TMI Blog1985 (11) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... e bad inasmuch as the State failed to produce any material whatsoever to show that it was rendering some or other service in lieu of the said fee. The declaration granted by the Court is to the following effect : We are, therefore, constrained to hold that the imposition of the Gallonage Fee of the nature and dimension of that fixed by the Denatured Spirit Rules of Hyderabad and Andhra Pradesh is invalid. A writ will, therefore, issue to the respondents to restrain them from collecting Gallonage Fees on denatured spirit at the rate of one rupee per gallon. The petitioner had also prayed for refund of the Gallonage Fee collected from him from March 1966 onwards. We see no justification for granting a refund of the Gallonage Fee paid by him prior to 1969 as he had done so without any protest. The petitioner is, however, entitled to a refund of the Gallonage Fee paid from 1969 onwards. A direction to that effect will issue. The writ petition is accordingly allowed ..... 2. The said writ petition was filed in 1969, and the decision was rendered on 6-3-1972; it is reported in M/s. Syntho Pharm v. Commissioner of Excise (1972) 2 Andh. WR 260. The plaintiffs/appellants herein were n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on various subsequent dates when he sent reminders 4. The State of Andhra Pradesh resisted the suit. It was pleaded in the written statement that, inasmuch as the plaintiff paid the said fee without any objection or protest, and voluntarily, he is not entitled to recover the same; the plaintiff is estopped from asking for refund; he is not a party to the aforesaid judgment. Further, the plaintiff having obtained the stock and dealt in intoxicants is now not entitled to claim the refund of the amount after having the benefit of supply and possession of, and business in denatured spirit on which the gallonage fee is paid. Further, the petitioner has passed on this amount to the third-parties who have taken the denatured spirit from him or the French polish in which the same is used. The petitioner cannot have undue enrichment of refunding the amount to third parties to whom it is passed on the suit is barred by limitation; Section 71 of the Contract Act has no application; the plaintiff is not entitled to refund under any equitable principle. 5. On the above pleadings; the trial Court framed the following nine issues:- (1) Whether the plaintiff is entitled to claim interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Contract Act, erred in holding that the suits were barred insofar as they related to the amount paid prior to 6-3-1969; the cause of action for filing the suits arose only on 6-3-1972, i.e., the date on which a Bench of this Court delivered the judgment in Syntho Pharm s case (1972-2 Andh.WR 260) (supra); the suits have been filed within three years therefrom; they are, therefore, not barred; there is no other Article or provision in the Limitation Act which bars the plaintiffs claim; accordingly, the entire claim ought to have been allowed; and (ii) the State is estopped from refusing to refund the amount illegally collected by it, inasmuch as it has not chosen to file appeals questioning the trial Court s decree granting refund for a period of three years; the levy and collection being illegal, the State is bound to refund the same, and it is unjust for the State to refuse to do so and thereby deprive a citizen of the amount which he paid under a bona fide mistake of law. 8. On the other hand, the learned Advocate-General, appearing for the State, submitted that the plaintiffs suits ought to have been dismissed inasmuch as allowing their claim amounts to unjust enrichment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a statutory provision, does not fall under Section 72, since the concept of either a contract or a quasi-contract is inappropriate to such a situation. However, in view of the decision of the Supreme Court in Sales Tax Officer v. Kanhaiya Lal, A.I.R 1959 S.C. 135, it must be held that even a tax paid under a mistake can be claimed back under the said provision. This decision, upon which substantial reliance is placed by the learned counsel for the appellants, establishes the following propositions, relevant in this behalf. They are : (i) The expression mistake occurring in Section 72 is not confined to mistake of facts, but extends to mistake of law as well. This is the decision of the Privy Council in Shiba Prasad Singh v. Srishchandra Naudi, A.I.R 1949 PC 297, which resolved the conflict of opinion among the Indian High Courts on the question. (ii) Unlike English, American and Australian law, money paid under a mistake of law can be recovered in India. (iii) Tax paid under a mistake of law can also be recovered under Section 72. (iv) However, proposition (iii) above does not imply that every sum paid under mistake is recoverable, no matter what the circumstances may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estitution. In Bibrosa v. Fairbairn 1943 AC 32, Lord Wright has stated the legal position as follows :- ..... any civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is, to prevent a man from retaining the money of, or some benefit derived from, another which it is against conscience that he should keep. Such remedies in English Law are generically different from remedies in contract or in tort, and are now recognized to fall within a third category of the common law which has been called quasi-contract or restitution. In