcement of fundamental rights and statutory to give consequental
relief by ordering repayment of money realised by the Government without the
authority of law, said that the special remedy provided in Article 226 is not
intended to supersede completely the modes of obtaining relief by an action in
a civil court or to deny defence legitimately open in such actions and that
among the several matters which the High Courts rightly take into consideration
in the exercise of that discretion is the delay made by the aggrieved party in
seeking this special remedy and the excuse there is for 'it. He further said
that if a person comes to the court for relief under Article 226 on the
allegation that he has been assessed to tax under a void legislation and having
paid it under a mistake is entitled to get it back, the court, if it finds that
the assessment was void, being made under a void provision of law, and the
payment was made by mistake, is still not bound to exercise its discretion
directing repayment; and that whether repayment should be ordered in the
exercise of this discretion win depend in each case on its own facts and
circumstances and that it is not easy nor is it desirable to lay a general
rule. He was of the view that if there has been unreasonable delay the court ought
not ordinarily to lend its aid to a party by this extraordinary remedy of
mandamus. On the question of the period of limitation within which the petition
must be filed, he observed that the period of limitation prescribed for
recovery of money paid under a mistake of law is three years from the date when
the mistake is known and that that period may ordinarily be taken to be a
reasonable standard by which delay in seeking remedy under Article 226 can be
measured. He further said that the court may consider the delay unreasonable
even if it is less than the period of limitation prescribed for a civil action,
but, where the delay is more than this period, it will almost always be proper
for the court to hold that it is unreasonable.
In State of Kerala v. Aluminium Industries
Ltd.(1) a Bench of seven judges of this Court followed the view taken in State
of Madhya Pradesh v. Bhailal Bhai (supra) on the question of the period of
limitation within which the petition has to be filed.
Section 17(1)(c) of the Limitation Act, 1963,
provides that in the case of a suit for relief on the ground of mistake, the
period of limitation does not begin to run until the plaintiff has discovered
the mistake or could, with reasonable diligence, have discovered it. In a case
where.payment is made under a mistake of law as contrasted with a mistake of
fact, generally the mistake becomes known to the party only when a court makes
a declaration as to the invalidity of the law. Though a party could, with
reasonable diligence, discover a mistake of fact even before a court makes a
pronouncement, it is seldom that a person can, even with reasonable diligence,
discover a mistake of law before a judgment adjudging the validity of the law.
Therefore, where a suit will lie to recover
moneys paid under a mistake of law, a writ petition for refund of tax within
the period of (1) (1965) 16 S.T.C. 689.
514 limitation prescribed i.e. within 3 year
of the knowledge of the take, would also lie. For a writ petition to recover
the money paid under a mistake of law, this Court has said that the starting
point of limitation is from the date on which the judgment declaring as void.
the particular law under which the tax was paid was rendered, as that would
normaly be the date on which the mistake becomes known to the party. If any
writ petition is filed beyond three years' after that date, it will almost
always be proper for the court to consider that it is unreasonable to entertain
that petition though, even in cases where it is filed within three years, the
court has a discretion, having regard to the facts and circumstances of each
case. not to entertain the application.
We are aware that the result of this view
would be to enable a person to recover the amount paid as tax even after
several years of the date of payment, if some other party would successfully
challenge the validity of the law under which the payment was made and if only
a suit or writ petition is filed for refund by the person within three years
from the date of declaration of the invalidity of the law. That might both be
inexpedient and unjust so far as the State is concerned.
A tax is intended for immediate expenditure
for the common good and it would be unjust to require its repayment after it
has been in whole or in part expended, which would often be the case, if the
Buis or application could be brought at any time within three years of a court
declaring the law under which it was paid to be invalid, be it a hundered years'
after the date of payment. Nor is there any provision under which the court
deny refund of tax even if the person who paid it has collected it from his
customers and has no subsisting liability or intention to refund it to them,
or, for any reason, it is impracticable to do so.
