Calcutta High Court
Messrs Swastik Projects Pvt. Ltd. & Anr vs The Kolkata Municipal Corporation & Ors on 24 February, 2016
W.P. No. 218 of 2004
IN THE HIGH COURT AT CALCUTTA
Constitutional Writ Jurisdiction
Original Side
Messrs Swastik Projects Pvt. Ltd. & Anr.
Vs.
The Kolkata Municipal Corporation & Ors.
Messrs Deepika Developer Pvt. Ltd. & Ors.
For the Petitioners : Mr. Jishnu Chowdhury, Advocate
Mr. Nilay Sengupta, Advocate
For the Respondents : Mr. Aloke Kumar Ghosh, Sr. Advocate
Mr. Nilanjan Chatterjee, Advocate Hearing concluded on : February 3, 2016 Judgment on : February 24, 2016 DEBANGSU BASAK, J.:-
The petitioners seek restitution of the mutation fees in respect of the Premises No. 40, Shakespeare Sarani, Kolkata - 700071 from the Corporation authorities.
According to the petitioners, they had paid the then prevailing mutation fees on August 10, 1998 in respect of the concerned premises. The legality of the imposition of mutation fees at such rate was challenged before the High Court in a writ petition. The learned Single Bench by a judgment and order dated January 31, 2000 had declared such imposition of mutation fees to be illegal. The Division Bench by a judgment and order dated July 7, 2000 had upheld such decision. The petitioner had made demand for refund by a letter dated August 4, 2000. The petitioners had, thereafter, filed the present writ petition on January 22, 2004. During the pendency of the writ petition the Hon'ble Supreme Court of India by a judgment and order dated March 9, 2005 has upheld the decision of the Division Bench striking down such imposition of mutation fees. Consequently, according to the petitioners, they are entitled to the refund as prayed for. According to the petitioners, the mutation fees were paid under a mistake of law. The law subsequently being declared null and void, the petitioners are entitled to refund of the mutation fees paid under such law.
Referring to the contentions of the respondents that the claim is barred by limitation, it is submitted on behalf of the petitioners that, the petitioners have filed the writ petition within time. The law was declared to be bad by the Single Bench on January 31, 2000. The writ petition had been filed on January 22, 2004. Reliance have been placed on All India Reporter 1990 Supreme Court page 772 (Salonah Tea Company Ltd. v. The Superintendent of Taxes, Nowgong & Ors.), All India Reporter 2001 Supreme Court page 787 (U.P. Pollution Control Board & Ors. v. M/s. Kanoria Industrial Ltd. & Anr.) and 2007 Volume 3 Calcutta Law Times page 64 (H.C.) (Asian Leather Limited & Anr. v. The Kolkata Municipal Corporation & Ors.) in this regard.
On behalf of the Corporation it is contended that, the petitioners have suppressed material facts and have come with unclean hands. They have suppressed that, subsequent to the payment on August 10, 1998 they have sold the property to third parties by a registered deed on August 13, 1998. The third party rights have consequently intervened in respect of the property concerned. The petitioners are not entitled to get refund of the mutation fees any longer. They are no longer the owners.
It is next contended on behalf of the Corporation that, the claim of the petitioners is barred by limitation. The mutation fees were paid on August 10, 1998 and the present writ petition had been presented on January 22, 2004.
Relying upon 1997 Volume 5 Supreme Court Cases page 536 (Mafatlal Industries Ltd. & Ors. v. Union of India & Ors.) it has been submitted that, the petitioners are not entitled to refund as prayed for in the facts of this case.
Referring to 2011 Volume 2 Supreme Court Cases page 439 (Godavari Sugar Mills Limited v. State of Maharashtra & Ors.) it has been submitted on behalf of the Corporation that, a civil suit is the remedy for the claim made by the petitioners herein.
I have considered the rival contentions of the parties and the materials made available on record.
