Holding

Tax collected without authority of law must be refunded; the writ petitions were filed within the limitation period and the High Court’s refusal to grant refund was erroneous.

Summary

Salonah Tea Co. paid taxes under assessment orders issued under the Assam Taxation (On Goods Carried by Road or Inland Waterways) Act, 1961. The assessments were later declared ultra vires and the tax was held to have been collected without legal authority. The company filed writ petitions under Article 226 seeking a refund, arguing that the tax was paid under a mistake of law and that the petitions were filed within the limitation period prescribed by Article 113 of the Limitation Act, 1963. The High Court set aside the assessment orders but refused a refund, citing alleged delay and a triable issue of limitation. The Supreme Court held that where tax is collected without authority, the State has a concomitant duty to refund, and that the petitions were timely because the mistake was discovered only after the 1973 Loong Soong decision. The Court ruled that the High Court erred in refusing refund and directed the respondents to return the illegally collected tax. The appeals were allowed.

Issues considered

The legality of tax assessment under the Assam Taxation Act after it was declared ultra vires
Whether a writ petition for refund under Article 226 can be dismissed on the ground of limitation or delay
Whether the limitation period under Article 113 of the Limitation Act applies to a refund claim based on mistake of law
Whether Section 23 of the Assam Taxation Act is applicable when the tax was collected without legal authority
Whether the State is obligated to refund taxes collected without authority of law

Legislation cited

Assam Taxation (On Goods Carried by Road or Inland Waterways) Act, 1961s. 16, s. 23, s. 7, s. 9
Constitution of Indias. Article 113, s. Article 13(2), s. Article 19(1)(f), s. Article 226, s. Article 265, s. Article 301, s. Article 304
Contempt of Courts Act, 1952
General Clauses Acts. section 25
Indian Contract Act, 1872s. section 72
Limitation Act, 1963s. Article 113

Subjects

tax refundmistake of lawlimitationwrit jurisdictionArticle 226consequential reliefultra viresAssam Taxation Actequitable discretion

Judgment

."
,.~t(-.

A SALONAH TEA COMPANY '·,~
.. v. ,. "
SUPERINTENDENT OF TAXES NOWG(,.,'J & c-r,s. ETC.

DECEMBER 18, 1987

B· [SABYASACHI ~UKHARJI AND S. RANGANATHAN, JJ.l---r
ConstitUtion of India, 1950: Article 226-Petition for refund of tax
.. paid under mistake of law-Maintainability of-Not to be turned down
on the negative plea of alternative remedy.

C Assam Taxation (On Goods Carried by Road or on Inland Water-~
ways) Act, 1961: ss. 7, 9, '16 & 23-High Court Setting aside assessmwt
order-but refusing refund on triable issue of /imitation-Validity of.

, Limitation Act, 1963, Article 113, Laches-Discretion-Exercise
D of by Court-Must be fair and equitable. ·

The Assam Taxation (On Goods Carried by Road or Inland.)..
Water-ways) Act,1954 was struck down as ultra vires the Constitution
in Atiabari Tea Co. Ltd. v, State of Assam, AIR 1961 SC 232. A new Act
. was thereafter passed which received the President's assent on April 6,
E 1961. The High Court declared the said Act to be ultra vires on August ,
1, 1963. The State and other respondents preferred appeals hero~·
Supreme Court against the decision. In the meantime, in Khyerbari Tea
Co. Ltd. & Anr. v. State of Assam, (1964] 5 SCR 975 the Court held the
Act to be intra vires on December 13, 1963. Following the decision in'1
Khyerbari case the appeals filed by the State and others were allowed by
, __ F this· Court on April 1, 1968. After this decision the respondents re-
-,__ quired the appellants by notices under s. 7(2) of the Act issued on July
s;· 1968 to submit return for the period ending June 30, 1961,
___ September 30, 1961, December 31, 1961 and March 31, 1962. Due to
the penal consequences mentioned in the said notices the appellants filed
returns on July 11, 1968. The assessment orders were passed under s.
G 9(3) of the Act. The tax was duly paid.

In November 1973. the appellants filed writ petitions before the 'f
High Court seeking direction for refund of the tax paid under mistake
relying on the High Court's Judgment in Loong Soong Tea Estate (Civil
Rule No. 1005 of 1969) dated July 10, 1973 declaring the asSessment as
H without jurisdiction.

474
SALONAH TEA CO. v. SUPDT. OF TAXES NOWGONG 475

The High Court set aside the orders and notices of demand but
A
refused claim of refund on the ground of delay and lacbes. It took the
view that it was possible for the appellants to know about the legality of
the tax sought to be imposed as early as 1963, when the Act in question
was declared ultra vires. The taxes having been paid in 1968 the claim in
November 1973 was belated. It, however, held that the claim for refund
was a consequential relief. B

In the appeals to this Court it was contended for the appellants
that they had paid the tax under a mistake of law and were entitled to
seek refund thereof, and a writ petition seeking refund of tax realised
without the authority of law cannot be rejected on the ground of limita-
tion or delay unless such delay can be said to amount to !aches or has
caused some irreparable prejudice to the opposite party. c

Allowing the appeals,
•
HELD: By the Court: (Per Sabyasachi Mukharji & Rangana-
than, JJ.) D
'
The money was refundable to the appellants. The writ petitions

l were within time. l484H]

Per Mukharji, J.