In the U.S.A., it is generally held that in
the absence of a statute to the contrary, taxes voluntarily paid under a
mistake of law with full knowledge of facts cannot be recovered back while
taxes paid under a mistake of fact may ordinarily be recovered back (see Corpus
Juris Secundum, vol. 84, p. 637). Although s. 72 of the Contract Act has been
held to cover cases of payment of money under a mistake of law, as the State
stands in a peculiar position in respect of taxes paid to it, there are perhaps
practical reasons for the law according a different treatment both in the
matter of the heads under which they could be recovered and the period of
limitation for the recovery.
The task of writing legislation to protect
the interest of the nation is committed to Parliament and the legislatures of
the States. We are refering to this aspect only to alert the attention to the
present state of law.
Now, the High Court relied on the decision of
this Court in Titokchand Motichand and Others v. H. B. Munshi, Commissioner of
Sales Tax, Bombay(1) for its conclusion that relief for refund cannot be (1)
(1970) 25 S.T.C. 289.
515 granted in the proceeding and that the
appellants must resort to the ordinary remedy of suits.
In Tilokch Motichand case, the petitioners
before this court had realised several amounts from their customers outside
Bombay cot account of sales tax. The Sales Tax Officer, by his order dated
March 17, 1958, forfeited the same under s.21(4) of the Bombay Sales Tax Act,
1953. On March 28, 1958, the petitioners filed a writ petition in the High
Court of Bombay seeking a writ of mandamus restraining the Sales Tax Officer
from recovering the amount from them on the ground that s. 21(4) was ultra
vires the powers of the State Legislature and that the order of forfeiture was
violative of Articles 19(1) (f) and 265 of the Constitution.
On November 28, 1958, the writ petition was
dismissed by a learned Single Judge on the ground that the petitioners, having
defrauded other persons, were not entitled to any relief. The appeal filed
against the said order by the petitioners was dismissed on July 13, 1959.
Before the appeal was dismissed, the Collector of Bombay attached the
petitioners' properties and the petitioners paid the amount to the Collector of
Bombay between August 3, 1959 and August 8, 1960. In Kantilal Babulal &
Bros. v. H. C. Patel(1) decided on September 29, 1967, this Court struck down
s.
12A(4) of the Bombay Sales Tax Act, 1946 as
violative of Article 19(1)(f). The petitioners thereupon filed a writ petition
under Article 32 of the Constitution on February 9, 1968, claiming refund of
the amount paid by them under s. 72 of the Indian Contract Act, 1872 on the
ground that they paid the amount under a mistake of law and that they discovered
the mistake only when this Court struck down s. 12 (A) (4) of the Bombay Sales
Tax Act, 1946. The petitioners also alleged that they paid the amount to the
collector under coercion and they were entitled to recover the same.
The contention of the, petitioners was, for
the grounds on which this Court struck down s. 12A(4) of the Bombay Sales Tax
Act, 1946, s.21(4) of the Bombay Sales Tax Act, 1953, was also liable to be
struck down. It was in these circumstances that this Court had to consider the
question whether the petitioners were entitled to the relief claimed By a
majority of the Court it was decided that there was inordinate clay in filing
the petition and therefore it should be dismissed. Hidayatullah, C.J. observed
:
"His (the petitioner's) contention is
that the ground on which his petition was dismissed was different and the
ground on which the statute was struck down was not within his knowledge and
therefore he did not know of it and pursue it in this Court. To that I answer
that law will presume that he knew the exact ground of unconstitutionality.
Everybody is presumed to know the law. It was his duty to have brought the
matter before this Court for consideration. In any event, having set the
machinery of law in motion, be cannot abandon it to resume it after a number of
years, because another person more adventurous than him in his turn got the
statute declared unconstitutional, and got a favour able decision..... I. agree
with the opinion of my brethren (1) [1968] 1 S.C.R. 735.
Bachawat and Mitter, jj. that there is no
question here of a mistake of law entitling the petitioner to invoke analogy of
the Article in the Limitation Act .... ".