The first writ petitioner along with the respondent nos. 5, 6 and 7 claim to be the owners of Premises No. 40, Shakespeare Sarani, Kolkata
- 700071. It appears that, the owners had applied for mutation of their names in the records of the Kolkata Municipal Corporation. Such application was required to be accompanied by fees for recording of transfer or devolution of title of any land and building at the market value of such property by the registering authority by registered deed of sale. According to the petitioner, they were compelled to pay such fees. They had paid a sum of Rs.6,01,977/- as such fees with the Corporation authorities. The names of the writ petitioner no. 1 and the respondent nos. 5, 6 and 7 were thereafter mutated in the records of the Corporation in respect of such premises as owners. The Corporation was charging mutation fees at such rate under the provisions of Section 183(5) of the Kolkata Municipal Corporation Act, 1980 and the Kolkata Municipal Corporation (Taxation) Regulations, 1989. The issue as to the legality of such imposition was raised in W.P. No. 1394 of 1997 by a third party. Such writ petition was allowed by a judgment and order dated January 31, 2000 by declaring the imposition of mutation fees at such rate to be ultra vires the Constitution of India. The Single Bench judgment was challenged in an appeal. The appeal was dismissed by a judgment and order dated July 7, 2000. The Division Bench judgment was upheld by the Hon'ble Supreme Court on March 9, 2005.
The first writ petitioner had applied for refund on August 4, 2000. It followed up its request for refund by letters dated January 3, 2001 and December 2, 2003. The petitioner, thereafter, had filed the present writ petition on January 22, 2004.
Claim for refund of mutation fees consequent to the Kolkata Municipal Corporation (Taxation) Regulations, 1989 being declared ultra vires received consideration of the Court on earlier writ petitions. The Division bench in Vinod Somani (supra) was concerned with one of such case. The writ petitioner therein had filed an application claiming refund of the mutation fees paid by him in terms of the Regulations of 1989. The Division Bench noted the various decisions cited before their Lordships including Mafatlal Industries Ltd. & Ors. (supra). The Division Bench found the writ petitioners therein to have waited outside the fence, watching the pending litigation before the Court and allowing time to run and, thereafter, turn around when the Court passed an order setting aside such provision to try and obtain benefit thereunder. The claim of the petitioner was negated due to inordinate delay. In such a case the writ petition was of 2001. In the present case, the writ petition has been filed on January 22, 2004. The payment under the Regulations of 1989 was made on August 10, 1998.
Nothing has been placed on record to suggest that such payment was made under protest. There is no material on record to suggest that the petitioners had challenged the vires of the Regulations of 1989 at any stage prior to its demand dated August 4, 2000.
In Asian Leather Limited & Anr. (supra) imposition of drainage development fees by the Corporation authorities was an issue. The Division Bench was considering a mandamus appeal directed against the judgment and order dated November 19, 2003 passed by the learned Single Judge disposing of writ petitions by directing the Kolkata Municipal Corporation to accord sanction of the building plans without realizing any drainage development fees and to refund such fees if already realized. A point of limitation was raised. It has been held that, "43. After hearing the learned Counsel for the parties and after going through the materials on record we are of the view that if a person makes payment by mistake of law, Section 72 of the Contract Act is applicable and the period of limitation is three years as prescribed by Article 133 of the Schedule to the Limitation Act, 1963 and the provisions of Section 17(1)(c) of that Act will be applicable so that the period will begin to run from the date of knowledge of the particular law under which the money was paid being declared void; this could be the date of the judgment of a competent Court declaring that law void. According to Section 17(1)(c) of the Limitation Act, 1963, in the case of a suit for relief on the ground of mistake, the period of limitation does not commence to run until the plaintiff had discovered the mistake or could with reasonable diligence, have discovered it. In a case where payment has been made under a mistake of law in contrast 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. (see: Mahabir Kishore & Ors. v. State of Madhya Pradesh, reported in AIR 1990 SC 313)
44. By following the aforesaid proposition of law, we are of the view that in the cases before us, the writ petitioners had no cause of action for claiming refund of money so long the act on the part of the Corporation was declared illegal and ultra vires. The Corporation realised money in the name of Drainage Development Fees by virtue of a circular illegally issued by the Municipal Commissioner. So long, the competent Court did not declare such circular to be invalid, no question of refund of that amount arose and the limitation really starts from the moment, such action is declared to be invalid. Therefore, once it is held that the Corporation by its purported circular illegally recovered money from the citizen, as a consequential measure, a Writ Court is entitled to give the benefit of refund of money realised on the strength of such circular to the writ petitioners and the learned Single Judge did not commit any illegality in passing direction for refund of the money illegitimately taken by the Corporation."