1. No State has the right to receive or to retain taxes or monies
E

realised from citizens without the authority of law. There is in such
cases concomitant duty to refund the realisation as a corollary of the
constitutional inhibitiou that should be respected unless it causes
injustice or loss in any specific case or violates any specific provision of
law. !480H; 485E-F] F

In the instant case, tax was collected without the authority of law.
The notices were without jurisdiction. So was the assessment made
under s. 9(3) of the Act. The respondents, therefore, had no authority
to retain the money so collected, and as such the money was liable to
refund. l480DI G

2.1 In an application under Article 226 of the Constitution the
Court has power to direct the refund unless there has been avoidable
!aches on the part of the petitioner which indicate either the abandon-
ment of his claims or which is of such nature for which there is no
probable explanation or which will cause an injury either to respondent H
or any third party. l484C-D]
476 SUPREME COURT REPORTS [1988] 2 S.C.R.
)
A 2.2 Courts have, however, made a distinction between those cases
where a claimant approaches a High Court seeking relief of obtaining
refund only and those where refund is sought as a consequential relief
after striking down of.the order of assessment etc. A'petition of the
former nature is not ordinarily maintainable for the simple reason that
a claim for such a refund can always be made in a suit wherein it is open
B to the State to raise all possible defences to the claim, defences which
cannot_ in most cases be appropriately raised and considered in the
exercise of writ jurisdiction. [480F-H; 48' BI

In the instant case, s.23 of the Assam Act provided for refund to a
producer or a dealer any sum paid or realised in excess of the sum due
C from him under that Act. The section thus applies only in a case where
money is paid under the Act. If there is no provision for realisation of
the moµey under the Act, the act of payment was ultra vires, the money
had not been paid under the Act. In that view of the matter the case did
not cqme within s. 23 of the Act. The High Court having found that the
claim for refund was a consequential relief, it could have directed the
D State to' refund the amount in question. [~8.'G-H: ~R4A-B]

2,3 Exercise of every discretion must be fair and equitable. The
period of limitation prescribed for recovery of money paid by mistake
under the Limitation Act was three years fromJIJe date when the mis·
take was known. In the instant case, knowledge is attributable from the
E date of judgment in Loong Soong's case on lOth July, 1973. There
being a statement that the appellants came to know of that fact in
October 1973 and there being no denial by the averment made on this
ground, the High Court was in error in presuming that there was a
triable issue on this ground and refusing to grant refund. Within a
month in November 1973 the present petitions were filed. There was no
F unexplained delay. The appellants had proceeded diligently. There is
nothing to indicate that had they been more diligent, the appellants
could have discovered the constitutional inhibition earlier. The position
is not clear even if there is a triable issue. The position becomes clearer
only after the decision in Loong Soong's case. It could not, therefore,
be said that the appellants had abandoned their claims. I487B-D I
G
Suganmal v. State of Madhya Pradesh and Others., AIR 1965 SC
1740; Tilokchand Motichand & Ors. v. H.B. Munshi & Anr., [1969] 2
SCR 824; Kantilal Babula/ v. H.C. Patel 21 S.T.C. 174; Chandra
Bhushan & Anr. v. Deputy Director of Consolidation (Regional), U.P.
& Ors., [1967] 2 SCR 286; R.L. Kapur v. State of Madras, [1972] 3
H SCR 417; State of Madhya Pradesh v. Bhailal Bhai & Ors;., [1964] 6
SALONAH TEA CO. v. SUPDT. OFTAXES NOWGONG 477

• )-· SCR. 261; ·Ramchandra Shankar Deodhar & Ors. v. The State of A
MahartlShtra & Ors., [1974] 2 SCR 216; A. V. Venkateswaran, Col-
lector l•/ C.tStoms, Bombay v. Ramchand Sobhraj Wadhwani and
.'another. .fl!>li2] 18CR. 753; Shiv Shankar Dai Mills etc. etc. v. State of
Haryana & Ors. etc., [1980] 1 SCR. 1170 and State of Madhya Pradesh

ys1and others etc. etc. v. Nandlal Jaiswal and others etc. etc., AIR 1987 SC
referred to.
B

· ·3. It is only on the delivery of the judgment.in Loong Soong's
case in 1973, the appellants realised the right to claim the relief of
refund as a consequential relief, setting aside the assessment and the
assessment was set aside by the very order itself. That right has been
. granted by the High Court. The High Court has not refused the setting c
)..aside on the gronnd of delay. It would be inconsistent for the High
Court to refuse to grant consequential relief after setting aside the
assessment. IC the realisation was without the authority of law and that
"was declined by the High Court by the judgment in the instant case,
which claimed also the consequential relief, that relief must automati-
D
cally follow. Refunding the amount as a consequence of declaring the
assessment to be bad and recovery to be illegal will be in consonance
-'.with justice, equity and good conscience. (489F-H]

4. The challenge to the assessment on the ground that the assess-
ment was bad could not be made in an appeal under the Act because the
E
right to appeal being a creature of the Act, if the Act is ultra vires that
·¥,ght would not ensure to the benefit of the appellant. Section 16 of the
:Act under. which an appeal lay within thirty days from the date of
service of an assessment order therefore had no application. Similarly,
r rule 55 or the Rules framed under the Act barring claims or refund
unless made within one year from the date of the original order or
F
assessment, being unconstitutional had no application. (485H; 486A·B; 48711]

Per Ranganathan, J.