Bachawat, J. said that the payment made by
the petitioners were made not under any mistake of-law and, therefore, they
cannot claim any relief on the ground of mistake. Mitter, J. was of the view
that after the decision of the Bombay High Court, the petitioners did not
willingly pay the amount forfeited, but that they made the payment after
attachment of their properties and, therefore, the amounts were really paid
under coercion and the period of limitation would normally run from the date of
the payment.
We are not quite sure that if the maxim that
everyone is presumed to know the law is applied, there will be any case of
payment under a mistake of law unless that presumption is rebutted in the first
instance, for, the moment it is assumed that everyone is presumed to know the
law, it is clear that no one can make a mistake as to the law. It is sometimes
said that every man is presumed to know the law, but this is only a slovenly
way of stating the truth that ignorance of the law is not in general an
excuse(1). "There is no presumption in this country that every person
knows the law; it would be contrary to common sense and reason if it were
SO"(2).
Be that as it may, the High Court deduced the
conclusion from the decision in Tilokchand Motichand's (supra) case that the
question whether a declaration by a court that a law is unconstitutional and
therefore void would not always furnish the starting point of limitation for a
suit for recovery of the amount paid under that law and that the question must
be decided on the facts of each case. The Court further said that the parties
should seek relief under Article 226 as expeditiously as possible. and even if
the ordinary remedy by way of a suit is not barred by limitation, it will be
proper exercise of discretion under Article 226 of the Constitution to decline
to interfere in cases where the persons approach the court after several years,
in the absence of special and sufficient grounds.
If one thing is clear from the judgments
rendered in Tilokchand Motichand's case (supra) by the Judges who formed the
majority, it is this : they did not consider the payments made by the
petitioners a.% payments made under a mistake of law. Therefore, we, do not see
the relevance of that case for the decision of the case here.
But, that however, is not the end of the
matter. In the earlier writ petitions which culminated in the decision in D.
Cawasji & Co. v. The State of Mysore and Others (supra) the appellant did
pray for refund of the amounts paid by them under the Act and the High Court
considered the prayer for refund in each of the writ petitions and allowed the
prayer in some petitions and rejected it in the others on the ground of delay.
The Court observed that these writ petitioners whose prayers had been rejected
would be at liberty to institute suits (1) See erick Pollock,
"Jurisprudence and Legal Essays", p. 89.
(2) Soo Maule, J. in Martindale v. Falkner (
1846) 2 C.D. 706, 719.
517 or other proceeding. We are not sure that,
in the context, the High Court meant, by 'other proceedings', applications in
the nature of proceeds under Article 226, when it is seen that the Court
refused to entertain the relief for refund on the ground of delay in the
proceedings under Article 226 and that in some cases the Court directed the
parties to file representations before Government. Be that as it may, in the
earlier writ petitions, the appellants did not pray for refund of the amounts
paid by way of cess for the years 1951-52 to 1965-66 and they gave no reasons
before the High Court in these writ petitions why they did not make the prayer
for refund of the amounts paid during the years in question. Avoiding
multiplicity of unnecessary legal proceedings should be an aim of all courts.
Therefore, the, appellants could not be allowed to split up their claim for
refund and file writ petitions on this piece-meal fashion.
If the appellants could have, but did not,
without any legal justification, claimrefund of the amounts paid during the
years in question, in the earlier writ petitions, we see no reason why the
appellants should be allowed to claim the amounts by filing writ petitions
again. In the circumstances of this case, having regard to the conduct of the
appellants in not claiming these amounts in the earlier writ petitions without
any justification, we do not think we would be justified in interesting with
the discretion exercised by the High Court in dismissing the writ petitions
which were filed only for the purpose of obtaining the refund and directing
them resort to the remedy of suits.
We dismiss the appeals but make no order as
to costs.