Nelson v. Larholt (1948) 1 KB 339 Lord Denning has observed as follows :- It is no longer appropriate to draw a distinction between law and equity. Principles have now to be stated in the light of their combined effect. Nor is it necessary to convass the niceties of the old forms of action. Remedies now depend on the substance of the right, not on whether they can be fitted into a particular framework. The right here is not peculiar to equity or contract or tort, but falls naturally within the important category of cases where the Court orders restitution if the justice of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced by it in support of its plea of unjust enrichment, the State should not be allowed to raise the said contention in these appeals. On the other hand, it is for the plaintiff to plead and satisfy the Court that, by grant of relief to him, he would not be unjustly enriched. Evidently, a provision of law designed to prevent unjust enrichment cannot be made use of precisely to gain unjust enrichment. In the present case, the State expressly pleaded in the written statement that the grant of relief to the plaintiff would amount to undue enrichment of the plaintiff, inasmuch as he has passed on this amount to third-parties. Indeed, apart from the plea of limitation, this was the only other defence put forward by the state. True it is that there is no issue on this aspect; but, there were issues which clearly took in this aspect as well. Issues 3, 6 and 7, which related to the plaintiff s right to claim refund under Section 72 of the Contract Act, and also to the question whether the plaintiff was estopped from claiming the refund of the amount, did take in this plea. Moreover, it was for the plaintiff to establish that, by grant of this relief, he would not be unjustly enriched, it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded yarn manufactured by them .......the excise duty paid on to the buyer of the fabric ...... It is in the background of these undisputed facts that we are called upon to decide the question whether the Mills are entitled to claim refund of the excise duty paid on blended yarn from the Revenue. Having regard to the above facts, can it be said that they have suffered any loss or injury as a result of the transaction in question? The answer has to be in the negative. If that be so, how can the Mills be said to be the real owners of the money in the form of excise duty which is alleged to have been retained by the Revenue? ........ Therefore, if anybody is entitled to restitution, it is the buyer of fabric and not the Mills. If the claims made by the Mills were to be allowed or granted, that would undoubtedly result in injust enrichment of the Mills for though they have not suffered any loss or injury they would get the refund of excise duty paid by them to the Revenue. That is not the object with which Section 72 of the Contract Act is enacted ......". We respectfully agree with every word in the said observations. Indeed, they correctly echo our thoughts, and give expression to o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions cited by the parties before us. At the outset, we may say that the decisions on this question have not been uniform. It is only in very recent times that the Courts have come to emphasize the equitable nature of the remedy contained in Section 72, and the implications flowing therefrom. In earlier cases this aspect was neither raised, nor considered and therefore, the relief of restitution granted; but, when the equitable nature of the relief was raised with reference to the theory of unjust enrichment, the Courts refused to grant relief unless the plaintiff pleaded and proved all the facts which go to establish that he has suffered some loss or injury which must be made good by granting the equitable relief of restitution under Section 72. 16. The first case cited by Mr. N. Rajeswara Rao, the learned counsel for the plaintiffs/appellants, is in Sales Tax Officer v. Kanhaiya Lal, A.I.R 1959 S.C. 135. The petitioner in this case was a dealer under the U.P. Sales Tax Act. He paid sales tax on the forward transaction in silver-bullion entered into by him; the levy of sales tax on forward transaction was held to be ultra vires by the Allahabad High Court by its judgment in Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a Bench of the Bombay High Court. In this case, it was held that, an amount of duty illegally collected is refundable, even though it was recovered from the consumers by the manufacturer and may result in his unjust enrichment. With respect to the learned Judges, we are unable to agree with the said view, for the reasons discussed hereinbefore. Moreover this decision is clearly contrary to the later decision of the Supreme Court in State of M.P. v. Vyankatlal, A.I.R 1981 S.C. 901, as we shall presently show. 19. Mr. N. Rajeswara Rao then relief upon the decision in Union of India v. I.T.C. Ltd., 1985 (21) E.L.T 655 (Kant) in support of his contention that the plea of unjust enrichment cannot be allowed to be raised by the State for the first time in appeal. It is true that the said decision does say so; but, we are unable to agree with it, in view of the decision of the Supreme Court in Mulamchand v. State of Madhya Pradesh (A.I.R 1968 S.C. 1218), the principle of which, we have held, is equally applicable in a case arising under Section 72 of the Contract Act. It is not necessary to repeat the reasons over again here. This is a decision of the Karnataka High Court. 