1. The assessments on the appellants. were illegal. The taxes
demanded on the basis thereof had been collected without the authority
G
or law. The High Court, therefore, while allowing the appellant's
)-prayer for quashing the assessment should also have allowed the refund
· or the illegally collected taxes. (490D] ·

Superintendent of Taxes v. Onkarmal Nathmal Trust, [1975] ,
Sopp. SCR 365, applied. H
478 SUPREME COURT REPORTS [ 1988] 2 S.C.R.
-~
A The petitions filed in November, 1973 were within the period of
limitation prescribed in Article 113 of the Limitation Act read with s. 23
--\--
of the Assam Act. The appellants' averment that they realised their
mistake only when they came to know about the decision of Loong
Soong Tea Estate case in July, 1973 stands uncontroverted. There is
nothing on record to show that the appellants had realised their mistake
B earlier. [49!0-F)

State of M.P. v. Bhailal Bhai, [!964l 6 SCR 261 referred to.

It was considered unnecessary therefore to consider the larger-
question whether the bar of limitation would be fatal to a writ petition
C for refund. [49~F-G I

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.
3023-3029 OF 1979.

From the Judgment and Order dated 14.6. 1979 of the High
D Court of Gauhati in Civil Rule Nos. 509 to 512 of 1973.

R.F. Nariman, P.H. Parekh. M.K.S. Mench and San jay Bharthri
for the Appellants.

Prabir Chaudhary for the Respondents.
E
The Judgment of the Court was delivered by

SABYASACHI MUKHARJI, J. These appeals arise out of the
1
Judgment and order dated 14th June, 1979 of the High Court of
Gauhati in Assam setting aside the order and notice of demand undef
F the Assam Taxation (on Goods carried by Road or Inland Waterways)
Act, hereinafter called the Act, but declining to order any refund of
the taxes paid. In 1954 Assam Taxation (on Goods carried by Road or
Inland Waterways) Act was first enacted. This Court struck down the
Act as ultra vires the Constitution of India. See Atiabari Tea Co. Ltd.
v. The State of Assam & Ors., AIR 1961SC232. On 6th of April, 1961
G a new Act passed received the assent of the President. The High Court
again struck down the Act declaring it ultra vires the Constitution on
1.8.63. On 13.12.63 Khyerbar Tea Co. Ltd. & another v. State of
Assam, [1964 I 5 SCR 975 in a challenge to the Act under Article 32 of
the Constitution, this Court held the Act to be intra vires. On 19th
December, 1966, Judgment was passed in Civil Rule No. 190/1965. On
H Ist April 1968, the appeals preferred by the State of Assam against the
SALON AH TEA CO. v. SUPDT. OF TAXES NOWGONG [MUKHARJI, J.] 479

..-\ High Court order dated 13.12.63 were allowed on the basis of the A
declaration of the Act to be intra vires the Constitution. Thereafter
...j notices were issued by Superintendent of Taxes, Nowgong, requiring
the appellant under section 7(2) of the Act to submit returns for the
period ending 30.6.61, 30.9.61, 31.12.61 and 31.3.62. Returns were
duly filed. Assessment Orders were passed under section 9(3) of the
said Act. On !Oth July, 1973, the High Court passed judgment in B
,.~ Loong Soong Tea Estate, (Civil Rule No. 1005 of 1969) declaring the
\ assessment as without jurisdiction. It is the case of the appellant-peti-
.oner that in view of the above judgment, the appellant came to know
. bout the mistake in paying the tax as per assessment order and also
hat the appellant became entitled to refund of the amount paid. The
/ present Writ Petition was filed in November, 1973 before the High C
' Court of Assam. Thereafter in June, 1976, the learned Single Judge of
)...- the High Court referred the matter to a larger Bench. The Division
Bench on June 14, 1979, passed judgment setting aside the orders and
" notices of demand but refused relief of refund claimed by the appel-
lant.
D
> Aggrieved thereby. the appellant has preferred the present appe-
als. The appellant-petitioner claimed in all these petitions that the
assessments were illegal and prayed that directions be given to the
respondents to refund the tax collected in pursuance of those orders.

r The Legislature of Assam passed the Act, as mentioned herein- E
before in 1954 called the Assam Taxation (on Goods carried by Road
·and Inland Waterways) Act, 1954 which purported to levy tax on
>·1 manufactured tea and jute carried by road and inland waterways. The
'>'\ Act was declared ultra vires the Constitution by this Court in Atiabari
case (supra) on the ground that previous sanction of the President was
not taken. Thereafter the Legislature passed the Act which received F
'If the assent of the President on 6.4.61. The validity of the Act was also
challenged and the High Court declared that Act to be ultra vires on
lst August, 1963. Against the judgment and order passed by the High
Court, the State of Assam and other respondents preferred appeals
before this Court. In the meantime, M/s Khyerabari Tea Co. Ltd.
--. challenged the provisions of the Act directly before this Court by filing G
an application under Article 32 of the Constitution and this Court in its
~ judgment dated 13.12.63 held the Act to be intra vires. Following the
aforesaid decision of this Court, the appeals filed by the State of
Assam and others against, the judgment of the High Court were
allowed by this Court on ttie lst April, 1968. It was after this decision
that the respondents required the appellant by a notice under section H
480 SUPREME COURT REPORTS [1988] 2 S.C.R.

7(2) of the Act issued on 8.7.68 to submit returns for four periods
-~
A mentioned hereinbefore. Due to penal consequences mentioned in the
said notices in the event of failure to file return and pay the truces, the -'1-
appellant filed return on July 11, 1968 and paid the various truces.

