1. These three T.Ps. arise under the following circumstances. The petitioner who is the same person in all the three T.Ps. carries on business in the construction work and undertaking building contracts.
For the purpose of executing such building contracts, the petitioner purchases metals, sand, bricks, wooden planks, hoses, etc., which are used in the construction work.
2. The first respondent completed the assessment for the three years, 1981-82, 1982-83 and 1983-84 in the following manner :Sl. No. TNGST No. Assessment year Date1 TNGST/260561/81-82 1981-82 14-03-19832 TNGST/260561/82-83 1982-83 07-12-19833 TNGST/878615/83-84 1983-84 07-01-1985 3. The petitioner was under the impression that they had to pay purchase tax on the purchase of construction materials aforesaid and the respondent was also under a similar mistaken impression. It was believed following [1958] 9 STC 353 (SC) (Gannon Dunkerley's case) that the construction materials are used in the construction of the end-product, namely building. While so, the Madras High Court rendered a decision on February 11, 1985 in State of Tamil Nadu v. East Coast Constructions and Industries [1986] 61 STC 337, that the purchase of such construction materials and used in the construction of a building, will not attract purchase tax under Section 7-A(1) of the Tamil Nadu General Sales Tax Act. The petitioners became aware of the said decision only on May 12, 1986 when the case was reported in journals in [1986] 61 STC 337 (Mad.). The petitioners immediately filed an application on May 12, 1986 before the Deputy Commissioner (CT), Coimbatore, seeking orders of refund by invoking Section 32 of the Tamil Nadu General Sales Tax Act, 1959. The Deputy Commissioner held that the levy of tax for the said three assessment years had become final since the petitioner did not file any statutory appeal. The Deputy Commissioner further expressed his inability to set aside the assessment because Section 32 had been amended with effect from November 1, 1982 and he could exercise power only if the order of the assessing authority was prejudicial to the interest of the revenue. The order of the Deputy Commissioner is dated June 19, 1986. The petitioner thereupon filed three writ petitions in the High Court of Madras on April 22, 1988 seeking a writ of certiorarified mandamus to quash the respective orders of assessment and direct refund of the tax paid under Section 7-A of the Tamil Nadu General Sales Tax Act, 1959 for the said three years. By virtue of the Tamil Nadu Taxation Special Tribunal Act, 1992, all the writ petitions had been transferred to this Special Tribunal.
4. A common counter-affidavit has been filed on behalf of the respondents and the main contention is that the orders of assessment have become final and there is inordinate laches on the part of the petitioner in approaching the High Court for refund. It is pointed out that the judgment of the Madras High Court was rendered on February 11, 1985, whereas the writ petitions were filed on April 22, 1988. Unless the orders of assessment are set aside in a manner known to law the Special Tribunal should not exercise its discretionary powers in ordering refund of the amounts as claimed by the petitioner.
5. Mr. Sriprakash, appearing for the petitioner, projects his arguments in the following manner. The petitioners having paid the tax under a mistaken impression and the levy and assessment being illegal, the respondents have no jurisdiction to retain the amounts in view of Article 265 of the Constitution of India. No doubt, the petitioner has to explain the delay in approaching the court for refund of the tax collected illegally from the petitioner. Secondly, he also agrees that the petitioner has to come within the guidelines laid down by the Supreme Court of India in [1998] 111 STC 467(Mafatlal Industries Ltd. v. Union of India). A number of judgments have been cited before us by both sides on the scope of the power of this Tribunal to order refunds.
In other words, there is no dispute that the amounts were collected under a mistake of law thinking that the purchase of construction materials and used in the construction of building would attract purchase tax under Section 7-A. In State of Tamil Nadu v. East Coast Constructions and Industries [1986] 61 STC 337 a division Bench of the Madras High Court has held that the purchase of such construction materials and used in the construction of building could not be taxed under Section 7-A(1) of the Tamil Nadu General Sales Tax Act, 1959 because the construction of a building cannot be equated to "manufacture of other goods". This judgment of the division Bench has become final.
6. The only question for decision is whether the petitioner has been guilty of laches in approaching the court for refund. The principles of refund in such matters have been elaborately discussed by the Supreme Court of India in [1998] 111 STC 467 (Mafatlal Industries Ltd. v. Union of India). The Supreme Court was examining the validity of the amended provisions of the Central Excises and Salt Act, 1944 and the fixation of the period of limitation. No doubt, in the Tamil Nadu General Sales Tax Act, there are no such provisions fixing the period of limitation for claiming refund. All the same the general principles relating to the claims for refund as enunciated by the apex Court has to be understood and followed. The apex Court classified into 3 broad categories, all claims of refund : (1) Claim for refund on the basis that the provision of law was unconstitutional.