20. We th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciple of restitution, underlying Section 72 of the Contract Act, the Court s discretion to grant or refuse the relief is intact, and has to be exercised only to further the ends of justice and to prevent unjust enrichment, and not for the opposite purpose. 22. The next decision is of another Bench of this Court in Godavari Plywoods Ltd. v. Union of India, 1984 (18) E.L.T 732. This was a case where refund of excise duty paid under a mistake of law was sought, by way of a writ petition. It was held that, inasmuch as the burden of excise duty has been passed on to the consumer, grant of refund to the manufacturer is not permissible, since that would amount to unjust enrichment of the manufacturer. The directive principles contained in Articles 46 and 36 of the Constitution, as also the underlying the spirit of our Constitution, were relied upon to come to that conclusion. We agree with their views. 23. At this stage, we may refer to another Bench decision of this Court in Kesoram Cements, Basantnagar v. Union of India, 1982 (10) E.L.T 214, where it was held that, the refund of an illegally collected duty cannot be denied by the department on the ground that the assessee has passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in Orient Paper Mills Ltd. v. State .of Orissa, A.I.R 1961 S.C. U38, where it was held that, a tax paid under an invalid law has to be refunded to the dealer. The Supreme Court, however, noticed its later decisions in Shiv Shanker Dal Mills v. State of Haryana, A.I.R 1980 S.C. 1037; Newabganj Sugar Mills v. Union of India, A.I.R 1976 S.C. 1152; and Amarnath Omprakash v. State of Punjab, A.I.R 1985 S.C. 218, and in particular to the following passage occurring in Amarnath Omprakash s case : We do not see how a mere declaration that the levy and collection of fee in excess of Rs. 2/- per hundred would automatically vest in the dealer the right to get at the excess amount when in fact he did not bear the burden of it and when the moral and equitable owner of it was the consumer public to whom the burden had been passed on. The primary purpose of Section 23A is seen on the face of it; it prevents the refund of licence fee by the market committee to dealers, who have already passed on the burden of such fee to the next purchaser of the agricultural produce and who want to unjustly enrich themselves by obtaining the refund from the market committee. Section 23A in truth, recognise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kash v. State of Punjab, A.I.R 1985 S.C. 218, referred to above], the Court would not grant the relief of refund where the plaintiff has not really suffered any loss or prejudice he having passed it on to others, doing so would be the negation of the very equitable principle underlying Section 72. In other words, instead of preventing unjust enrichment, such grant of refund would amount to unjustly enriching a person, certainly the Court would not lend its hand to such a course in the name of giving effect to an equitable principle. It is equally relevant to mention that, in this decision, the Supreme Court has also noticed its earlier decision in Sales Tax Officer v. Kanhaiya Lal, A.I.R 1959 S.C. 135, besides the decision in Orient Paper Mills Ltd. v. State of Orissa, A.I.R 1961 S.C. 1438. This decision is an important mile-stone in the development of law under Section 72, and we respectfully follow it, as indeed we are bound to. We are also of the opinion that, the said decision lays down a very salutary rule of equity. Today we find that dealers and businessmen collect sales tax, market fee, and other similar impost from public on the representation that it has to be made over t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in Vyankatlal s case (A.I.R 1985 S.C. 901) (Supra). We are of the opinion that the dealers and manufacturers cannot equate themselves with the State. The funds of the State belong to the people, while the funds of the dealers and manufacturers belong to themselves. Public policy demands that the Court should not exercise its powers to unjustly enrich any one at the cost of the State, or at the cost of the consuming public. 26. For the above reasons, we hold that the plaintiffs suits for refund must fail; but, inasmuch as they have already been decreed partly against which the State has not filed any appeal, we cannot disturb the decrees of the trial Court; we cannot grant any further relief in these appeals. 27. There is yet another ground why we should deny relief to the plaintiffs. They did not file any writ petition questioning the levy of gallonage fee; another person, Syntho Pharm questioned the same and succeeded. He had expressly asked for refund in that writ petition. He was granted refund only from 1969 to 1972, i.e. the fee which he paid under protest; the fee which he had paid prior to 1969 without any protest was refused to be refunded. Do the plainti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt regarding the invalidity of lavy. 29. On the other hand, the learned Advocate-General contended that every person is supposed to know the law, the plaintiffs must be deemed to have known about the illegality of the levy on each occasion they made the payment and, therefore, it is each payment which gives rise to the right to sue, and not the pronouncement of the Court. Support is sought from certain decisions for this proposition, which we shall presently refer to. 30. Before, however, we refer to the decisions, it is well to notice