In the judgment under appeal after elaborate discussion, the
B High Court came to the conclusion that when a petitioner approaches
the High Court with the sole claim for refund of money by writ of
mandamus, the same is normally not granted but where the refund is
prayed as a consequential relief the same is normally entertained if
there is no obstruction or if there be no triable issue like that a
limitation which could not be conveniently tried in writ petition.

c .,
In this case indisputably it appears that true was collected without
the authority of law. Indeed the appellant had to pay the true in view of
~
the notices which were without jurisdiction. It appears that the assess-
ment was made under section 9(3) of the Act. Therefore, it was with-
out jurisdiction. In the premises it is manifest that the respondents had
D no authority to retain the money collected without the authority of law
and as such the money was liable to refund.

The only question.that falls for consideration here is whether in

E
an application under Article 226 of the Constitution the Court should
have directed refund. It is the case of the appellant that it was after the ·
judgment in the case of Loong Soong Tea Estate the cause of action
1
arose. That judgment was passed in July 1973. It appears thus that the
High Court was in error in coming to the conclusion that it was possi- ....
ble for the appellant to know about the legality of the true sought to be 1
imposed as early as 1963, when the Act in question was declared ultra j /
vires as mentioned hereinbefore. Thereafter the taxes were paid in
F 1968. Therefore the claim in November, 1973 was belated. We are ~
unable to agree with this conclusion. As mentioned hereinbefore the
question that arises in this case is whether the Court should direct
refund of the amount in question. Courts have made a distinction
between those cases where a claimant approaches a High Court seek-
ing relief of obtaining refund only and those where refund is sought as
G a consequential relief after striking down of the order of assessment +-
etc. Normally speaking in a society governed by rule of law taxes ~
should be paid by citizens as soon as they are due in accordance with
law. Equally, as a corollary of the said statement of law it follows that
taxes collected without the authority oL law as in this case from a
citizen should be refunded because no State has the right to receive or
H to retain taxes or monies realised from citizens without (he authority of
law.
SALONAHTEACO. v. SUPDT. OFTAXESNOWGONG [MUKHARJI,J.l 481

In Suganmal v. State of Madhya Pradesh and Others, AIR 1965
A
SC 1740, this Court held that the High Courts have power to pass any
appropriate order in the exercise of the powers conferred on them
under Article 226 of the Constitution. A petition solely praying for the
issue of a writ of mandamus directing the State to refund the money
alleged to have been illegaly collected by the State as tax was not
ordinarily maintainable for the simple reason that a claim for such a B
refund can always be made in a suit against the authority which had
illegally collected·the money as a tax and in such a suit it was open to
the State to raise all possible defences to the claim, defences which
cannot in most cases,, be appropriately raised and considered in the
exercise of writ jurisdiction. It appears that Section 23 of the Act deals
with refund. In the facts of this case, the case did not come within C
section 23 of the Act. But in the instant appeal, it is clear as the High
Court found in our opinion rightly that the claim for refund was a
consequential relief.

In Tilokchand Motichand & Ors. v. H.B. Munshi & Anr., [1969)
2 S.C.R. 824, claimants in that case contended that they did pay taxes D
under section 21( 4) of the Bombay Sales Tax Act, 1953 which was ultra
vires on the particular ground on which it was struck down by this
Court. On 28th. March, 1958 the petitioners in that case filed a writ
'petition in the High Court and contended that section 21(4) of the said

r Act was ultra vires the powers of the State Legislature and was viola-
tive of Articles 19(1)(f) and 265 of the Constitution. The single Judge E
of the High Court dismissed the petition on the ground that the
petitioners defrauded their customers and so were not entitled to any
relief even if there was a violation of fundamental rights. The appellate
bench of the High Court dismissed the appeal on the ground that it
would not interfere with the discretionary order of the single Judge.
Thereafter, it appears that on December 24, 1958, the Collector F
attached the properties of the petitioners for recovering the amount as
arrears of land revenue and the petitioners paid the amount in instal-
ments between August 1959 and August 1960. On September 29, 1967
this Court in Kantilal Babulalv. H.C. Patel, 21 S.T.C. 174 struck down
section 12A(4) of the Bombay Sales Tax Act, 1946 corresponding to
section 21(4) of the 1953 Act, on the ground that it was violative of G
Article 19( l}(f) of the Constitution inasmuch as the power conferred
by the section was unguided, uncanalised and uncontrolled and so was
not a reasonable restriction on the fundamental right guaranteed
under that Article. On the assumption that section 21(4) of the 1953
Act was also liable to be struck down on the same ground, on February
9, 1968, the petitioners therein filed a writ petition under Article 32 of H
482 SUPREME COURT REPORTS [1988] 2 S.C.R.

A the Constitution claiming a refund of the amount. The petitioners
contended that they did not know that the section was ultra vires on the
particular ground on which this Court had struck it down and they had
paid the amounts under coercion or mistake, that the mistake was
discovered on September 29, 1967 (the date of the judgment of this
Court) and that they were entitled to the refund under section 72 of the
B Indian Contract Act, 1872.

