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2002 DIGILAW 135 (CAL)

Vinod Somani v. Calcutta Municipal Corporation

2002-02-28

Barin Ghosh

body2002
JUDGMENT Barin Ghosh, J. Calcutta Municipal Corporation Taxation Regulations (1989) permitted the Calcutta Municipal Corporation to collect mutation fees in the manner and to the extent prescribed in the said Regulations. The mutation fee, according to the said Regulation, is payable by the person seeking mutation. The petitioner sought mutation and, accordingly, paid mutation fees on the basis of the said Regulations on 20th May, 1997. While making the said payment, the petitioner did not raise any dispute as to his obligation to pay the same. 2. Shrey Mercantiles Pvt. Ltd. filed a writ petition in this Court, which was registered as W.P. No. 1394 of 1997. In that Shrey Mercantiles Pvt. Ltd. questioned the constitutional validity of the said Regulations. A learned Single Judge while dealing with the said writ petition held by a judgment dated 31st January, 2000 that the said Regulation is ultra vires the Constitution, and, accordingly, is unconstitutional and of no effect. I am told that an appeal was preferred against the said judgment of the learned single Judge and the Appellate Court also confirmed the said judgment and now the matter is pending before the Supreme Court. I am told that since after the judgment of the learned Single Judge dated 31st January, 2000 there had been no stay of the operation of the said judgment in that view of the matter, on and from 31st January, 2000 it must be deemed that the said Regulation was not in existence ever. In that view of the matter, without having any obligation to pay, the petitioner paid the mutation fees and, accordingly, the petitioner contends that he, having paid the same without having any obligation to pay the same in law, is entitled to recover the same in view of section 72 of the Contract Act or in view of the provisions contained in Articles 265 of the Constitution. For that purpose, the present writ petition has been filed. 3. A Bench of Supreme Court comprising of seven Hon'ble Judges in the case of Sales Tax Officer vs. Kanhaiyalal, reported in AIR 1959 SC 135 , declared the law on the subject. In that case, Kanhaiyalal, a partnership firm, entered into certain forward contracts in silver bullion at Banaras in the assessment years 1948-49, 1949-50 and 1950-51. 3. A Bench of Supreme Court comprising of seven Hon'ble Judges in the case of Sales Tax Officer vs. Kanhaiyalal, reported in AIR 1959 SC 135 , declared the law on the subject. In that case, Kanhaiyalal, a partnership firm, entered into certain forward contracts in silver bullion at Banaras in the assessment years 1948-49, 1949-50 and 1950-51. The forward transactions were brought to tax under assessment orders dated 31st May, 1949, 30th October, 1950 and 22nd August, 1951 respectively. On 27th February, 1952 the Allahabad High Court held in Budh Prakash Joy Prakash vs. STO, reported in AIR 1952 Allahabad 764, that the provisions of the Uttar Pradesh Sales Tax Act (Taxing of Forward Contracts) were ultra vires the Uttar Pradesh Legislature. Kanhaiyalal thus applied for refund of tax paid by it basing the claim on the said judgment of the Allahabad High Court. It was declined by the Commissioner of Sales Tax and thereupon Kanhaiyalal filed a writ petition in Allahabad High Court seeking quashing of the said three assessment orders and for a direction to refund the tax collected. Meanwhile, the judgment of the Allahabad High Court was affirmed by the Supreme Court in STO vs. Budh Prakash Joy Prakash, reported in AIR 1954 SC 459 . The writ petition filed by Kanhaiyalal was allowed by a learned Single Judge which was upheld by the Division Bench. The matter was then taken up before the Supreme Court. The Supreme Court upheld the decision of the Division Bench. By reason thereof, since 1959 law, as was declared by the Supreme Court, was that a person can take advantage of the success of another in the event, such success tantamounts to quashing of the provisions of the law under which such tax had been collected and, accordingly, every person is entitled to claim refund of the amount paid by way of tax collected under such unconstitutional provision of law. In Mafatlal Industries Ltd. vs. Union of India, reported in 1997(5) SCC 536 , the validity of the principles of law enunciated in Kanhaiyalal (supra) had been questioned before the Supreme Court. In Mafatlal Industries Ltd. vs. Union of India, reported in 1997(5) SCC 536 , the validity of the principles of law enunciated in Kanhaiyalal (supra) had been questioned before the Supreme Court. In Mafatlal(supra) the majority members of the Bench, which comprised of nine Hon'ble Judges, held that where a refund is claimed on the ground that the provision of the Act under which it was levied is or has been held to the unconstitutional, such a claim being a claim outside the purview of the enactment can be made either by way of suit or by way of a writ petition, but the sustainability of such claim is, however, subject to an