Orissa High Court
P. Rama Rao And Sons And Ors. vs State Of Orissa on 4 August, 1989
Equivalent citations: [1990]77STC303(ORISSA)
Author: A. Pasayat
Bench: A. Pasayat
JUDGMENT A. Pasayat, J.
1. Although these three applications have been filed by three different assessees and for different assessment years, the point in dispute being common they are disposed of by this common judgment.
2. The petitioners are dealers registered under the provisions of the Orissa Sales Tax Act, 1947 (for short "the Act") and the Orissa Sales Tax Rules, 1947 (for short "the Rules"). They challenge the orders of reassessment made under Section 12(8) of the Act, questioning the correctness, propriety, legality and validity of levy of tax at different rates on "cement" and "white cement", and at different points of taxation. The power of the State Government to impose tax on "white cement" at a rate different from "cement", and at a different point of taxation with effect from 1st April, 1978, is also questioned. Since the points for adjudication are questions of law, we do not feel it necessary to delve into the factual tangle. The factual position as is absolutely necessary for determination of the case is that cement is declared to be a goods subject to tax at first point of sale in terms of the provisions contained in Rule 93-H. By Notification No. 15236 CTA-12/78-F dated 22nd March, 1978, cement was declared to be taxable at the first point of sale inside the State of Orissa with effect from 1st April, 1978. Since no specific rate of tax was provided, it continued to be taxable at the rate applicable to articles in respect of which rates of taxation have not been provided for. At the relevant point of time it was 7 per cent, as the assessment years involved in these three writ applications are 1978-79 and 1979-80. White cement was made taxable at the rate of 10 per cent with effect from 1st October, 1977, and continued to be taxed at that rate till 31st March, 1982. The petitioners paid tax to their sellers being of the view that cement and white cement constitute the same commodity and therefore, white cement is to be taxed at the first point of sale and the sellers of the petitioners being the first sellers were entitled to collect tax from the petitioners. Assessments were completed under Section 12(4) of the Act in each of the cases accepting that white cement is not a different commodity from cement and is to be taxed at the same rate and at the first point of sale. Subsequently, proceedings under Section 12(8) of the Act were initiated by the Sales Tax Officer concerned. The basis for such initiation is not known except that in the case of Jamula Venkata Ramana & Sons, it has been indicated in the assessment order that the A.G. audit party had objected to the allowance of deduction of turnovers relating to first point tax-paid goods in respect of white cement and, therefore, the proceedings were being initiated. In the other two cases, nothing is mentioned in the assessment order. The assessments were completed under Section 12(8) and extra demands of tax were raised against each of the petitioners. The petitioners have challenged the assessments as aforesaid on the grounds as described hereinafter.
3. Mr. B.K. Mahanti, learned Senior Advocate, appearing for the petitioners, contended as follows :
(i) "Cement" and "white cement" are one and the same commodity and therefore, the petitioners have rightly paid tax at the first point of sale to their sellers and the claim of deduction in respect of first point tax-paid goods was in order and the initiation of the proceedings under Section 12(8) of the Act was, therefore, without jurisdiction. For this purpose reliance has been placed on a decision of the Allahabad High Court reported in [1974] 33 STC 556 (Commissioner of Sales Tax, U.P., Lucknow v. Mango Mal Nanak Ram).
(ii) Rule 93-H clearly provides that "cement" is to be taxed at the first point of sale. "White cement" being a category of cement cannot be subjected to tax at the last point of sale in a series of taxable sales. Even if different rates of tax may be levied in respect of the same commodity (without conceding to its constitutional validity of such provision) yet the point of taxation cannot be changed.
(iii) The petitioners having already paid tax are entitled to adjustment of the amount of tax paid, even if it is conceded for the sake of argument that the tax is leviable at the last point of sale in a series of taxable sales. Such adjustment is equitable and the State should not be interested to collect more than what is legally due to it.
(iv) The State had no competence to provide for two rates of taxes in respect of the commodities belonging to one specie.
In these premises, it is submitted that the assessment as made is without jurisdiction, illegal and void.
4. Mr. A.B. Misra, learned Standing Counsel, appearing on behalf of the Revenue raised a preliminary objection as to the maintainability of the writ applications on the ground that effective alternative remedy by way of filing appeals is available to the petitioners. They having not done so, the writ applications are not maintainable and are liable to be dismissed. In support of this contention, he placed strong reliance on a decision of the Supreme Court reported in [1983] 53 STC 315 ; AIR 1983 SC 603 (Titaghur Paper Mills Co. Ltd. v. State of Orissa).