(2) Claims for refund based on the ground that there was mis-application of law.
(3) Claims for refund enunciated on the basis of a decision rendered in a third party case.
7. On the general principle, vis-a-vis a statutory provision for refund, the apex Court observed as follows : "So far as the jurisdiction of the High Court under Article 226--or for that matter, the jurisdiction of this Court under Article 42--is concerned, it is obvious that the provisions of the Act cannot bar and curtail these remedies. It is, however equally obvious that while exercising the power under Article 226/Article 42, the court would certainly take note of the legislative intent manifested in the provisions of the Act and would exercise their jurisdiction consistent with the provisions of the enactment." 8. The apex Court then laid down the principles of refund in different type of cases. We will take note of those principles which have relevance to the case before us : (1) If the excise duty paid by the assessee was ultimately passed on to the buyers or any other person, and that the assessee has suffered no loss or injury, the action for restitution based on Section 72 of the Contract Act, 1872 is unsustainable.
(2) The decision in Kanhaiya Lal's case [1958] 9 STC 747 (SC) cannot be understood as laying down the correct law if refunds to be ordered even in cases where the liability had been passed on by the assessee to a third party.
(3) Article 265 of the Constitution of India should be construed that in cases where the assessee had passed on the liability to the consumer or third party, is not entitled to restitution or refund.
(4) There is always a presumption that the assessee had passed on the liability to the consumer or third party. It is for the assessee to rebut the presumption.
(5) Where there is no statutory provision for refund, a petition can be taken under Article 226 of the Constitution of India to assail the levy as illegal and claim refund.
9. It has also been pointed out by the apex Court that Section 72 of the Contract Act, 1872 may be attracted and the issue has to be decided on the basis of the rule of equity. There is therefore, little difficulty in coming to the conclusion that the petitioner has a right to maintain this writ petitions and assail the orders of assessment and claim refund. The only other question will be whether the petitioner is guilty of laches in approaching the court. We will now refer to a few decisions which enable assessees to get refund in similar circumstances. In (1992) 2 SCC 598 (Dehri Rohtas Light Railway Company Limited v. District Board, Bhojpur); In this case certain demands under the Bengal Cess Act, 1880 from the party based on a judgment of the Calcutta High Court reported in the year 1979 in a journal, the party filed writ petitions under Article 226 of the Constitution of India before the Patna High Court for quashing the demand against him right from the year 1953-54 to 1966-67. The High Court by judgment dated January 6, 1981 dismissed the writ petition. For the subsequent years 1967-68, 1971-72, the High Court allowed the writ petitions and quashed the demand notices. While considering the question in respect of the earlier demands, the Supreme Court observed as follows : "The question, therefore, arising in these appeals is whether the appellant is entitled to the same relief in respect of the demands for the earlier years. Since the demands for the earlier years were the subject-matter of the challenge in the suit which was pending, the company had not sought relief of quashing the said demands in the writ petition filed earlier. The challenge in the suit as stated was only on the basis of the agreement and not on the ground of illegality. The company did not include the demands for the earlier years in the first writ petition. It is, therefore, contended for the respondents that the second writ petition filed after a long lapse of several years had been rightly dismissed by the High Court." ".....The appellant did not include the earlier demand in the writ petition because the suit to enforce the agreement limiting the liability was pending in appeal, but the appellant did attempt to raise the question in the appeal itself. However, the court declined to entertain the additional ground as it was beyond the scope of the. suit. Thereafter, the present writ petition was filed explaining all the circumstances. The High Court considered the delay as inordinate. In our view, the High Court failed to appreciate all material facts particularly the fact that the demand is illegal as already declared by it in the earlier case." ".....The principle on which the relief to the party on the grounds of laches or delay is denied is that the rights which have accrued to others by reason of the delay in filing the petition should not be allowed to be disturbed unless there is a reasonable explanation for the delay. The real test to determine delay in such cases is that the petitioner should come to the writ court before a parallel right is created and that the lapse of time is not attributable to any laches or negligence. The test is not to physical funning of time. Where the circumstances justifying the conduct exists, the illegality which is manifest cannot be sustained on the sole ground of laches."(Salonah Tea Company Ltd. v. Superintendent of Taxes, Nowgong) it was held that payment made under the mistake of law could be ordered to be refunded in a petition filed under Article 226 of the Constitution of India. Observed the Supreme Court : ".....Equally, as a corollary of the said statement of law it follows that taxes collected without the authority of law as in this case from a citizen should be refunded because no State has the right to receive or to retain taxes or monies realised from citizens without the authority of law."(Mahabir Kishore v.State of Madhya Pradesh) the provisions of Section 72 of the Contract Act, 1872 were examined. It was observed as follows : ".....In a case where payment has been made under a mistake of law as contrasted 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." 12. It is interesting to note that in that case also the plaintiff came to court after coming to know of the judgment in another case laying down the correct position in law.