a basic fact. If every one is supposed to know the law, then the very concept of mistake of law becomes inappropriate and meaningless. An absolute and total adherence to the rule (every one is supposed to know the law) is likely to lead to unjust consequences in many cases. The said rule has to be counter-balanced with the fact that the law itself recognizes the concept of mistake of law. The decisions show that all these years the Supreme Court and other Courts have recognized a decision of a high Court or the Supreme Court, declaring a law or a rule to be invalid, as constituting the starting point of limitation for filing suits or petitions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasonable diligence, discover a mistake of law before a judgment adjudging the validity of the law. It is not possible for us to treat the said observations of the Supreme Court as obiter, and ignore them. In fact, these observations have been followed by the High Courts all over the country uniformly. Secondly, even the obiter dicta of the Supreme Court are held to be binding on the High Courts. It cannot also be said that the said observations are more in the nature of loud thinking and do not constitute a considered opinion. There is no decision of the Supreme Court which takes a contrary view; hence we must follow the same and hold that the suits were filed within limitation. 32. We may now consider the decision cited by the learned Advocate-General Reliance is placed upon the following observations in the opinion of Hidayatullah, C.J. in Tilokchand Motichand v. H.B. Munshi, A.I.R 1970 S.C. 898 :- To that I answer that law will presume that he knew the exact ground of unconstitutionality. Everybody is presumed to know the law. It was his duty to have brought the matter before this Court for consideration. In any event, having set the machinery of law in motion he cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is applicable to this case, a suit for recovery of such excess duty had to be filed within three years from the date of payment to the Department." In our opinion, these observations do not run counter to the principle enunciated by the Supreme Court in Cawasji s case 1978 (2) E.L.T (3 154) = A.I.R 1975 S.C. 813. They must be understood in the particular facts of that case. In this case, the plaintiff failed to allege and establish the date on which he discovered the mistake of law or the date oh which he could, with reasonable diligence, have discovered it. Moreover, the plaintiff appellant had earlier filed a writ petition challenging the levy, but withdrew it in view of cl. (3) of Article 226 of the Constitution, as it then stood. (The said clause introduced by Constitution Forty Second Amendment, barred the remedy under Article 226 where an alternative remedy was available). After withdrawing the writ petition, he pursued the remedies provided by the Act, and then again came to the High Court by way of a writ petition. In other words, in this case, the appellant was aware of the illegality of the levy and had even challenged it in Court. In such a case, he could not contend t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing out of a suit where the question of limitation was considered was brought to our notice. Further most of the cases are cases declaring the law as void under which the tax is assessed and collected. Hence we have anxiously considered the rule of limitation when a suit is filed for the refund of the tax illegally collected. 40. It is well known, the first mile-stone in this branch of law is Sales Tax Officer v. Kanhaiya Lal, A.I.R 1959 S.C. 135. The levy of the sales tax on forward transactions was held to be ultra vires and not within the powers of the U.P. Legislature and the assessee asked for quashing the assessment orders and for a writ of Mandamus requiring the State to refund the amounts collected. The High Court granted relief as prayed for. On appeal by the State the Supreme Court affirmed the said judgment and sustained the claim under Section 72 of the Contract Act 9 of 1872. Three principles emerge from the said judgment : (i) The term mistake used in Section 72 of the Contract Act embraces mistakes of fact and mistake of law, (ii) Tax paid under mistake of law can be recovered under Section 72 of the Contract Act, (iii) However, such recovery will be subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e money paid to him either by mistake or under coercion. The present article under the Limitation Act for refund of tax collected under coercion is Article 24 and the period of limitation begins when the money is paid. The said article corresponds to Article 62 of the previous Limitation Act and this legal position is settled by the judgment of the Supreme Court in Venkata Subbarao v. State of A.P. (A.I.R 1965 S.C. 1773). The language used in Article 24 and Article 62 does not speak of payment or collection of levy by State either under coercion or otherwise but the Court on a construction of the article held that such collections are within the contemplation of the Article. The said case arose out of a suit filed by the dealers when the State collected excess amount from them while they were acting as procuring agents of paddy. The Court treating such compulsory collection as a tax under coercion held that the proper article applicable is Article 62. Accordingly it was held, the money received as a tax by the defendant-State from the plaintiffs which the plaintiffs were not bound in law to pay but which they were compelled