So far as the challenge to the prescription of two different rates of taxes is concerned, Mr. Misra submitted that the State has ample power to provide for different rates of taxes for different commodities even though they may belong to same specie. According to him, the intention of the legislature is apparent from the fact that notwithstanding Rule 93-H, the legislature in its wisdom has levied tax on white cement at the rate of 10 per cent. He further submitted that the prayer for adjustment of tax is not acceptable in the abseace of any specific provision therefor. He also submitted that equity and taxation are strangers and if the petitioners chose to pay tax to their sellers they did so at their own risk and the State cannot be deprived of its legitimate right to collect tax at the prescribed point of tax.
5. Having heard the learned counsel for the petitioners and the learned Standing Counsel for the department and on perusal of the records, we find that the contention regarding non-maintainability of the writ applications on the ground of availability of an alternative remedy cannot be sustained. Rule of exhaustion of statutory remedy before a writ is granted is a rule of self-imposed limitation, policy, convenience and discretion rather than a rule of law. It does not touch the jurisdiction of a court to grant relief in an appropriate case. It merely touches the field of exercise of discretion and does not bar the jurisdiction. See AIR 1972 Orissa 8 (Nabaghan Sahu v. Election Officer, Mukundapur Grama Panchayat). The rule of exhaustion of statutory remedy is not an inflexible rule and on application made, invoking the extraordinary jurisdiction of the High Court need not be thrown out peremptorily, where there is complexity in the point of law involved and a decision on the points of dispute can save multiplicity of litigation. In such cases, it deserves a departure from the self-imposed restriction that normally a party should be asked to seek statutory remedy. See (1972) II CWR 1670 (Makunda Nayako v. Suna Omanatya), (1988) 65 CLT 753 (Ramakrishna Agrawal v. Collector, Central Excise and Customs, Orissa) and [1987] 65 STC 185 (Orissa) (Janajivan Foods Private Limited v. Sales Tax Officer, Ganjam-I Circle).
In Titaghur Paper Mills' case [1983] 53 STC 315 ; AIR 1983 SC 603, factual disputes were involved and therefore, the Supreme Court was of the view that the petitioner in that case should have availed the statutory remedy. Here the position is entirely different. The points falling for adjudication are points of law and there is no dispute with regard to facts. In these cases notices of admission and hearing were issued in 1981 and 1982. It would not be an act of propriety to throw out the writ applications particularly when the writ applications were entertained after hearing the learned counsel for the State as well as the Revenue. Nearly eight years have passed after the notices were issued. Neither the State nor the Revenue has filed a counter-affidavit and at this belated stage it would be a gross miscarriage of justice if the writ applications are not entertained on the ground of availability of alternative remedy. Considering the similar prayer by the Revenue, the Allahabad High Court turned it down on the ground that nearly a decade had passed from the date of admission till the date of hearing of the writ application. See [1982] 50 STC 183 (M.P. Poddar and Company v. Additional Judge (Revisions), Sales Tax, Gorakhpur). Similar is the view expressed by other Courts. See 1974 Tax LR 1740 (MP) (Flour & Food Ltd. v. Union of India) and 1975 Tax LR 1497 (Delhi) (Allied Motors Private Ltd. v. New Delhi Municipal Committee). In our jurisprudence it is not palatable to turn 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. See [1988] 69 STC 290 (SC) (Salonah Tea Company Ltd. v. Superintendent of Taxes, Nowgong).
Coming to the contention regarding cement and white cement being the same, we find that a similar question came up for consideration before the Allahabad High Court in the case of Mango Mal Nanak Ram [1974] 33 STC 556. The court held that in common parlance and commercial sense the word "cement" would include all varieties of cement. Making an analysis of the process of manufacture of white cement and the ordinary grey cement, the court held that the process is the same except that in white cement certain ingredients are mixed in small quantities which give it whitish colour and that both white cement and ordinary grey cement are used for almost identical purposes. We agree with the view of the Allahabad High Court.
6. Now coming to the question relating to propriety of having two rates of taxes for commodities belonging to the same specie, we find that in the aforesaid case the Allahabad High Court had indicated that it was open to the legislature to make a distinction between different varieties of commodities falling under a broad head and to provide different rates of taxes. In that case the court held that unless the legislature makes distinction between different varieties of cement (underlining by us), the word "cement" would include all kinds of cement. Therefore, the contention that two rates of tax could not have been provided for cement and white cement, is without any substance.