In Mafatlal Industries Ltd. & Ors. (supra) it has been held that, "108. The discussion in the judgment yields the following propositions. We may forewarn that these propositions are set out merely for the sake of convenient reference and are not supposed to be exhaustive. In case of any doubt or ambiguity in these propositions, reference must be had to the discussion and propositions in the body of the judgment.
(i) Where a refund of tax/duty is claimed on the ground that it has been collected from the petitioner/plaintiff -- whether before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991 or thereafter -- by misinterpreting or misapplying the provisions of the Central Excises and Salt Act, 1944 read with Central Excise Tariff Act, 1985 or Customs Act, 1962 read with Customs Tariff Act or by misinterpreting or misapplying any of the rules, regulations or notifications issued under the said enactments, such a claim has necessarily to be preferred under and in accordance with the provisions of the respective enactments before the authorities specified thereunder and within the period of limitation prescribed therein. No suit is maintainable in that behalf. While the jurisdiction of the High Courts under Article 226 -- and of this Court under Article 32 -- cannot be circumscribed by the provisions of the said enactments, they will certainly have due regard to the legislative intent evidenced by the provisions of the said Acts and would exercise their jurisdiction consistent with the provisions of the Act. The writ petition will be considered and disposed of in the light of and in accordance with the provisions of Section 11-B. This is for the reason that the power under Article 226 has to be exercised to effectuate the rule of law and not for abrogating it.
The said enactments including Section 11-B of the Central Excises and Salt Act and Section 27 of the Customs Act do constitute "law" within the meaning of Article 265 of the Constitution of India and hence, any tax collected, retained or not refunded in accordance with the said provisions must be held to be collected, retained or not refunded, as the case may be, under the authority of law. Both the enactments are self-contained enactments providing for levy, assessment, recovery and refund of duties imposed thereunder. Section 11-B of the Central Excises and Salt Act and Section 27 of the Customs Act, both before and after the 1991 (Amendment) Act are constitutionally valid and have to be followed and given effect to. Section 72 of the Contract Act has no application to such a claim of refund and cannot form a basis for maintaining a suit or a writ petition. All refund claims except those mentioned under Proposition (ii) below have to be and must be filed and adjudicated under the provisions of the Central Excises and Salt Act or the Customs Act, as the case may be. It is necessary to emphasise in this behalf that Act provides a complete mechanism for correcting any errors whether of fact or law and that not only an appeal is provided to a Tribunal -- which is not a departmental organ -- but to this Court, which is a civil court.
(ii) Where, however, a refund is claimed on the ground that the provision of the Act under which it was levied is or has been held to be unconstitutional, such a claim, being a claim outside the purview of the enactment, can be made either by way of a suit or by way of a writ petition. This principle is, however, subject to an exception: 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; this is for the reason that so far as he is concerned, the decision has become final and cannot be reopened on the basis of a decision on another person's case; this is the ratio of the opinion of Hidayatullah, C.J. in Tilokchand Motichand and we respectfully agree with it.
Such a claim is maintainable both by virtue of the declaration contained in Article 265 of the Constitution of India and also by virtue of Section 72 of the Contract Act. In such cases, period of limitation would naturally be calculated taking into account the principle underlying clause (c) of sub- section (1) of Section 17 of the Limitation Act, 1963. A refund claim in such a situation cannot be governed by the provisions of the Central Excises and Salt Act or the Customs Act, as the case may be, since the enactments do not contemplate any of their provisions being struck down and a refund claim arising on that account. In other words, a claim of this nature is not contemplated by the said enactments and is outside their purview.
