Excise contractors sought refund of education and health cess paid under state levies later declared unconstitutional, claiming mistake of law discovered on the High Court's decision. The Supreme Court upheld dismissal of their writ petitions, holding courts retain discretion to deny relief for delay even within three years.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
Ill
D. CAWASJI i CO., BTC. BTC.
v.
THB STATE OF MYSORB & ANR. October 29, 1974
[K. K. MATHEW AND A. ALAGilUSWAMl, 1J~]
n Corutitution of india, 1950-Art. 226-Paymerst of taxes made under mlstilkl of law-Period of limitation wh!n commentes-Jurlsdiction of tM High Court.
The appellants paid certain amounts . to the government a8 excise dutY and education ces for the years 1951-52 to 1965-66 in one case an from 1951-Sl ~ 1961-62 in the othr .. The High_ Cmrt t.ruq. down the poviions of e. levant Acts as unconstitutional. In wnt petitions before the Htgh Court claunlbD refund; the appellants contended that the payments in question were made by them c under mistake of law; that the mistake was discovered when the High Court o;tfuck down the provisions a unconstitutional and that the petitions were therefore in time. .But the Hlah Court dismissed them on the around of inordiliate delly.
Dismissina the appeale.
HELD: Where a suh wut lie to recover moneys pald under a mist&ke bt lao. a writ petition for refund of tu within the period of Umitatlou woUld U&, · Por llllDI a writ petition to rewver the money paid under o mistake bf Jaw the start. ina point of limitation ls from the date of which the judot decl•rbtl aa veitl the particular law under which the tax was paid was. rendered. £\len itt case "here it is IDed within thrr.e years, the court bas a discretion, bavl.na resard • ~ facts and circumslances ot each case not to entertain the appl.katlon. [!ll3H; Sl4A•B] .
StMe of Madhya Pradtm v. Bhailal BhtJI and Olhtr.J [1964] 6 S.C.lt 261 relied on, State of KeJYJia v. if..luminium Indusirie.r Ltd, (1965) 16 S.T;C. 689• feE · ferred to and Trilok Chand Motich4nd and Others v. H. B. Muniht. CoirinilssitJner of Sales Tax, Bonibay (1970) 2S S.T.C. 289 held inapplicable~
in the instant case having regard to the conduct of the appellants in jiot claiMbig the. amountS in the earlier writ petitions without any iustification. there is llO justification in interferitig with discretioil exercised by the High Court ill disfu.isl.; i~~ the writ petitiris. The appellants did riot pray for i:efurid of the arrioun pa1d .bY way ,of ~ for, the years lSl-52 to 1965-6 and ey gave tto resoDJ before the .H1g.b urt 10 • thest: ,Petittons why .theY, -d1 n,ot m*.e . th_e prayr -~~ fut1_d of the aouts. . pd , d\11118 the yea~ 19, 9..l}._st19Ii: /1 v~~c!•Di .E!l!![ell.)' of unnecessary legal proceedtnSS should be the IUm of iill colrtfS. The aptJe11a~ should not be allowed to split up theif dalm for refund and fi1e writ pet!Hdn! Jii · a piece-meal fas.IC?_n. If tlie tppella_rits could b!lv but did nt, · without. ay _legal n In fh• earlier lustiflcation writ f!etltlons claim rC.fund there of Is te no amounts, reason why paid th~ durlt~s should tJte ee years atlowed In questloto c 1 aim thi amoUnts by filini writ petitions apln. [S 17B-q
In the second batch qf appeals the reason why this Court did .~ot So Jrlto o G guestlon C?f the validity of the .Act was that relevant materials were nt .1-'l!l(.:Cd 6efofe the court by the appellant for' successfully challenglrig its validity and ~hey were therefor to blame themselves. [S18H]
CML APPELLATE JUiliJ>icnoN : Civn Appeal&. NC~t. 437. 4St; 452-476 and 477-459 of 1974.
Il Aweals _by. Special i..eav~ from the itidgmet & Ordei . ditedj 3(1;& November, 1972 o'f. the Mysore.High Court in W.Ps. (;i .. ~ 2671, 26732681/68, 181, 19199, 1~~195, 200---21}4J61; 1 .. 1-8J93j61 and 2652665/68 tespettiftly. . . . -- - 2-Ut9SupCJI75
(1975] 2 S.C.ll.
