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Report No. 61

6.7. Liability of State.-

The settled position in law, as regards the liability of State, as laid down by the Supreme Court,1-2-3 is as follows:-

(a) Where tax is levied by mistake of law, then ordinarily it is the duty of the State, subject to any provision of the law relating to sales tax, to refund the tax;

(b) If refund is not made, remedy through court is open, subject to the same restrictions and also to the period of limitation, namely, three years, from the date when the mistake had become known to the person who had made the payment by mistake.

(c) The High Courts have the power, for the enforcement of statutory rights and fundamental rights, to give consequential relief by ordering repayment of money realised by the Government without the authority of law. The power is, of course, discretionary.

1. State of Kerala v. Aluminium Industries, (1965) 16 STC 689 (SC), referred to in the Yearly Digest (1965) KLR 528.

2. State of Madhya Pradesh v. Shailal Bhai, AIR 1964 SC 1000 (1010), paras. 14 to 17.

3. Gil! & Co. v. Commercial Tax Officer, (Civil Appeal No. 1580-1595 of 1967 dated 9-2-1968), 1968 SC Notes 80: (1968) 22 STC 524 (SC).

Certain Problems connected with Powers of the States to Levy a Tax on the Sale of Goods and with the Central Sales Tax Act, 1956 Back

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