or forced to pay because of the threats or apprehension of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercise the discretion in favour of the petitioner in view of the delay. Justice Sikri and Hegde, J., held that the payment clearly constitutes a payment under mistake of law and the State is bound to refund the amount as the cause of action arose when the Supreme Court delivered the judgment. Hidayatullah, C.J. observed : The question is : can the petitioner in this case take advantage, after a lapse of a number of years, of the decision of this Court? He moved the High Court but did not come up in appeal to this Court. His contention is that the ground on which his petition was dismissed was different and the ground on which the statute was struck down was not within his knowledge and therefore he did not know of it and pursue it in this Court. To that I answer that law will presume that he knew the exact ground of unconstitutionality. Everybody is presumed to know the law. It was his duty to have brought the matter before this court for consideration. In any event, having set the machinery of law in motion he cannot abandon it to resume it after a number of years, because another person more adventurous than him in his turn got the statute declared unconstitutional, and got ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umed to be valid until it is struck down by a competent Court. The fact after a futile attempt to get the provision in question declared invalid the petitioners gave up their fight and submitted to the law which was apparently valid is no proof of the fact that they know that the provisions in question is invalid. And held that the petitioner committed a mistake of law and his petition is fit to be accepted. We quoted these passages in extenso to show how difficult it is to come to the conclusion that a particular set of facts constitutes a mistake or a coercion and which limb of Section 72 of the Contract Act shall apply when in particular separate articles apply to different situations in respect of the payment of the tax. 42. Now we shall look to D. Cawasji Company v. State of Mysore, 1978 (2) E.L.T (J 154) = A.I.R 1975 S.C. 813, on which great reliance and emphasis is placed by the learned counsel for the appellants. That case also arose out of a writ petition where in the first batch of writ petition the High Court of Mysore struck down the provisions of the Elementary Education Act holding that the provisions of the Act providing levy and collection of educational cess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limitation is from the date on which the judgment declaring as void the particular law under which the tax was paid was rendered, as that would normally be the date on which the 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 it is unreasonable 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 of each case, not to entertain the application. The above dictum also arises out of a writ petition. The learned Judge no doubt made observations which are fully in favour of the appellant. But one thing is clear, this is a case where the Act was struck down as unconstitutional and the tax paid under unconstitutional law is sought to be recovered treating the proceedings as void. Whether the appellants herein can invoke such principle in their favour on the strength of this judgment which declared that the collection of gallonage fee is illegal will be examined by us presently. 43. The last case in these series of the Supreme Court is one reported in Shri Vallabh G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, is a case, a suit for recovery of such excess duty had to be filed within three years from the date of payment to the Department. This case establishes the requirement of proving the diligence in discovering the mistake in invoking Section 72 of the Act even though the payment of tax was considered to be one made under mistake of law. 44. The word mistake as defined by Story, J., in his wellknown Treatise on Equity Jurisprudence as contra-distinguished from accident runs thus : This is sometimes the result of accident, in its large sense; but, as contra-distinguished from it, it is some unintentional act or omission, or error, arising from ignorance, surprise, imposition, or misplaced confidence." It is necessary to bear in mind that in order to invoke the extended period of limitation either under Article 96 of the old Limitation Act or under Section 17 of the present Act, the mistake must have occurred on the date of the payment but not on an event that occurred subsequent to the date. The word discovered occurring in Section 17 pre-supposes that the mistake exists actually even before the discovery. The several dicta occurring in the decided cases that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equitable to allow the party to retain the money received by him. However when money is paid when the law is in payee s favour it cannot be recovered by reason a subsequent judicial decision reversing the former understanding of the law. (Vide Halsbury s Laws of England Vol. 32, Fourth Ed., para 72 at page 43). The dictum of Sir Wilfrid Greene, M.R. occurring in Derrick v. Williams, (1939) 2 All. ER 559 at p.565 is pertinent in this connection. The learned Judge was commenting about the amendment to a pleading permitted by the Court below on the ground that the party has committed mistake of law in making the payment in view of a judgment of House of Lords delivered subsequent to the payment. He