SUPREME COURT REPORTS
512
R. 1. Kolah, (In CAs Nos. 450.451, 453, 468--471, ~79--484 of 74 only) A.. Jagannath Shetty, K. /.John, I. B. Dadacr1anji, 0. C. Mathur and Ravinder Narain, for the appellants.
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B. Sen (In CA. No. 437/74) Chandrakant ~aju, Advocate for Karnatka (In CA. No. 477 j74) and M. Veerappa, for the Respondents.
The Judgment of the Caurt was delivered by
B
1. Civil Appeals Nos. 437--451 & 477-489 of 1974.
MATHEW, J.-The appellants filed writ petitions before the High CourL of Mysore under Article 226 of the Constitution for a declaration that. the Mysore Elementary Education Act, 1941, and the amendments to it by the Mysore Elementary Education (Amendment Act XII of 1955) providing for levy and collection of Education Cess 00 items on which Education Cess is being levied as prescribed in the schedules ct the respective Acts were beyond the competence of the Mysore State Legislature and for refund of the Educational Cess paid during 1951-52 to 1965-66 on shop rentals and tree tax in respect of toddy and duty of excise in respect of arrack and special liquor. The High Court dismissed the writ petitions by a common judgment and thes~ appeals are directed against that judgment.
The Hir,h .CclUrt of Mysore had, in D. Cawasji & Co. v. The Stat~ of My sore and Others(1 ), struck down the provisions of the Mysore Elementary Education Act and the amendments to it on May 2, 1968. That decision was affirmed by this Court in State of Mysore and Others v. D. Cawas;; & Co. and Others(). Before the decisicn of this Co1,1rt, the Mysore Legislature had passed the Mysore Education Cess· (Validation and Levy) Act, 1969 on September 10, 1969 validating the levy and the collectioll of cess under ·the Act. But the Validation Act was held to be invalid by the Mysore High Court. The writ petitions were filed befcll'e the Hi Court in June and July, 1968, i.e. after the decision of the Mysore High Court in D. Cawasji & Co. v. State of Mvsore and Others(!) and before this Court rendered! its judgment.· · . ·
The contention of the appellantS before the High Caurt was that the payrtlents of cess in questicm were made by them under a mistake of law; that they discovered the mistake only on May 2, 1968 when the High Court, by its Judgment, declared that . the provisions of the Act and the amendments· thereto were unconstitutional, and that, as they filed the writ petitions within three months• of that decisiort. the writ ~titicms were within. time.
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· The High Court found that· there was delay in filing the petitions and, it was majnly for that reason that the High Court dismissed them.
In State of Madhya Pradesh v. Bhai(al Bhai and . Others(t) Des Gupta, J. who delivered the judgment of the Court, while holding that (I) (1968) 2 Mysore Law .Tournai 78. (2) (1971] 2 S.C.R. 799. (3) [ 1964] 6 S. C. R. 261.
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D. CAWASJI & CO. v. MYSORE (Mathew 1 J.)
513
In State of Kerala v. Aluminium Industries Ltd.(l) a Bench of seven judges of this Court followed the view taken in State of Madhya Pradesh v. Bhailal Bhai (supra) on the question of the period of limi~ F tatictn within which the petition has to be filed.
Section 17(1 )(c) of the Limitation Act, 1963, provides that in the case of a suit for .relief on the ground o'f mistake, the period of limitation ·does not begin to run until the plaintiff has discovered the mistake or could, with reasonable diligence, have discovered it. In a case where payment is made under a mistake of law as contrasted with G 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 befcre a court makes a pronouncement, it is seldom that a person can, even with reasonable diUJtence. discover a mistake of law before a judgment adjudging the validity of the law.
Therefore, where a suit will lie to recover moneys paid under a H mistake of law, a writ petition for refund of tax within the periOd of
(l) (196S) 16 S.T.C. 689.
[197S] 2 S.Clt, 2 S.Clt, S.C~lt,
114 SUPJtEME COUll T R.BPOllT9 [197S] 2 S.Clt, 2 S.Clt, S.Clt, limitlticil prescribed i.e. within 3 rem ol the knowledge of the milltake, would also lie. For filina ll wit petition to recover the montaJ plid under a mistake of law, thts Court bas sa1d that the starung pomt ot limitation i from the date on which the judgment declaring as void the particular law under which the tax was paid was rend~red, as that would nctrmaUy be the date on which 1he mistake becomes known to the party. If any writ petition is filed beyond. three years' after that date, it will almost always be proper for the court to consider that i• is unreasonabie to entertain that petition, though, even in cases where it is filed within three years, the court has a discretion, having regard to the facts and , circumstances o.f each case. not to entertain the applicttion.