It was held by the majority that the petition should be dismissed
on the ground of !aches. Hidayatullah, C.J. held that Article 32 gave
the right to move the Court by appropriate proceedings for enforce-
ment of fundamental rights and the State cannot place any hindrance in
C the way of an aggrieved person. But once the matter had reached this
Court, the extent or manner of interference is for this Court to decide.
(emphasis supplied). The Chief Justice reiterated that this Court had
put itself in restraint in the matter of petitions under Article 32. For
example, this Court, reiterated the Chief Justice, refrained from acting
under the Article if the party had already moved the High Court under
D Article 226 and if the High Court had exercised its parallal jurisdic-
tion. It was said in such a case, the Court would not allow fresh pro-
ceedings to be started under Artide 32 but would insist on the decision
of the High Court being brought before it on appeal. Similarly, in
inquiring into belated and stale claims, this Court should take note of
evidence of neglect of the petitioner's own rights for a long time or of
E the rights of innocent parties which might have emerged by reason of
the delay. The Chief Justice emphasised that it was not possible for
this Court to lay down any specific period as the ultimate limit of action
and each case will have to be considered on its own facts. A petition
under Article 32 was neither a suit nor an application to which the
Limitation Act applied. Further, putting curbs in the way of enforce-
F ment of fundamental rights through such legislative action might be
questioned un\ler Article 13(2) for, if a short period of limitation was
prescribed the fundamental right might be frustrated. Therefore, for
the matter of relief in each case, this Court had to exercise its descre-
tion from case to case and where there was appearance of an avoidable
delay and the delay affected the merits of the claim, this Court held the
G party disentitled to invoke its extraordinary jurisdiction. In the facts of
that case, the majority Judges .found that by his own conduct, the
petitioner had abandoned his own litigation years ago and the Court
would not apply the analogy of the Article in the Limitation Act in
cases of mistake of law and give him relief.

H Bachawat, J. in. a concurring judgment observed that the normal
SALONAH TEA CO. v. SUPDT. OF TAXES NOWGONG IMUKHARJI, J.] 483

remedy for recovery of money paid to the State under coercion or A
mistake of law is by suit. The right to move this Court for enforcement
of fundamental rights was guaranteed by Article 32, and no period of
limitation was prescribed for such a petition. Bachawat, J. reiterated
that the writ issues as a matter of course if a breach of a fundamental
right is established, but this did not mean that in giving relief under the
Article this Court might ignore all laws of procedure. The extraordi- B
nary remedies under Articles 32 and 226 of the Constitution, said
Bachawat, J ., are not intended to enable a claimant to recover monies
the recovery of which by suit is barred by limitation. In the absence of
;my rules of procedure under Article 145(1)(c), the Court may adopt
any reasonable rnle. Bachawat, J. emphasised that for example, the
Court will not allow a petitioner to move this Court under Article 32 C
on a petition containing misleading and inaccurate statements. Simi-
larly, the general principles of res judicata were applied where applic-
able on grounds of public policy. Bachawat, J. emphasised that where
the remedy in a writ application under Article 32 or Article 226 cor-
responded to a remedy in an ordinary suit and the latter remedy was
subject to the bar of a statute of limitation, the Court imposed on D
analogy the same limitation on the summary remedy in the writ jurisd-
iction even though there was no express statutory bar of !imitation, on
grounds of public policy and on the principle that the laws aid the
vigilant and not those who slumber. Mitter, J. more or less expressed
the same view.
E
Sikri, J. allowed the appeal because he was of the opinion that
the petitioners were under a mistake of law, the mistake was dis-
-1 covered, like all assessees, when the Court struck down section UA(4)
'""' of the 1946 Act and they came to this Court within six months of that
date and hence there was no delay.
F
Hegde, J. allowed the petition. He was of the opinion that in the
facts of that case, there was no delay .. He observed that mere impres-
sion of a party that a pnwision of law might be ultra vires cannot be
equated to knowledge that the provision was invalid.

Under Article 113 of the Limitation Act, 1963 the limitation was G
,_ the period of three years from the date the right to sue accrues. It may
" be noted that in the instant case under section 23 of the Act, it was
provided that the Commissioner shall, in the prescribed manner
refund to a producer or a dealer any sum paid or realised in excess <!f
the sum due from him under this Act either by case or, at the option bf
the producer or dealer, be set off against the sum due from him' in H
484 SUPREME COURT REPORTS [1988] 2 S.C.R.

A respect of any other period. Section 23 applies only in a case where
money is paid under the Act. If there is no provision for realisation of
the money under the Act, the act of payment was ultra vires, the
money had not been paid under the Act. In that view of the matter
section 23 would not apply.
B
The High Court in the instant case after analysing the various
decisions came to the conclusion that where a petitioner approached
the High Court with the sole prayer of claiming refund of money by
writ of mandamus, the same was normally not granted but where the
refund was prayed as a consequential relief the same was normall
entertained if there was no obstruction or if there was no triable issue
c like that of limitation. We agree that normally in a case where tax or
money has been realised without the authority of law, the same should
be refunded and in an application under Article 226 of the Constitu-
tion the Court has power to direct the refund unless there has been
avoidable !aches on the part of the petitioner which indicate either the
D abandonment of his claims or which is of such nature for which there is
no probable explanation or which will cause any injury either to
respondent or any third party. It is true that in some case the period of "
three years is normally taken as a period beyond which the Court
should not grant relief but that is not an inflexible rule. It depends
upon the facts of each case. In this case, however, the High Court
E refused to grant the relief on the ground that when the section was
declared ultra vires originally that was the time when refund should
have been claimed. But it appears to us, it is only when the Loong
Soong case was decided by the High Court in 1973 that the appellant
became aware of his crystal right of having the assessment declared r
ultra vires and in that view of the matter in October, 1973 when the)..,,-/
F judgment was delivered in July, 1973 the appellant came to know thai
there is mistake in paying the tax and the appellant was entitled to )
refund of the amount paid. That was the time when the appellant came
to know of it. Within a month in November 1973 the present petition
was filed. There was no unexplained delay. There was no fact indi-
cated to the High Court from which it could be inferred that the
G appellant had either abandoned his claims or the respondent had
changed his position in such a way that granting relief of refund would ->-
cause either injury to the respondent or anybody else. On .the other ~
hand, refunding the amount as a consequence of declaring the assess-
ment to be bad and recovery to be illegal will be in consonance with
justice, equity and good conscience. We are, therefore of the view that
H the view of the High Court in this matter cannot be sustained.
SALONAH TEA CO. v. SUPDT. OFTAXES NOWGONG [MUKHARJI, J.l 485

