TMI Blog1977 (6) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... works in accordance with the specifications and the terms of the agreement. It is stated that all such contracts including manufacture of bricks were works contracts and were executed in 1953. In terms of the letter dated 24th July, 1971, being annexure B to the petition, it was agreed that if any sales tax is payable on the transactions involved in the execution of the said contracts, such sales tax is to be realised from the Corporation of Calcutta separately. It appears that by a letter dated 22nd September, 1953, the Commissioner of Commercial Taxes wrote to the Commissioner of Calcutta Corporation that the petitioner being a dealer registered under the Act is liable to pay tax to the Government on the sale price of the contracts executed by it in favour of the Corporation of Calcutta. The petitioner filed its returns as a dealer and assessments were made and sum of Rs. 53,045.10 was determined to be the sales tax in respect of the transactions involved in the execution of the contracts with respondent No. 5. The said sum represented the sales tax for the years 1951-52 to 1954-55. The petitioner deposited the said amount with the Reserve Bank of India. In terms of the agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... works not involving sale of goods. As a result of the judgment delivered by Hazra, J., on 1st March, 1972, the petitioner has discovered the mistake under which it had paid to the taxing authorities sales tax in respect of those works contracts and as the petition has been moved immediately thereafter, the said assessments are liable to be quashed and the amount of tax paid in respect of those contracts are liable to be refunded to the petitioner. Counsel for the respondents did not seriously contend that the contracts in question were not works contracts. He, however, contended that the assessments were made on the understanding of the law as it prevailed at the relevant time. If, thereafter, the Supreme Court gives a different interpretation of the law, the assessments remain valid assessments and until the remedies are resorted to under the Act for setting aside those assessments, there cannot be any claim for refund. It has been further contended that, in any event, the judgment in the case of State of Madras v. Gannon Dunkerley Co.[1958] 9 S.T.C. 353 (S.C.); A.I.R. 1958 S.C. 560. was delivered on 1st April, 1958. The petitioner in the present case has moved this application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f those transactions. It is now well-settled that under section 72 of the Indian Contract Act, 1872, a party in entitled to recover money paid by mistake or under coercion, and if it is established that the payment, even though it be of a tax, has been made by the party labouring under a mistake of law, the party receiving the money is bound to repay or return it though it might have been paid voluntarily, subject however to question of estoppel, waiver, limitation or the like: (Sales Tax Officer, Banaras v. Kanhaiya Lal Makund Lal Saraf [1958] 9 S.T.C. 747 (S.C.). The term "mistake" appearing in section 72 of the Indian Contract Act is wide enough to comprise within its scope a mistake of law as well as a mistake of fact. The only two circumstances that entitle a party to recover the money back are that the money must have been paid by mistake or coercion. When an assessment has been made under a provision of the statute which is subsequently declared ultra vires a payment made on the basis of such an assessment can be treated as one made under a mistake of law. There is hardly any difference between such a case and the one where there is no provision or authority for an assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he special remedy provided in article 226 of the Constitution is, however, not intended to supersede completely the modes of obtaining relief by an action in a civil court or to deny defences legitimately open in such action. The power to give relief under article 226 is a discretionary power and it is specially so in the case of power to issue writs in the nature of mandamus. Among several matters which the High Court in the exercise of such discretion has to take into consideration is the delay made by the aggrieved party in seeking the special remedy and also the nature of controversy of facts or law to be decided as regards the availability of consequential relief. Whether repayment should be ordered in the exercise of this discretionary power will depend in each case on its own facts and circumstances. It is neither desirable nor feasible to lay down any abstract rule or formula for universal application. It may, however, be stated as a general rule that if there has been unreasonable delay the court ought not ordinarily lend its aid to a party by this extraordinary remedy of mandamus. Again where even if there is no such delay the Government or the statutory authority against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order rejecting the writ petition and held that the High Court had to examine after the affidavit had been filed the question as to whether the appellant had paid the tax under a mistake of law as also when the appellant came to discover its mistake. In view of the above decision, I have to examine whether the tax had been paid under a mistake of law and when the petitioner came to discover its mistake. The specimen copy of the tender being annexure A to the petition shows that the petitioner has to execute and complete the construction of Dry Water Flow Channel in a substantial and workman-like manner in accordance with the specification to the satisfaction of the Chief Engineer and any other officer representing him (clause 11 of the tender). Payment to the contractor will be made from time to time during the course of the work at the rate of 90 per cent upon the value of the work actually executed as certified by the engineer. The remaining 10 per cent shall be retained by the Corporation of Calcutta till after the completion of the work when 1 per cent of the money so retained will be paid along with the final bill for the work (clause 19). All materials other than those su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s used in the execution of a works contract treating it as a sale. In an appropriate case, it may so happen that the parties to the contract may enter into distinct and separate contracts, one for the transfer of materials for money consideration and the other for the payment of remuneration for services and for work done. In such a case, there are really two agreements, though there is a single instrument embodying them, and the power of the State to separate the agreement to sell from the agreement to do work and to render services and to impose a tax thereupon cannot be questioned: State of Madras v. Gannon Dunkerley Co.