We are aware that the result of this view would 1» to enable a penon to recover the amount paid as tax even after several years of the date of payment, if some other party would successfully challenge the validity of the law under which the payment was made and if oiY a suit or writ petition is filed for re by .the person within threo years from the date of declaration of the invalidtty of the ·law. That might both be inexpedient and unjust 10 far as the State il concen1eclt. A tax is Intended for immediate expenditure for the common good and it would· be unjust t~ require its repayment after it has been io. whole or in part expended, which would often be the case, If the iu.it or application could be brought at any time within three years of . a court declaring_ the law under which it was paid_ to be invalid, be it a hundered years' after the date of payment. Nor is there any provision under which the CCIW't deny refund of tax ·even if the person who paid it has collected it from his customers and has no subsisting liability or intention to refund it to them, or, for any re8$0n, it is impracticable to do so.
In the U.S.A., it is generally held that in the absence of a ·statuto to the ccmtrary, taxes voluntarily paid tmder a mistake of law with full know] edge of, facts cannot be recovered back while taxes· paid under a mistake of fact may ordinarily be recovered back (see CorpU$ J~tris Se¢undum, vo1. 84, p. 637). A1thouglt s. 72 of the Contract Act has been. held to cover cases of payment ct money under a mistake of 1E1w, as the State 3tands in a peculiar position In respect of taxes paid to it, there are perhaps practical reasons for the law according a different treatment both in the matter of the heads under which they could bo recovered and the period of llmitaticn for the recovery.
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The task of writing legislation to protect the interest .of the nation is committed to Parliament and the legislaures of the States. We. :ue refering to this aspect only to alert the attention to the present state of Jaw.
Now, the High Court relied on the decision of this Court in Til4,kchand Moticfrand and Others v. H. B. Mumhi, Commbslone of Srs Tax .. Bombay(1 ) for its conClusion that relief tor refund cannot be
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(I) 0970) lJ. S.T.C. 28!J.
S15
D. CAWASJI A CO. V• MYSOIUI (Mat/ww, /,)
A granted in the p~edinp alld that the appellants must resort- td the ordinar:r remedy bl euit!j
In Tilokchand Motichand'a case, the petitioners before this Coutt had realised several amounts from their customers outside Bombay eel acoount of sales tax. The Sales Tax Officer, by his order dated March 17, 1958, forfeite<f the same Wider s.21(4) of the Bombay Sales Tu: 8 Act, 1953. On March 28, 1958, the petitioners filed a writ petition in the High Court of Bombay seeking a writ ctf _mandamus_ restrainin: the Sales Tax Officer from recovering the amount from them on the ground that s. 21 ( 4) was _ultra vires_ the powers of the State LegislatUre and that the order of forfeiture was violative of Articles 19(1)(f) and 265 cJ the Constitution. On November 28, 1958, the writ petition was dismissed by a learned Single Judge on the ground that the peti~ _C_ tioners, having defrauded other persons, were not entitled to any relief. The appeal filed against the said order by the petitioners was dismissed on July 13, 1959. Before the appeal was dismissed, the Collector of Bombay attached the petitioners' prcperties at¢ the petitioners paid the amount to the Collector of Boml:iay between August 3, 1959 and August 8, 1960. In Kantllal Babulal & Bro.r. v. H. C. Patel(l) de· clded on September 29, 1967, tbis Court struck down s. 12A(4) of D the Bombay Sales Tax Act, 1946 as violative of Article 19 ( 1 ) (!) . The petiticners thereupon filed a writ petition under Article 32 of the ~onstitution on February .9, 1968, claiming refund of the amount paid by theni under s. 72 of the Indian Contract Act, 187Yon the &round that they paid the amount under a tnistake of law and that they discovered the mistake oitly when this Court struck down s. 12(A)(4) of the crnbay Sales tax Act, 1946. The petitioners also alleged that E ifiey paid the aniouiit to the collectOr under coercion ~d they were entitled to recover the same. The contention of the petitionerS wa;, for the grounds cin which this Court struck down s.12A(4) of the Bombay Sales Tax Act, .1946, s.21 (4) of the Boml;>ay Sales Tai ACt, 1953; was also liable to be stnick doWn. It was in these circumstana!'8 that this Court h to consider the question whether the petitiOmn ' :;::tm~ ,}fer~~~~uoi~~:tra: ~ rru~~:2eC::ti:~ ~ · . fore it shffii1t1 be disriU8sed. maayatbllah, C.J: observed :