(iii) A claim for refund, whether made under the provisions of the Act as contemplated in Proposition (i) above or in a suit or writ petition in the situations contemplated by Proposition (ii) above, can succeed only if the petitioner/plaintiff alleges and establishes that he has not passed on the burden of duty to another person/other persons. His refund claim shall be allowed/decreed only when he establishes that he has not passed on the burden of the duty or to the extent he has not so passed on, as the case may be. Whether the claim for restitution is treated as a constitutional imperative or as a statutory requirement, it is neither an absolute right nor an unconditional obligation but is subject to the above requirement, as explained in the body of the judgment. Where the burden of the duty has been passed on, the claimant cannot say that he has suffered any real loss or prejudice. The real loss or prejudice is suffered in such a case by the person who has ultimately borne the burden and it is only that person who can legitimately claim its refund. But where such person does not come forward or where it is not possible to refund the amount to him for one or the other reason, it is just and appropriate that that amount is retained by the State, i.e., by the people. There is no immorality or impropriety involved in such a proposition.
The doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched.
(iv) It is not open to any person to make a refund claim on the basis of a decision of a court or tribunal rendered in the case of another person. He cannot also claim that the decision of the court/tribunal in another person's case has led him to discover the mistake of law under which he has paid the tax nor can he claim that he is entitled to prefer a writ petition or to institute a suit within three years of such alleged discovery of mistake of law. A person, whether a manufacturer or importer, must fight his own battle and must succeed or fail in such proceedings. Once the assessment or levy has become final in his case, he cannot seek to reopen it nor can he claim refund without reopening such assessment/order on the ground of a decision in another person's case. Any proposition to the contrary not only results in substantial prejudice to public interest but is offensive to several well-established principles of law. It also leads to grave public mischief. Section 72 of the Contract Act, or for that matter Section 17(1)(c) of the Limitation Act, 1963, has no application to such a claim for refund.
(v) Article 265 of the Constitution has to be construed in the light of the goal and the ideals set out in the Preamble to the Constitution and in Articles 38 and 39 thereof. The concept of economic justice demands that in the case of indirect taxes like Central Excises duties and Customs duties, the tax collected without the authority of law shall not be refunded to the petitioner-plaintiff unless he alleges and establishes that he has not passed on the burden of duty to a third party and that he has himself borne the burden of the said duty.
(vi) Section 72 of the Contract Act is based upon and incorporates a rule of equity. In such a situation, equitable considerations cannot be ruled out while applying the said provision.
(vii) While examining the claims for refund, the financial chaos which would result in the administration of the State by allowing such claims is not an irrelevant consideration. Where the petitioner-plaintiff has suffered no real loss or prejudice, having passed on the burden of tax or duty to another person, it would be unjust to allow or decree his claim since it is bound to prejudicially affect the public exchequer. In case of large claims, it may well result in financial chaos in the administration of the affairs of the State.
(viii) The decision of this Court in STO v. Kanhaiya Lal Mukundlal Saraf must be held to have been wrongly decided insofar as it lays down or is understood to have laid down propositions contrary to the propositions enunciated in (i) to (vii) above. It must equally be held that the subsequent decisions of this Court following and applying the said propositions in Kanhaiya Lal have also been wrongly decided to the above extent. This declaration -- or the law laid down in Propositions (i) to (vii) above -- shall not however entitle the State to recover the taxes/duties already refunded and in respect whereof no proceedings are pending before any authority/Tribunal or Court as on this date. All pending matters shall, however, be governed by the law declared herein notwithstanding that the tax or duty has been refunded pending those proceedings, whether under the orders of an authority, Tribunal or Court or otherwise.