(1) Reading the agreement, in my view, there are no distinct and separate contracts, one for the transfer of materials for money consideration and the other for the payment of remuneration for services and for work done. It is one and indivisible contract and the payment also is to be made on the value of the work actually executed. In these circumstances, the respondents could not treat the supply of the materials involved in the execution of such contract as a sale and impose tax thereupon. The next enquiry will be when the mistake was discovered by the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it came to discover the mistake only on 1st March, 1972, and there was no unreasonable delay in asking for the relief under article 226 of the Constitution. The result is that this application succeeds. The assessment orders dated 29th March, 1955, and 17th August, 1959, being annexure E to the petition, in so far as they purport to impose sales tax for the execution of the contract for Dry Water Flow Channel with the Corporation of Calcutta are quashed by a writ of certiorari. Respondents Nos. 1, 2 and 4 are directed by a writ of mandamus to refund the sum collected from the petitioner by way of sales tax in respect of the said contracts. As no relief has been asked for against respondent No. 5, there will be no order against respondent No. 5. The rule is made absolute to the extent indicated above. There will be no order as to costs. The State preferred appeal against this decision of DEBIPROSAD PAL, J. S.N. Dutt, for the appellants. Mani Bhusan Sarkar, A.K. Mitra and J.L. De, for respondent No. 1. A.P. Sarkar, for respondent No. 2. JUDGMENT DUTT, J.-This appeal is at the instance of the sales tax authorities and it is directed against the judgment of D. Pal, J., wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise sales tax on such contracts. In that view of the matter, his Lordship found that as no sales tax was payable, respondent No. 5 was not liable to reimburse respondent No. 1 the amount of sales tax paid by it. It was further held that the payment and realisation of sales tax were made on account of mistake of law. It was the case of respondent No. 1 in the writ petition that upon perusal of the judgment of Hazra, J., it had discovered for the first time in March, 1972, that the said sum of Rs. 53,045.10 was paid by it to the sales tax authorities for the years 1951-55 under a mistake of law inasmuch as the transactions did not constitute sale of goods. It was contended that the mistake of law was common to both respondent No. 1 and the sales tax authorities. Respondent No. 1, accordingly, prayed for the quashing of the orders of assessment dated 29th March, 1955, and 17th August, 1959, by a writ in the nature of certiorari. Further, it was prayed that the sales tax authorities might be directed to refund the said sum of Rs. 53,045.10, which was realised by them from respondent No. 1 on account of sales tax for the said years. D. Pal, J., came to the findings that the contracts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es tax on such contracts. It has been strenuously urged on behalf of the appellants that the contracts in question were not contracts for work and labour, but they also included contracts for sale of goods. In other words, it is contended that the contracts were divisible in the sense that each of them consisted of two separate contracts, one for the transfer of materials for money consideration and the other for payment of remuneration for services and work done. Our attention has been drawn to item No. 7 of the schedule to the contract (annexure A to the writ petition), which is as follows: Description of works Qty. Rate per "7. Manufacture of precast brick concrete slabs 11,000 100" 2 ft. 0 in. x 1 ft. 6 in. x 4 in. with 1 in. S. ft. down khoa and cement mortar 6: 3:1 at worksite and laying the same dry with break joints true to profile for lining the bed and sides of the channel. It is argued on behalf of the appellants that item No. 7 shows that there was an agreement for sale of bricks by respondent No. 1. On a perusal of the different clauses of the terms of the contract it appears to us that respondent No. 1 contracted to do certain works for the construction of channe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or work and labour and the other for sale of materials. In paragraph 19 of the writ petition, it has been alleged by respondent No. 1 that upon perusal of the judgment of Hazra, J., in the said suits, it discovered in March, 1972, that the said sum of Rs. 53,045.10 was paid to the credit of the appellants as sales tax for the years 1951 to 1955 under a mistake of law as the transactions did not constitute sale of goods. Indeed, it appears from the judgment of Hazra, J., that the contention of respondent No. 1 was that the contracts were also for sale of materials. It is true that the said contention was made by respondent No. 1 obviously for the purpose of fastening the liability of payment of sales tax upon respondent No. 5 and that in the event of the said contention being upheld, respondent No. 1 was not to lose anything. But at the same time, there is nothing on record to suggest that respondent No. 1 was not labouring under such a mistake of law as to the true nature of the contracts. Save and except a bare denial, the appellants have not put forward any material against the said allegation of respondent No. 1 that it was not under such a mistake till the delivery of the judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Prima facie triable issue as regards the availability of such relief on the merits on the grounds like limitation, the court should ordinarily refuse to issue the writ of mandamus for such payment. The maximum period fixed by the legislature as the time within which the relief by a suit in a civil court must be brought may ordinarily be taken to be a reasonable standard by which delay in seeking remedy under article 226 can be measured. The court may consider the delay unreasonable even if it is less than the period of limitation prescribed for a civil action for the remedy, but where the delay is more than this period, it will almost always be proper for the court to hold that it is unreasonable. It is contended on behalf of the appellants that the mistake was detected by respondent No. 1 in 1958 when the Supreme Court delivered its judgment in the case of Gannon Dunkerley Co.[1958] 9 S.T.C. 353 (S.C.). and so it must be held that respondent No. 1 came to this court after an unreasonable delay. In that case, the Supreme Court settled the law that no sales tax can be imposed on the supply of materials used in a works contract, but if such a contract also embodies within it a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the provisions of the Orissa Sales Tax Act, 1947, authorising the imposition of sales tax on works contracts were ultra vires the State Legislature and for a writ directing the officers to refund the sales tax realised from the appellant. The High Court, following the judgment of the Supreme court in State of Madras v. Gannon Dunkerley Co.[1958] 9 S.T.C. 353 (S.C.)., held that the assessment of the sales tax on the appellant was not in accordance with law and directed the refund of the tax paid, if recovery thereof was not barred under section 14 of the Orissa Sales Tax Act, 1947, on the date of the filing of the application. The appellant appealed to the Supreme Court and challenged that the order of the High Court limiting its right to get refund on two grounds, namely, that section 14 was ultra vires the State Legislature, and that an application under section 14 was not the only remedy open to the taxpayer and the power of the High Court to direct refund of tax illegally recovered was not restricted by that section. It was held by the Supreme Court that the provisions of section 14 were not ultra vires the State Legislature; that the appellant's petition was for the enfo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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