13. We will now take up the decisions which deal directly with the question of limitation and laches. We are concerned with the question of limitation because in this case it is pointed out that though the judgment in [1986] in 61 STC 337 (Mad.) (State of Tamil Nadu v. East Coast Constructions and Industries) was rendered on February 11, 1985, the writ petitions seems to be filed in the year 1988. The explanation is that the judgment was reported only later in or about May, 1986.
Immediately, the petitioner had moved the authorities and failing in his attempt to get relief from the Deputy Commissioner, he filed the writ petitions. The Deputy Commissioner had rejected the plea on June 19, 1986. There is considerable delay after this date before the writ petitions seem to be filed. This delay of nearly 2 years has not been explained at all by the petitioners in their affidavit. It is this delay which was causing us some concern. But the learned counsel sought to explain this delay by relying on the merits of his case and argued that the illegality would cure the defect in the non-explanation of the delay of 2 years. The argument is that where a period of limitation is prescribed and a party files the suit on the last day it cannot be held that there was delay in filing the suit. It is not necessary for the plaintiff to explain the delay in filing the suit at the end of the period of limitation. It is not difficult to accept the above proposition. Argues Mr. Sriprakash, that for filing a writ petition claiming refund the period of 3 years can be legitimately taken as the period of limitation. So considered the filing of the writ petitions in April, 1998 cannot be thrown out on the ground of limitation or laches.
He also cites the following decision in support of his arguments. In (1984) 2 MLJ 245 (S. Loganathan v. Special Officer, TUCS) Mr.
Venkataswami, J., as he then was observed as follows : "The other contention of the learned counsel for the first respondent that the writ petitions are liable to be dismissed on the ground of laches also cannot be accepted. It is seen from the counter-affidavit that the petitioners have filed the writ petitions on November 7, 1978 and simultaneously were trying to get relief from the higher departmental authorities and having failed in their attempts, have pursued the remedy under Article 226 of the Constitution of India. The writ petitions having been admitted and a prima facie case has been made out, it is unjust to deny the relief merely on the ground of laches." 14. A Pull Bench of the Patna High Court Builders Association of India v. State of Bihar [1992] 85 STC 362 had this to say about laches vis-a-vis the merits of a case.
"In my view the writ petition having been admitted, and the case of the petitioner being 'positively good' as it is squarely covered by the decision of the Supreme Court itself (annexure 3) and the respondents being bound by that judgment ought to have given a notice to the petitioner. I accordingly overrule the second contention of the learned Additional Advocate-General also." 15. It was observed that the rule of laches or delay is not a rigid rule and unless there are third party rights created, the court can always exercise the discretion in granting relief. Similarly, in [1985] 153 ITR 721 (Ker) ; 1984 Tax LR 514 (T.A. George v. Agricultural Income-tax Officer) the Kerala High Court observed as follows : "There is no period of limitation prescribed for invoking the jurisdiction of this Court under Article 226 of the Constitution.
But all the same the persons interested in seeking relief must act within a reasonable time or period. In case where the order or decision under attack affects the very jurisdiction or is found to be one without jurisdiction or passed in excess of jurisdiction, the delay in filing the application is of no serious consequence. The delay in a particular case has to be decided on the facts and circumstances of the case. The power to grant relief under Article 226 of the Constitution is a discretionary power." 16. The Bombay High Court in (1984) 18 ELT 207 (Universal Drinks Private Ltd., Nagpur v. Union of India) observed as follows : "The instant writ petitions, therefore, cannot be dismissed either on the ground of delay, laches or limitation. Even otherwise, we would not decline to exercise discretion in allowing refund in these cases even assuming that the claim was barred by time, because the claim for refund in these petitions is a genuine claim, which is not disputed on merits by the respondents. In this regard we may refer to the salutary warning given by the Supreme Court to the public authorities in the case reported in Madras Port Trust v. Hymanshu International AIR 1979 SC 1144 ; 1979 ELT (J. 396) that they should not resort to technical pleas of limitation in regard to the legitimate and just claims made against them by the claimants." 17. Finally, the Supreme Court has in an authoritative manner laid down as follows in AIR 1984 SC 971 ; (1984) 16 ELT 171 (Shri Vallabh Glass Works Ltd. v. Union of India) ".....In view of the decision of the High Court, the fact that the appellant had paid duty in excess of what they were bound in law to pay should be now taken as having been established. It is not disputed that if the appellants had filed a suit within the period of limitation the excess amount would have become refundable by virtue of Section 72 of the Indian Contract Act. Section 17(1)(c) of the Limitation Act, 1963 provides that where in the case of any suit or application for which a period of limitation is prescribed under that Act, the suit or application is for relief from the consequences of a mistake, the period of limitation shall not begin to run until the plaintiff or applicant had discovered it or could have with reasonable diligence discovered it.....".