said : The substantial point, however, apart from the question of procedure, is one upon which, in my opinion, this amendment also fails. In a nutshell, the amendment is as follows : I am entitled to withdraw my consent to having my claim satisfied by the money paid into Court, because, at the time when I so consented, I was under a misapprehension as to the law." It was suggested by counsel for the respondent that there was some mistake of fact. Even if that would have helped him - and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oid and any assessments made and orders passed become void ab intio and they need not be set aside and a citizen can seek redress without formally requesting the Court to set aside the orders that have become final but when there is only change of law on an interpretation. The assessments will become illegal and the assessee cannot seek redress without setting aside the orders that have become final. [Vide Madras Rubber Factory Ltd. . Union of India, 1981 (8) ELT 879 (Delhi)]. In each case the Court has to examine whether the mistake of law is one occurred due to unconstitutional law which was void or due to any change of law by different interpretation placed by the Court. In the former case there may be justification for a citizen to rely upon a subsequent judgment as the assessments have become void when the law itself is truck down but in the latter case it is clearly a subsequent event and it cannot give him a right to plead the mistake of law to postpone the starting point of limitation. 46. In this connection it is necessary to note the vital distinction between Section 17 and also Article 96 of the previous Act. Under the previous Limitation Act it is enough if the plain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7). But the difficulty arose when the Supreme Court extended this doctrine for the recovery of the tax paid under a mistake of law also and that is the law of the land binding on us. However we are emphasising these aspects to show, that the private law remedy of a suit is quite inadequate to work out equities between the State and the citizen and the Supreme Court may have to re-state the law in view of the compelling public need when an occasion arises. Sections 70 and 72 occurring in Chapter 5 of the Contract Act relating to quasi-contracts cannot be effectively employed in working out the rights between the State and the citizen, in particular when tax was collected under unconstitutional law. Those provisions can be resorted to when excess payment is made or when the contract entered into by the State was found to be void, and in all other cases where the relationship between the State and the citizen is quasi-contractual. 47. The right of a citizen to obtain refund of tax collected under unconstitutional law by filing a suit was upheld in Venkataraman Co. v. State of Madras, (A.I.R. 1966 S.C. 1089) and it is held that Article 96 of the previous Limitation Act applies to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of 5 to 10 years. In the absence of any provision analogous to Section 29 of the English Act, in our Limitation Act, the Courts are bound to interpret Section 17 strictly and the non-compliance of the same is fatal to the plaintiffs case. 49. The result of our discussion is that the Civil Court before whom the suit is laid for recovery of tax illegally collected, has to apply the following tests before according relief to the plaintiffs. (a) The Court should see whether the suit is laid for recovery of tax paid under mistake or under coercion. In the former case Article 113 of the Limitation Act applies and in the latter case Article 24 applies. (b) Whether the law was declared unconstitutional or only the proceedings were held to be illegal under the judgment relied on by the plaintiffs. (c) If the law is declared unconstitutional all the proceedings taken under that law in respect of every citizen be treated as void and the period of limitation will start as per Section 17 of the Limitation Act from the date of that judgment. (d) If the Court merely construed the statute and declared that any proceedings are illegal, the plaintiff who is a third party to the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opose to amine the correctness of the view expressed by the Division Bench in view of this subsequent judgment of the Supreme Court. We proceed on the basis that it is correct. However the result of this judgment is, the law is not struck down but the collection of the fee was held to be illegal. Rule 3 of the Andhra Pradesh Denatured Spirit and Denatured Spirituous Preparations Rules, 1971 empowers the authorities to collect the gallonage fee at one rupee per gallon and the said gallonage fee shall be paid by the licensee before a transport permit is granted. Rule 64 further states the transport permit shall not be granted before payment of gallonage fee. The said Rule 3 was not struck down but what was held is that the collection of the fee is illegal as the services were not commensurate to the fee charged. The State can show commensurate service at any time and sustain the collection of fee. Hence we cannot proceed on the basis that the law itself is unconstitutional when the levy alone is held to be illegal, and hence the plaintiffs cannot rely upon this judgment under Section 17 of the Limitation Act to extend the period as a starting point of limitation claiming that the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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