The Supreme Court had also the occasion to consider a similar case in the case of Arya Vaidya Pharmacy v. State of Tamil Nadu [1989] 73 STC 346 ; AIR 1989 SC 1230. Considering the question as to whether ayurvedic products could be subjected to tax at different rates, the court held that it is open to the legislature or the State Government if it is so authorised in that behalf by the legislature to select different rates of tax for different commodities. But where the commodities belong to the same class or category there must be a rational basis for discriminating between one commodity and another for the purpose of imposing tax. It is commonly known that considerations of economic policy constitute a basis for levying different rates of sales tax and what the actual rate should be is not a matter for the courts to determine generally, but where a distinction is made between commodities falling in the same category a question arises at once before a court whether there is justification for the discrimination and if the court finds that there is no rational basis then it can strike down the rates. In the instant case, Mr. Mahanti, learned counsel for the petitioners, having given up the challenge as to the legality or otherwise in providing different rates of tax for cement and white cement, we do not propose to adjudicate that question. However, we may indicate that the State is not possessed of the power to make a distinction between commodities belonging to the same category unless there is some rational basis for discriminating between one commodity and another, as has been held by the Supreme Court in the case of Arya Vaidya Pharmacy [1989] 73 STC 346 ; AIR 1989 SC 1230.
7. This Court had occasion to consider the legality of provisions for different rates of tax, where commodities belonged to the same specie. In one case, dispute had arisen as to whether sugar includes sugar-candy. Following the ratio of the decision of the Supreme Court in the case of State of Gujarat v. Sakarwala Brothers [1967] 19 STC 24, it was held that sugar includes sugar-candy. See [1982] 51 STC 75 (Orissa) (State of Orissa v. Satyabadi Sahu & Sons). But subsequently while sugar continued to be tax-free as per serial No. 37, sugar-candy was subjected to levy of tax at the rate of 4 per cent with effect from 1st May, 1976. This levy was challenged before this Court on the ground that sugar-candy being nothing but a form of sugar, the levy of tax was unauthorised. This contention was turned down. See [1986] 61 STC 49 (Orissa) (Una Subba Rao v.State of Orissa). Therefore, the contention that specie "cement" itself was sought to be taxed at the first point of sale and provision for different rates is illegal, is without any substance.
8. Coming to the contention regarding adjustment of tax paid to the petitioners' sellers, we find that the assertion of the petitioners that they had paid tax to their sellers had not been disputed and no counter has been filed. It was specifically mentioned in paragraph 3(f) of each of the writ applications that the petitioner had paid tax at the rate of 10 per cent at the time of purchase and that it had, on enquiry from its sellers, learnt that the amount in question had been deposited with the State Government. In view of the undisputed position that the petitioners have paid tax at the time of purchase and the same has been deposited with the State Government, the only question that remains for consideration is as to whether the petitioners are entitled to the adjustment of the amounts even if it is held that the goods are subjected to tax at the last point of sale in a series of taxable sales. Mr. Mahanti for the petitioners submitted that the State is and should not be entitled to collect more than what is legally due to it and in the absence of any specific prohibition in the statute, adjustment of the amounts paid under a mistaken belief from the tax due, if any, is permissible.
Mr. Misra, on the other hand, contended that the petitioners are not entitled to any adjustment in the absence of any specific provision and that this Court had turned down a similar prayer in the case of Singal Trading Co. v. State of Orissa [1988] 69 STC 329. In our considered opinion, where public interest dictates and the State had the benefit of tax paid, there can be a direction for adjustment. By application of the doctrine of unjust enrichment the State should be permitted to get what is legally due to it and nothing more. This Court had occasion to consider cases, where even though an assessee is liable to be assessed in a particular circle, had filed returns and paid tax in another circle. While upholding the assessment made by both the circles and holding that both the circles had the jurisdiction to make the assessments, this Court held that there is no prohibition that the tax paid cannot be adjusted and in appropriate cases tax paid in the wrong circle had to be adjusted from the total tax payable. In the case of State of Orissa v. Sundarlal Mandholiwal [1976] 37 STC 409, a Full Bench of this Court held that there should not be occasion for double assessment and in case an assessee faces an assessment where all the turnover is taken into account, it would be open to him when he is called upon in different circles for the purposes of assessment, to show that he has already been assessed for the entire turnover and there is no question of assessing the said turnover twice. In the case of Keshrichand Pushraj v. Commissioner of Sales Tax [1976] 37 STC 417 [App.], this Court while considering a similar question also held that while purchase tax has been paid in one circle in respect of the gross turnover of both the places of business, there is no reason as to why the dealer should be pursued further. Therefore, while holding that the assessments were in order, the demands were quashed. A contention was raised in another case involving same point in the case of Carona Sahu Company Limited v. Commissioner of Sales Tax, Orissa [1976] 37 STC 418 [App.] (Orissa) to the effect that there is no provision for adjustment, even though the tax has been paid in a wrong circle. This Court held that there is no positive provision which prohibits adjustment in a case where the turnover has been assessed to tax already. In that case also the court quashed the extra demand of tax in respect of the turnover which had already suffered tax. The case of Singal Trading Co. [1988] 69 STC 329 (Orissa), has absolutely no relevance as that related to a case with regard to acceptability of other modes of evidence where the statute provides for production of declaration forms was under consideration.