18. On behalf of the Revenue the learned Government Advocate, Mr. R.Mahadevan, relied on [1972] 30 STC 120 (AP) (Gurram Sreeramulu, Garlapati Anjaneyulu & Co v. State of Andhra Pradesh). In that case a learned single Judge refused to exercise the discretion under Article 226 of the Constitution of India. The ratio of the judgment depended on the facts of the case. In [1982] 49 STC 347 (Inder Singh Harbans Singh v. State of Madhya Pradesh) the Madhya Pradesh High Court observed that even a writ petition under Article 226, filed within the period of limitation provided for a suit for similar relief could be rejected on the ground of laches. Those propositions of law cannot be disputed, but the judgment will depend upon the facts of each case. In [1982] 51 STC 310 (Cal) (Union of India v. Commercial Tax Officer, Shyambazar Charge), all that was laid down was that even if an assessment was void and payment was made through a mistake, the court was not bound to order repayment and that the exercise of discretion would depend upon the facts of each case. A decision in AIR 1987 SC 251 (State of M.P. v.Nandlal Jaiswal) explains clearly the circumstances under which an objection can be dismissed on the ground of laches. Observed the Supreme Court : "The High Court does not ordinarily permit a belated resort to the extraordinary remedy under the writ jurisdiction because it is likely to cause confusion and public inconvenience and bring in its train new injustices. The rights of third parties may intervene and if the writ jurisdiction is exercised on a writ petition filed after unreasonable delay, it may have the effect of inflicting not only hardship and inconvenience but also injustice on third parties. When the writ jurisdiction of the High Court is invoked, unexplained delay coupled with the creation of third party rights in the meanwhile is an important factor which always weighs with the High Court in deciding whether or not to exercise such jurisdiction." 19. We have given our anxious consideration to the question of delay and laches and we do not think that the writ petitions (T.Ps.) can be dismissed on the ground of laches. It is true that the petitioners could have approached the High Court within a reasonable time after the Deputy Commissioner refused to grant any relief to the petitioners as early as on June 19, 1986. But the petitioners filed the writ petitions only in April, 1988.
20. Having regard to the observations of the Supreme Court in AIR 1984 SC 971 ; [1984] 16 ELT 171 (Shri Vallabh Glass Works Ltd. v. Union of India) and the practice of adopting 3 years as the period of limitation, especially in a case for refund of amounts illegally collected from a party, we are inclined to accept the argument of the petitioners all that the writ petitions cannot be dismissed on the ground of laches. Once this position is made clear the petitioners are entitled to succeed.
21. But there is yet another question which has to be looked into in view of the judgment of the Supreme Court in Mafatlal's case [1998] 111 STC 467. Though the petitioners paid the disputed amount by way of purchase tax under Section 7-A, we do not know whether there was any adjustments between the petitioners and the persons for whom he constructed building. This is an aspect which has to be examined by the assessing authority before arriving refund to the petitioners.
22. In fine we hold that the orders of assessment impugned in these petitions have to be quashed and they are accordingly quashed. We hold that the petitioners are entitled for refund, provided they have riot passed on the liability to any other party. This has to be examined by the assessing authority before directing refund of the amounts. We therefore, remand the case back to the assessing authority to decide the question of refund after giving a notice to the petitioners and after giving a personal hearing. The T.Ps. are allowed and remanded to the assessing authority to decide the case in accordance with the directions contained in this judgment.
And this Tribunal doth further order that this order on being produced be punctually observed and carried into execution by all concerned.
Issued under my hand and the seal of this Tribunal on the 2nd day of February, 1999.