)- Chandra Bhushan & Anr. v. Deputy Director of Consolidation
(Rerfrmal), U.P. & Ors., [1967] 2 S.C.R. 286 was a case where this A
Co . : . ,••served that the High Court erred in exalting a rule of practice
ink . ,.,, e of limitation and rejecting the perition of the appellant for
refund without considering whether the appellant was guilty of !aches
and undue delay. Shah, J. delivering the judgment of the Court
~-observed that the primary question in each case is whether the applic- B
ant had been guilty of !aches or undue delay. ·

Reference may be made in this connection to R.L. Kapur v. State
of.Madras, [1972] 3 S.C.R. 417. There the ·question arose about
punishing for contempt. The jurisdiction conferred on the High Court
under Article 215 of the Constitution to punish for contempt of itself
~ was a special one, not arising or derived from the Contempt of Courts c
Act, 1952, and therefore, not within the purview of the Penal Code.
Such a position is also clear from the provisions of the Contempt of
Courts Act. The effect of section 5 of that Act was only to widen the
scope of the existing jurisdiction of a special kind and not conferring a
n.ew jurisdiction. So far as contempt of the High Court itself is con- D
cerned, as distinguished from that of court subordinate to it, the Con-
~ stitution vested these rights in every High Court, and so no Act of a
legislature could take away that jurisdiction and confer it afresh by
virtue of its own authority. That being the position, this Court held
that section 25 of the General Clauses Act would not apply.
E
·2(- Similarly, it appears to us that this was a tax realised in breach of
the section, the refund being of the money realised without the author-
ity of law. The realisation is bad and there is a concomitent duty to
.~. refund the realisation as a corollary of the constitutional inhibitation
that should be respected unless it causes injustice or loss in any specific
case or violates any specific provision of law.. F

In that view of the matter in the facts of this case we are of the
opinion that the money was refundable to the appellant. The appellant
had proceeded dilig£'ntly. There is nothing. to indicate that had the
appellant been more diligent, the appellant fould have discovered the
constitutional inhibition in 1966. The position is not clear even if there G·
-t' is any triable issue. The position becomes clearer only after the deci-
sion in Loong Soong's case as mentioned hereinbefore.

Our attention was drawn on behalf of the respondents that under
section 16 of the Act an appeal lay in the prescribed manner within
thirty days from the date of service of any order of assessment but the H
486 SUPREME COURT REPORTS (1988) 2 S.C.R.

A challenge to the assessment on the ground that the assessment was bad
could not be made in an appeal under the Act because the right to
appeal being a creature of the Act, if the Act is ultra vires that right
would not enure to the benefit of the appellant.

In State of Madhya Pradesh v. Bhailal Bhai & Ors., (1964) 6
B S.C.R. 261 this Court had occasion to consider what was unreasonable
delay in moving the court when tax was paid under a mistake. There
the respondents were dealers in tobacco in the State of Madhya
Bharat. The State had imposed sales tax on the sale of imported
tobacco by the respondents. But no such tax was imposed on the sal
of indigenous tobacco. The respondents filed writ petitions under Arti-
e cle 226 of the Constitution for the issue of writ of mandamus directing
the refund of sales tax collected from them. They contended that the
impugned tax was violative under Article 301(a) of the Constitution
and they paid the tax under a mistake of law and the tax so paid was
refundable under section 72 of the Indian Contract Act, 1872. The
appellant contended that there was no violation of Article 301 of the
D Constitution, and even if there was such violation the tax came within A

the special provision under Article 304(a) of the Constitution and the
High Court had no power to direct refund of tax already paid and in
any event the High Court should not exercise its discretionary power
of issuing a writ of mandamus directing this to be done since there was
unreasonable delay in filing the petition. The High Court rejected all ~
E the contentions of the appellant and a writ of mandamus was issued as
prayed for. It was held that tax was violative under Article 301 of the
Constitution. But it was held that even though the tax contravened ,._
Article 301 of the Constitution, it was valid if it came within the saving.
provisions of Article 304 of the Constitution. Tobacco manufactured Y
or produced in the appellant State, similar to the tobacco importea'
F from outside had not been subjected to the tax and therefore the tax )
was not within the saving provisions of Article 304(a) of the Constitu-
tion. It was reiterated that the tax which had already been paid was so
paid under a mistake of law under section 72 of the Indian Contract
Act. The High Courts had power for the purpose of enforcement of·
fundamental rights and statutory rights to grant consequential reliefs
G by ordering repayment of money realised by the Government without +-
the authority of law. It was reiterated that as a general rule if there has -4
been unreasonable delay the court ought not ordinarily to lend its air
to a party by the extraordinary remedy of mandamus. Even if there is
no such delay, in cases where the opposite party raises a prima facie
issue as regards the availability of such relief on the merits on grounds
H like limitation the Court should ordinarily refuse to issue the writ of
SALONAH TEA CO. v. SUPDT. OF TAXES NOWGONG [MUKHARJI, J.] 487