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"His (the petitioner's) contention is that the ground OJl which his petition was dismissed was dlflerent and the Jrolind on which the statute wail struck down was nQt within bJI owledge iuid t))erefore he did not know of it end purSUO it in this Court. To that I answer that law will pre.sume ..hat he knew the exact ground of unconstitutionality. EverybOdy is presumed to know the law. It was his dtity tCI hilvo brought the matter before this Court for consideration. IB any event, having set the machinery of law in motiem, _he cannot abandon it to resume it after a number of years, be> cause another perscn more adventurous than him in his t got the statute declared unconstitutional, and got a favur able decision. . . . . I agree With the opinori of my brethi'ea
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SUPRME COURT .RPOR~~ :: : :.: .· .. : {1975'J .S.C.R·. ·, . , "• . . I . i and Mitter, JJ. that the: is is no q?estion here here of A
Bahawat and Mitter, JJ. that the: is is no q?estion here here of · a mistake of law entitling the petitioner to mvcj}c:e analogy of the Article in the Limitation Act .... ".
·B.ach .awa~, ]. said that the payment made by the petitioners wer~ made ·not under any mistake of law and. therefore, they cannot claun any relief on the ground of mistake: Mitter, J. was <?f. the vie~ that af_ter lhe decision of the Bcnnbav H1gh Court. the pet1ttoners d1d not Wlllingly pay the amount torfcitcd, but that they made. the payment after attachment of their propcr1t~::s and, thcr~ t ._.t·..;, th~ amounts were really pajd under coercion and the period of limitation would normally run from tl.te date elf the payment.
B
We arc not quite sure that if the ma:um that cwryon<! is presumed to know the law is applied, there will be any case of payment under a mistake of law unless that presumption is rebutted in the first instance, for, the moment it is assumed that everyone is presumed to know the law, it is clear that no one can make a mistake as to the law. It is sometimes said that every num is presumed to know the law. but this is only a slovenly way of stating the truth that ignorance of the law is oot in general an excuse( l) ... There is no presumption in this country that every person knows the Jaw; it would be contrary to common sense and reason if it were so" (2 ).
D ·
· Be that as it may, the High Court deduced the conclusion from the decision in Tilokclrand 1.fotichand's (supra) case that the question whether a declaration by a court that a taw is unconstitutional and therefor~ void would not aJways furnish the starting point of limitation .tor a. SUit for recovery of the amount p :.1.id under that taw and that the qU:est1on must be decided on the fact~ of each case. The Court further s1d that the P:lrtics should seck rclicl under Article 226 as expedi!10usly as poss1blc .ad vcn .if te ordinary remedy by way of a ~ujt 15 not bar_red by lumtatlon. tt wtll be proper exercise of discrl!tiOn under Art1clc 226 of the Constitution to decline to interfere in cases where ~e persons approach the court after several years, in the absl!nce ~f spectal and suftictcnt grounds.
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M J!.to,:J.thing is clear from the judgments rendered in Tilokchand tl •0 c t .care (supra) by the Judges who formed the maiority, it is 119 • ey •d not cons1dcr the payments made by the pctitico.ers as Ptnents made under a mist~1ke of law. Therefore. we do not see the rc cvance of that case for the decision of the case here.
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.· But •. hat boever, b; not the end or the matter In the earlier /t ~.etatJOns whJch culminated in the decision in D. Cawasji & Co v, fUI r~~ of Myore0 n1 Other1 (supra) the appella.nt did pray for.reconsidcred eth:onts paid by ther;t under the Act nnd the High Court nllowcd the rf :Yr {Qr refund. n each of the writ petitions and the grounu ~ J.{ m me PChhons and reiected it in the others on whos prayers hJ~ 1 c~.Cotrt observed that thce writ petitiofl':rs · ll -:7:"'~-:::·---- en TcJCCtcd would be at liberty to institute suits
(I) See Frederik PoHock .. J . (2) Sec Maule : umprudcnce un leaal &.'lays". p. 89. • J.ln_ McrtmriCJie v. Falk"' ( 18-'6> 2 C. B. 706.719.