exception that where a person approaches the High Court or the Supreme Court challenging the Constitutional validity of a provision but fails, he cannot take advantage of the declaration of unconstitutionality obtained by another person on another ground and that is for the reason that so far as the unsuccessful person is concerned, the decision rendered in his case has become final and cannot be reopened on the basis of a decision given in another person's case. The Court further clarified that it is not open to any person to make a claim for refund on the basis of a decision of a Court or Tribunal rendered in the case of another person. The learned counsel for the petitioner contended that this clarification must be restricted to those cases where the refund is not claimed on the basis of declaration of law that the taxing law as such is unconstitutional. For that purpose, the learned counsel has drawn my attention to paragraphs 3 to 6 and then to 26 to 32 of the reported decision. For that purpose, the learned counsel has drawn my attention to paragraphs 3 to 6 and then to 26 to 32 of the reported decision. As I have understood the judgment of the Supreme Court in Mafatlal Industries case, it appears to me that the pronouncement of law is that when payment is made under a valid statute and subsequently such statute is declared to be unconstitutional that gives a right to the person to claim refund both under Article 265 of the Constitution and also under section 72 of the Contract Act, inasmuch as when a decision would render the taxing law totally obliterated and, accordingly, it would have effect from the date of collection of such tax and, as such, the person to be successful in such a decision would be given the benefit of such declaration, but a person who remained in the fence and did not challenge his liability to pay tax which has been paid by him cannot, after payment of the same, on the knowledge that another person has been successful in obliterating the law, seek to claim refund either under section 72 of the Contract Act or under Article 265 of the Constitution. If for a declaration given later the taxing law is altogether effaced the person who has lost earlier would not get refund, but the person who never thought that the taxing law is bad would get the refund is not acceptable. Thus according to me it has been pronounced by the Supreme Court that if a person claims that the decision of the Court or Tribunal in another case has made him to discover the mistake of law under which he has paid the tax, he can claim refund and can pursue such claim by preferring a writ petition or by instituting a suit within three years of such alleged discovery of mistake of law, but then he can do so provided he had objected to such payment at the time of making such payment. In this connection reference may be had to section 21 of the Contract Act, 1872 which says that a contract is not voidable because it was caused by a mistake as to any law in force in India. Then again, in terms of section 23 of the Indian Contract Act, the consideration or object of an agreement is lawful unless it is forbidden by law. Then again, in terms of section 23 of the Indian Contract Act, the consideration or object of an agreement is lawful unless it is forbidden by law. Thus in terms of illustration given in section 21 of the Indian Contract Act if A and B make a contract grounded on the erroneous belief that a particular debt is barred by the Indian Law of Limitation, though the contract is not voidable and accordingly even if money has been paid thereunder, that is not recoverable. Therefore, when money is paid to the State on the erroneous belief that a particular tax is payable, the money so paid by way of tax is not recoverable. A person seeking refund must, therefore, first object at the time of payment and then fight his battle and must succeed or fail in such proceedings, otherwise there will be total anarchy in the administration of law. A person who has challenged and had been unsuccessful, though the matter was dealt with subsequently in another matter either by the High Court or by the Supreme Court, as the case may be, would not be entitled to get the benefit of such subsequent pronouncement of the High Court or of the Supreme Court, for the lis for refund launched by him has reached finality, but a person who had not disputed his obligation to pay at any time and had not taken any step whatsoever at any point of time but after declaration of law would come and claim a refund after 10,20 and 30 years, that cannot be the law and, accordingly, in my reading the Supreme Court has pronounced in Mafatlal's case that unless the person is successful in his lis in which the law has been declared ultra vires or unless he has launched such a proceeding claiming a declaration that the law is ultra vires, he cannot seek refund. As such, there is nothing further to be done in the instant case and, accordingly, the writ petition is dismissed. 4. All parties are to act on a xerox signed copy of this dictated order on the usual undertaking. Writ petition dismissed.