mandamus. Though the provisions of the Limitation Act did not as
A
such, it was further held, apply to the granting of relief under Article
226, the maximum period fixed by the legislature as the time within
which relief by a suit in a Civil Court must be claimed may ordinarily
be taken to be a reasonable standard by which delay in seeking remedy
under Article 226 could be measured. The Court might consider the
delay unreasonable even if it is less than the period of limitation pre- B
scribed for a civil action for the remedy. Where the delay is more than
that period it will almost always be proper for the court to hold that it
is unreasonable. The period of limitation prescribed for recovery of
_money paid by mistake under the Limitation Act was three years from
the date when the mistake was known .• In this case knowledge is
attributable from the date of the judgment in Loong Soong's case on
IOth July, 1973 and there being a statement that the appellant came c
to know of that fact in October, 1973 and there being no denial by the
averment made on this ground, the High Court, in our opinion, in the
instant case was in error in presuming that there was a triable issue on
this ground and refusing to grant refund.
D
In Ramachandra Shankar Deodhar & Ors. v. The State of
Maharashtra & Ors., [1974] 2 S.C.R. 216, in a different context, it was
observed that !aches or existence of alternative remedy may be ground
for not granting relief. But in view of the facts of this case, it is not
necessary to deal with that case in any detail.
E
In A. V. Venkateswaran, Collector of Customs, Bombay v.
Ramchand Sobhraj Wadhwani and another, [1962] 1 S.C.R. 753 this
Court held that the High Court was in error in its view that though the
respondent had failed to exercise his statutory remedy, the fact that it
had become time-barred at the date of the hearing of the appeal
against the order in the petition under Article 226, was a good ground F
for the Court tO exercise its discretion in granting the relief prayed for
by the respondent in his petition.

Learned counsel drew our attention to Rule 55 of the Act where
it was stated that no claim to any refund shall be allowed unless it was
made within one year from the date of the original order of assessment G
or within one year of the final order passed on appeal or revision as the
case may be, in respect of such assessment. It was contended on behalf
of the respondents that here a fixed period of limitation was prescribed
and by virtue of Article 226 of the Constitution, we should not allow to
subvert that ruJe. This principle, in our opinion, in view of the fact that
the rule was unconstitutional will have no application. H
488 SUPREME COURT REPORTS [1988] 2 S.C.R.
A In Shiv Shanker Dai Mills etc. etc. v. State of Haryana & Ors.
etc., 11980] 1S.C.R.1170 Krishna Iyer, J. speaking on behalf of him-
self as well as on behalf of R.S. Pathak, J. as the learned Chief Justice
then was and A.D. Koshal, J. observed that where public bodies.under
colour of public laws recover people's money, later discovered to be
B erroneous levies, the dharma of the situation admits of no equivoca-
tion. There was no law of limitation especially for public bodies on the
virtue of returning what was wrongly recovered to whom it belongs. In
our jurisprudence it is not palatable to tum down the prayer for high
prerogative writs on the negative plea of alternative remedy, since the
root principle of law married to justice, is ubi jus ibi remedium. Hi'!.
Lordship observed as follows:
c
"Since the root principle of law married to justice, is ubi jus
ibi remedium. Long ago Dicey wrote:

'The law ubi jus ibi remedium, _becomes from this
Point of view something more important than a mere
tautological proposition. In its bearing upon constitu-
tional law, it means that the Englishmen whose
labours gradually formed the complicated set of laws
and institutions which we call the Constitution, fixed
their minds far more intently on providing remedies
E for the enforcement of particular rights or for avert-
ing definite wrongs, than upon any declarations of the
Rights of Man or Englishmen ... The Constitution of
the United States and the Constitutions of the sepa-
rate States are embodied in written or printed docu-
ments, and contain declaration of rights. But the
F statesmen of America have shown an unrivalled skill
in providing means for giving legal security to the
rights declared by American Constitutions. The rule
of law is as marked a feature of the United States as
of England.

G Another point. In our jurisdiction, social justice is a
pervasive presence; and so, save in special situations it is
fair to be guided by the strategy of equity by asking those
who claim the service of the judicial process to embrace the
basic rule of distributive justice, while moulding the relief,
by consenting to restore little sums, taken in little transac-
H tions, from little persons, to whom they belong."
SALONAHTEACO. v. SUPDT. OF TAXES NOWGONG [MUKHARJI, J.] 489

We are in respectful agreement with this approach. A

-· In State of Madhya Pradesh and others etc. etc. v. Nandlal Jaiswal
and others etc. etc., A.I.R. 1987 S.C. 251 this principle was reiterated
by Bhag\Vati, C.J. that it was well settled that the power of the High
Court to issue an appropriate writ under Article 226 of the Constitu-
B
tion was discretionary and the High Court in the exercise of its discre-
tion did not ordinarily assist the tardy and the indolent or the acquies-
cent and the lethargic. If there was inordinate delay on the part of the
petitioner in filing a writ petition and such delay was not satisfactorily
_explained, the High Court might decline to intervene and grant relief
in the exercise of its writ jurisdiction. The evolution of this rule of
!aches or delay was premised upon a number of factors. The High c
Court did not ordinarily permit a belated resort to the extraordinary
remedy under the writ jurisdiction because it was likely to cause confu-
sion and public inconvenience and bring in its train new injustices. It
was emphasised that this rule of !aches or delay is not a rigid rule which
can be cast in a straitjacket formula. There may be cases where despite
delay and creation of third party rights the High Court may still in the D
exercise of its discretion interfere and grant relief to the petitioner.
But where the demand of justice is so compelling that the High Court
would be inclined to interfere in spite of delay or creation of third
party rights would by their very nature be few and far between. Ulti-
mately it would be a matter within the discretion of the Court; ex
hypothesi every discretion must be exercised fairly and justly so as to E
promote justice and not to defeat it. We are in respectful agreement

.. , with this approach also .