(ix) The amendments made and the provisions inserted by the Central Excises and Customs Law (Amendment) Act, 1991 in the Central Excises and Salt Act and the Customs Act are constitutionally valid and are unexceptionable.
(x) By virtue of sub-section (3) to Section 11-B of the Central Excises and Salt Act, as amended by the aforesaid Amendment Act, and by virtue of the provisions contained in sub-section (3) of Section 27 of the Customs Act, 1962, as amended by the said Amendment Act, all claims for refund (excepting those which arise as a result of declaration of unconstitutionality of a provision whereunder the levy was created) have to be preferred and adjudicated only under the provisions of the respective enactments. No suit for refund of duty is maintainable in that behalf. So far as the jurisdiction of the High Courts under Article 226 of the Constitution -- or of this Court under Article 32 -- is concerned, it remains unaffected by the provisions of the Act. Even so, the Court would, while exercising the jurisdiction under the said articles, have due regard to the legislative intent manifested by the provisions of the Act. The writ petition would naturally be considered and disposed of in the light of and in accordance with the provisions of Section 11-B. This is for the reason that the power under Article 226 has to be exercised to effectuate the regime of law and not for abrogating it. Even while acting in exercise of the said constitutional power, the High Court cannot ignore the law nor can it override it. The power under Article 226 is conceived to serve the ends of law and not to transgress them.
(xi) Section 11-B applies to all pending proceedings notwithstanding the fact that the duty may have been refunded to the petitioner/plaintiff pending the proceedings or under the orders of the Court/Tribunal/Authority or otherwise. It must be held that Union of India v. Jain Spinners and Union of India v. ITC have been correctly decided. It is, of course, obvious that where the refund proceedings have finally terminated -- in the sense that the appeal period has also expired -- before the commencement of the 1991 (Amendment) Act (19-9-1991), they cannot be reopened and/or governed by Section 11-B(3) [as amended by the 1991 (Amendment) Act]. This, however, does not mean that the power of the appellate authorities to condone delay in appropriate cases is affected in any manner by this clarification made by us.
(xii) Section 11-B does provide for the purchaser making the claim for refund provided he is able to establish that he has not passed on the burden to another person. It, therefore, cannot be said that Section 11-B is a device to retain the illegally collected taxes by the State. This is equally true of Section 27 of the Customs Act, 1962."
The petitioners herein claim restitution under Section 72 of the Contract Act, 1872. In Mafatlal Industries Ltd. & Ors. (supra) has held that, the claims for restitution are subject to the claimant establishing that he has not passed on the burden to a third party as the claimant then cannot say that he had suffered any loss or prejudice.
The real loss or prejudice is suffered by the person who has ultimately borne the burden. Such person can legitimately claim its refund. Where such person does not come forward or where it is not possible to refund him for any reason it is just and appropriate that the amount is retained by the State. The doctrine of unjust enrichment has been held to be inapplicable to the State as the State represents the people of the country.
The contentions of the petitioners that, their claim is not barred by the laws of limitation and that there is a conflict of view between Vinod Somani (supra) and Asian Leather Limited & Anr. (supra) need not be gone into in the facts of the present case. Admittedly the petitioner no. 1 and the respondent nos. 5, 6 and 7 had sold their right, title and interest in respect of the immovable property concerned on August 13, 1998, that is, prior to the law being declared illegal on January 31, 2000, the request for refund made by the first writ petitioner on August 4, 2000 and the filing of the writ petition on January 22, 2004. The transferees are not parties to the present writ petition. It is likely that the petitioners have passed on their burden to the transferees. At least there is no material on record to substantiate that the petitioners did not pass on such burden. It would not be prudent to embark upon any further enquiry in a writ petition in the facts of this case.