Therefore, it cannot be said that adjustment of tax paid under a mistaken belief cannot be made against the tax legally due. Such a view also finds support from a decision of the Supreme Court in the case of Shiv Shanker Dal Mills v. State of Haryana AIR 1980 SC 1037. The following paragraph lucidly expresses the position of law and we find support from the relevant portion of the said decision :
"......Where public bodies, under colour of public laws, recover people's moneys, later discovered to be erroneous levies, the dharma of the situation admits of no equivocation. There is no law of limitation, especially for public bodies, on the virtue of returning what was wrongly recovered to whom it belongs, nor is it palatable to our jurisprudence to turn 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......"
9. The doctrine of unjust enrichment is founded on a broad principle that unjust enrichment should not be retained at the expense of one who has suffered. In French law the principle is known as "aciio de in rem verse" which is founded on the principle of equity which forbids one man to enrich himself at the expense of another. It applies in every case in which, the estate of one person being enriched without lawful cause at the expenses of another person, the latter, in order to obtain what is due to him, does not enjoy the benefit of any action based on contract, quasi-contract, delict or quasi-delict. The fiction of quasi-contract was useful historically in creating a remedy for certain cases of unjust enrichment. In our view the time has come at which the fiction should be abolished and the law placed on the firm ground of reasonable principle of unjust enrichment. The fiction is the algebra of law and a picturesque form of algebra besides. The Police Code (Article 123), C.C. of Japan (Article 703), Soviet Russia (Articles 399-402), Chinese Code (Article 179) and the Swiss Federal Code of Obligation (Article 62) contain a general principle providing that unjust benefit must be returned.
10. The same principle has been often discussed under the subject "restitution". A person holding title to property is under an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it. Basis of the law should be restitution where it is unreasonable and unjust for the defendant to retain the benefit which he has received. The theory of implied contract still persists in law. "Restitution" means the restoring of anything unlawfully taken from another. It is most frequently used in the common law for setting them in possession of land and tenements that has been unlawfully disseised of them. Looked at from another angle under Section 72 of the Indian Contract Act, a person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it. Section 72 of the Contract Act includes payment made under a bona fide mistake of law. In our view, in case of payment of a tax which is ultra vires or unconstitutional or paid under a mistaken belief or wrong interpretation of the provisions of law, the party is entitled to have a refund or adjustment of it from the State whether he had paid it under protest or not. This also has been the consistent view of the Supreme Court. See [1958] 9 STC 747 ; AIR 1959 SC 135 (Sales Tax Officer v. Kanhaiya Lal) and [1961] 12 STC 357 ; AIR 1961 SC 1438 (Orient Paper Mills v. State of Orissa). While dealing with cases of refund of tax collected without authority of law, the Supreme Court held that where public bodies under colour of public laws recover people's money, later discovered to be erroneous levies, the dharma of the situation admits of no equivocation. There is no law of limitation especially for public bodies on the virtue of returning what was wrongly recovered to whom it belongs. In our view, what is appropriate in the case of tax collected under an invalid law is applicable to the case of tax paid under a bona fide mistaken belief. The adjustment of the amount in such cases would be in consonance with justice, equity and good conscience.
11. In a welfare State it is not proper to take a rigid view. There should not be unjust enrichment on the part of a State. It would not be proper to tax a person twice in respect of the same transaction, particularly when he has paid tax under a bona fide belief. In our view, therefore, the petitioners are entitled to the adjustment of the tax paid at the time of purchase. Since the details of the payment of tax are not available and have not been specifically indicated in the writ applications, we direct the assessing officer (opposite party No. 2) to allow an opportunity to each of the petitioners to adduce evidence in support of its payment of tax to its sellers and the quantum thereof. On production of such evidence, the assessing officer shall give credit therefor against the tax demand raised. To avoid farther delay, we direct that each of the petitioners shall appear before the assessing officer on 29th August, 1989, with proof of payment of tax. Opposite party No. 2 shall take up the matter that day or on some other day, if the circumstances so warrant. If the petitioners, however, fail to adduce evidence as directed or produce insufficient evidence, it shall be open to the assessing officer to refuse adjustment of the amount in respect of which no evidence is produced, or insufficient evidence is produced.
12. In the result, the orders of assessment tide annexures 1 and 1-A are quashed in each of the cases and the matter is remitted back to the assessing officer (opposite party No. 2) as afore directed. The writ applications are accordingly disposed of. There shall be no order as to costs.
L. Rath, J.
13. I agree.