' In this case looked at from one point of view, it is only on the
~\delivery of the judgment in Loong Soong's case in 1973, the appellant
realised the right to claim the relief of refund as a consequential relief, F
setting aside the assessment and the assessment was set aside by the
very order itself in this case. That right has been granted by the High
Court, the High Court has not refused the setting aside on the ground
of delay. It would be inconsistent for the High Court to refuse to grant
consequential relief after setting aside the assessment. If the realisa-
.__, tion was without the authority of law and that was declined by the High G
Court by the judgment in this case which claimed also the consequen-
~ tial relief, that relief must automatically follow and the High Court was
wrong in taking the view that a triable issue of limitation arises in this
case. In the absence of any averment to the contrary, the averment of
the appellant in the petition that they came to know only after the
Loong Soong's case must be accepted. The High Court was wrong in H
490 SUPREME COURT REPORTS [1988] 2 S.C.R.

A contending that they should have been more diligent. After all the
discretion must be fair and equitable. In the facts of this case, we are of
the opinion that the High Court was in error in the approach it took.
We, therefore, set aside the judgment and order of the High Court and
direct refund of the tax illegally realised by the respondent.
B The appeals are allowed. We set aside the judgment and order to
the extent that it refused refund of the tax illegally realised. In the facts
of this case the parties will pay and bear their own costs.

S. RANGANATHAN J. I agree with the order proposed by my
learned brother but would like to add a word of reservation.
c
2. In view of the judgment of this Court in Superintendent of ·
Taxes v. Onkannal Nathmal Trust, [1975] Supp SCR 365, there can be
no doubt that the assessments on the appellants were illegal and that'
the taxes demanded on the basis thereof had been collected without
the authority of law from the appellants. The appellant's contention is
D that they had paid the taxes under a mistake of law and are entitled to
seek refund thereof. It is difficult to see how the High Court could
have allowed the appellant's prayer for quashing the assessments but
refused the prayer for the refund of the illegally collected taxes. The
appeals have, therefore, to be allowed.

E 3. Counsel for the respondents, however, places strong reliance
on the following observations of a Constitution Bench of this Court in
State of M.P. v. Bhailal Bhai, [1964] 6 SCR 261:

"Though the provisions of the Limitation Act do not, as ';-/
such, apply to the granting of relief under Art. 226, the
F maximum period fixed by the Legislature as the time within )
which relief by a suit in a Civil Court must be claimed may
ordinarily be taken to be a reasonable standard by which
delay in seeking remedy under Art. 226 could be measured
xxxx
G Where the delay is more than that period it will
almost always be proper for the Court to hold that it is
unreasonable."

He also relies on Cawasji & Co. v. State, [1975] 2 SCR 511 and drawn.
our attention to the decision in Vallabh Glass Works v. Unfon, [1984] 3
H SCR 180 where the claim for refund in respect of a period beyond
SALONAH 1EA CO. v. SUPDT. OF TAXES NOWGONG (RANGANA1HAN J.] 491
,{
three years was rejected. He contends, on the strength of the above A
decisions, that the High Court rightly rejected the appellants' claims
_, for refund.

4. On the other hand, it is contended for the appellants that a
writ petition seeking refund of taxes collected without the authority of
law cannot be rejected on the ground of limitation or delay unless such B
delay can be said to amount to !aches or has caused some irreparable
prejudice to the opposite party or some other like forceful reason
exists. Counsel refers in this context to Venkateswaran v. Ramchand,
~[19621 1 SCR 75; Chandra Bhushan v. Deputy Director, [1967] 2 SCR
286; Tilokchand Motichand v. Munshi, [1969] 2 SCR 824; Rama-
chandra S. Deodhar v. State, [1974] 2 SCR 216; Joginder Nath v. c
Union, [1975] 2 SCR 553; Shivshankar Dai Millsv. State, [1980] 1 SCR
>- 1170 and State of M.P. v. Nand/a/ Jaiswal, AIR 1987 SC 251 and
contends that these decisions have qualified the observations of Das
Gupta, J. in Bhailal Bhai's case.

5. As pointed out by my learned brother, in the present case, the D
appellants' averment that they realised their mistake only when they
came to know about the decision in the Loong Soong Tea Estate case in
July 1973 stands uncontroverted. There is nothing on record either to
show that the appellants had realised their mistake even earlier, at
about the time when the writ petition in the Loong Soong Tea Estate
case was filed or at the time when the earlier decision of 1966 referred E
in the Loong Soong Tea Estate case judgment was rendered. On this
finding of fact, the writ petitions, filed by the appellants in November
.. ·1 1973, were filed within the period of limitation prescribed in Article
113 read with s. 23 of the Limitation Act, 1963. Thus the petitions were
\...:• within time even by the test enunciated in Bhailal Bhai's case .
F
• 6. I think, therefore, that, for the purposes of the present case, it
is unnecessary to consider the larger question whether the bar of limi-
tation should be considered as fatal to a writ petition as to a suit for
recovery or whether it is only a relevant but not conclusive factor that
should be taken into account by the court in exercising a discretion.
.,. G
P.S.S. Appeals allowed.
~