In Godavari Sugar Mills Limited (supra) the Supreme Court has answered the question whether a writ petition for "recovery of money" is maintainable or not. It is held in paragraph 8 as follows:-
"8. The observations in Suganmal related to a claim for refund of tax and have to be understood with reference to the nature of the claim made therein. The decision in Suganmal has been explained and distinguished in several subsequent cases, including in U.P. Pollution Control Board v. Kanoria Industrial Ltd. and ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd. The legal position becomes clear when the decision in Suganmal is read with the other decisions of this Court on the issue, referred to below:
(i) Normally, a petition under Article 226 of the Constitution of India will not be entertained to enforce a civil liability arising out of a breach of a contract or a tort to pay an amount of money due to the claimants. The aggrieved party will have to agitate the question in a civil suit. But an order for payment of money may be made in a writ proceeding, in enforcement of statutory functions of the State or its officers. (Vide Burmah Construction Co. v. State of Orissa.)
(ii) If a right has been infringed--whether a fundamental right or a statutory right--and the aggrieved party comes to the Court for enforcement of the right, it will not be giving complete relief if the Court merely declares the existence of such right or the fact that existing right has been infringed.
The High Court, while enforcing fundamental or statutory rights, has the power to give consequential relief by ordering payment of money realised by the Government without the authority of law. (Vide State of M.P. v. Bhailal Bhai.)
(iii) A petition for issue of writ of mandamus will not normally be entertained for the purpose of merely ordering a refund of money, to the return of which the petitioner claims a right. The aggrieved party seeking refund has to approach the civil court for claiming the amount, though the High Courts have the power to pass appropriate orders in the exercise of the power conferred under Article 226 for payment of money. (Vide Suganmal v. State of M.P.)
(iv) There is a distinction between cases where a claimant approaches the High Court seeking the relief of obtaining only refund and those where refund is sought as a consequential relief after striking down the order of assessment, etc. While a petition praying for mere issue of a writ of mandamus to the State to refund the money alleged to have been illegally collected is not ordinarily maintainable, if the allegation is that the assessment was without a jurisdiction and the taxes collected was without authority of law and therefore the respondents had no authority to retain the money collected without any authority of law, the High Court has the power to direct refund in a writ petition. (Vide Salonah Tea Co. Ltd. v. Supdt. of Taxes.)
(v) It is one thing to say that the High Court has no power under Article 226 of the Constitution to issue a writ of mandamus for making refund of the money illegally collected. It is yet another thing to say that such power can be exercised sparingly depending on facts and circumstances of each case. For instance, where the facts are not in dispute, where the collection of money was without the authority of law and there was no case of undue enrichment, there is no good reason to deny a relief of refund to the citizens. But even in cases where collection of cess, levy or tax is held to be unconstitutional or invalid, refund is not an automatic consequence but may be refused on several grounds depending on facts and circumstances of a given case. (Vide U.P. Pollution Control Board v. Kanoria Industrial Ltd.)
(vi) Where the lis has a public law character, or involves a question arising out of public law functions on the part of the State or its authorities, access to justice by way of a public law remedy under Article 226 of the Constitution will not be denied. (Vide Sanjana M. Wig v. Hindustan Petroleum Corpn. Ltd.) We are therefore of the view that reliance upon Suganmal was misplaced, to hold that the writ petition filed by the appellant was not maintainable."
In U.P. Pollution Control Board & Ors. (supra) the Supreme Court found that the claimant before their lordships had paid water cess under protest and that no right had been created in favour of third parties on account of delay and that the claim for refund of water cess was made within the reasonable time after the decision of the Supreme Court declaring the collection of water cess to be illegal and without authority of law, their Lordships allowed such claim.
Salonah Tea Company Ltd. (supra) has been noted and considered in Godavari Sugar Mills Limited (supra).
In view of none of the petitioners along with the proforma respondents being the owners of the premises concerned in respect of which they claim restitution of mutation fees on the date of presentation of the writ petition and in view of the failure of the petitioners to establish that they have not passed on the burden of such mutation fees, I do not find any merit in the present writ petition.
W.P. No. 218 of 2004 is dismissed. No order as to costs.
[DEBANGSU BASAK, J.]