D. CAWASJI & CO. v. MYSORl~ (Mathew, !.)
517
We dismiss the appeals but make no order as to costs.
II Civil Appeals Nos. 452-476 of 1974
SUPI.Elfl OOUlT lEii'OlTS
[t9n] 2s.c.Jt
8Dd collection of health ces.1 under the 19~,1 Act u wen as under the 1962 Act filing writ petitions before the High Court of Mysore. They were disposed of by a coJDJllOn judgment [see Suram Buth & Co. v. T~ Deputy CommiSsumer (Exciu) d: Another (I)]. By th:) judgment, the High CCAJit struck down explanation to clause ( 1 ) oi Schedule A to the 1962 Act but rejt:cted all other prayers. That decision was challenged before this CA:1urt and this Court, by its ju.dl" ment dated September 26, 1966 (see Shinde Brother~ '· DepuJy Com- missioner() declared that the Stlltc of Mysorc hud no competenco to levy and ¢ollect health cess under the Mysorc Health Cess Act, 196.2, em shop rent and directed refund of health cess illeglllly 1col• lectod under the Henlth Cess Ac:t, 1962. And aR re:ar.uda the prnycr tor deolnrntlon thnt tho levy af heftlth ccs under the 19S 1 Aet wal Ulea;nl Md fgr rl.'lf'und of the eeNa collected under tht Aet, tbl• Cmm deellned. to MO into dun Q\JC:tlon; tho Court however, Mllld tbat utbl petlttonon wlU, however, ho ftt IIbert~ to dlt:l aultt, if !lPf ftdvJed!, to recPvr th~ tm()unt Pllcic.d to hnvo ben. ptdd tty them undr th!! HenJtb Ceu Act, 1951", Withlq wg mQnthli of lh dl8posnl of ftppool by thi~ Court, tht oppellut1 IUed writ p@thlonK foro tho Hlnh Caun ohAllcn&lns ~ viUdJf)l of th.tl 19 l Aof ttnd Jmyln.JIer rehmd of befllh eeM fJOU,.:tcd under the 19'1 Aet for the rlod from 19,1·! to l961·6l, Tho High Court held that thero · wa• lnordinPtc del~~ in ftUna tho mlt petl tlont and dismissed them on that around without ~QtoMJ into thQ lllCdta of the pctltJons. ·
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The appellant!! contended that the Hi.gb Court mnt wroq J.u dis~ missing the writ petition~ on the ground that there was inordinato delay in filing them. It may be recalled that the 19~ 1 Act had tCe. repealed iD .1962 and that the refund was claimed in respect of tm amounts paid bdore 1962 under the 1951 Act. Merely because t1m O>urt has said that the appellants can challenge the validity of tm Act, ·if they are so advised, by a suit, it would not follow that they can challenge its 'alidity in writ petiti~ without encountering Iegititltlito pleas available to the respondent. It there was inordinate delay in filing the writ petiti~, there was nothing in the judgment of tbb Court which prevented the High Court in disminina them on that JTound. The reason why this Court did not ao into the questictl of the validity of the 1951 Act was that relevant material8 were oot placed before the Court by the appellants. When this Court said that the appell~ts, if so advised, were at liberty to file suit for the r~~lief claimed, it cannot be taken as a sanctiC«l to the appellants by thi8 Court for approaching the High Court for relief under Article 226
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(1) (1966) l :Mysorc Law Journal 5S4. (2) A.I.R. 1967 S.C. 1512.
, .. ·. ~ .
t519
J). CAWASJI & CO. v. MYSORE (Mathew, J.)
P.B.R.
App~als dismisud.
| • .•. |
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2 issues framed by the court
When does limitation begin to run for a writ petition seeking refund of tax paid under a mistake of law?
Whether the High Court could refuse refund under Article 226 on grounds of delay despite payments being made under an unconstitutional levy?
Colour shows how this judgement treated each authority
State of Madhya Pradesh v. Bhailal Bhai and OthersRelied on¶32
[1964] 6 S.C.R. 261 · Who else cites this
State of Kerala v. Aluminium Industries Ltd.Followed¶42
(1965) 16 S.T.C. 689
Tilokchand Motichand and Others v. H. B. Munshi, Commissioner of Sales Tax, BombayDistinguished¶78
(1970) 25 S.T.C. 289
6 provisions across 6 enactments
D. Cawasji & Co.
State of Mysore
K. K. Mathew
A. Alagiriswami
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