11 Civil Appeals Nos. 452-476 of 1974 The
appellants filed writ petitions before the High Court of Mysore challenging the
levy of health cess under the Mysore Health Cess Act, 1951 (hereinafter
referred to as the '1951 Act') for the reason that the Act is outside the
legislative competence of the Mysore Legislature as well as on the ground that
levy of health cess under the 1951 Act on shop rentals and tree tax items in
respect of toddy and arrack is ultra wires sub-section (1) of s. 3 of the 1951
Act and s.
9(1) and (2) read with the schedule to the
Elementary Education Act, 1951. They also prayed for quashing the conditions in
the annual notification for sale of excise and claimed refund of the health
cess on shop rentals and tree tax in respect of toddy and arrack paid by them
for the years 1951-52 to 1961-62.
Before the High Court, a Preliminary
objection raised by the learned Advocate General on behalf of the State of
Mysore that since the writ petitions were filed more than three years after the
payments were made, the court should not entertain them. The High Court
sustained the objection and dismissed the writ petitions. These appeals are
directed against that order.
The 1951 Act under which the health cess was
collected from the appellant was in force in the State till it was repealed and
re-enacted by the Mysore Health Cess Act, 1962 (hereinafter referred to as the
'1962 Act') with effect from April 1, 1962. M/s. D. Cawasji & Co. and
several other excise contractors challenged the validity of levy 518 and
collection of health cess under the 1951 Act as well as under the 1962 Act
filing writ petitions before the High Court of Mysore They were disposed of by
a common judgment [see Surm Buth & Co. v. The Deputy Commissioner (Excise)
& Another(1). By the judgment, the High Court struck down explanation to
clause, (1) of Schedule A to the 1962 Act but rejected all other prayers. That
decision was challenged before this Court and this Court, by its judgment dated
September 26, 1966 (see Shinde Brothers v. Deputy Commissioner(2) declared that
the State of Mysore had no competence to levy and collect health cess under the
Mysore Health Cess Act, 1962, on shop rent and directed refund of health cess
illegally collected under the Health Cess Act, 1962. And as regards the prayer
for declaration that the levy of health cess under the 1951 Act was illegal and
for refund of the cess collected under that Act, this Court declined to go into
that question; the Court however, said that "the petitioners will,
however, be at liberty to file suits, if so advised, to recover the amounts
alleged to have been paid by them under the Health Cess Act, 1951".
Within two months of the disposal of appeals
by this Court, the appellants filed writ petitions before the High Court
challenging the validity of the 1951 Act and praying for refund of health cess
collected under the 1951 Act for the period from 1951-52 to 1961-62. The High
Court held that there was inordinate delay in filing the writ _petitions and
dismissed them on that ground without entering into the merits of the
petitions.
The appellants contended that the High Court
went wrong in domissing the writ petitions on the ground that there was
inordinate delay in filing them. It may be recalled that the 1951 Act had been
repealed in 1962 and that the refund was claimed in respect of the amounts paid
before 1962 under the 1951 Act. Merely because this Court has said that the
appellants can challenge the validity of Act, it they are so advised, by a
suit. it would not follow that they can challenge its validity in writ petition
without encountering legitimate pleas available to the respondent. If there was
inordinate delay is filing the writ petitions, there was nothing in the
judgment of 'Court which prevented the High Court in dismissing them on that
ground. The reason why this Court did not go into the question of the validity
of the 1951 Act was that relevant materials were not, placed before the Court
by the appellants. When this Court said the 'the appellants, if so advised,
were at liberty to file suit for the relief claimed, it cannot be taken as a
sanction to the appellants by the .Court for approaching the High Court for
relief under Article 226 (1) (1966) 1 Mysore Law Journal 554.
(2) A.I.R. 1967 S.C, 1512.
519 without regard to the question of delay
in filing the petitions. The appellants, as they did not place the relevant
materials before this Court for successfully challenging the validity of the
1951 Act, are to blame themselves. The appellants were directed by this Court
to Ale suits, if they were so advised.
In these circumstances, we do not think that
the High Court went wrong in dismissing the writ petitions on the ground of
inordinate delay. We dismiss the appeals, but make no order as to costs.
P.B.R. Appeals dismissed.
Back
