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TMI Blog1992 (4) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... les of cement made for and on behalf of the plaintiff of under its direction and also demanded sales tax in respect of 'the element of packing charges involved in the sales/supplies made. On this demand being made, the defendant sought reimburse merit of the same from the plaintiff denied its. liability to pay such lax. however agreed to deposit with the defendant Rs., and 1. 69,196.26 p totalling Rs. 5,66.734.95 p. The amount was paid on the condition that the defendant would contest the liability of payment of tax on the said packing element. The High Court of Madras accepted the objections of the defendant and allowed the writ petition in favor of the defendant and against the Sales Tax Authority. Madras High Court quashed She demand of levying of Sales Tax on the element of packing charges, State Authority was directed to refund the amount to defendant. Since no tax was leviable, the defendant became liable to refund back Rs. 5,66,734.95 P to the plaintiff. When amount was demanded by the plaintiff, the defendant put up the excuse that Sales Tax Authority had filed appeal in Supreme Court. it was also put up by the defendant that they were entitled to a sum of Rs. 3,38,523. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be recovered from the plaintiff. The amount paid by the pontiff was. towards its liability and nut trust as alleged. Since substantial amount was deposited by the defendant with Sales Tax Authority which liability was that of the plaintiff, hence the defendant was entitled to de-duct the amount of interest for blocking their amount with the Sales Tax Authority and also spent money for pursuing litigation on behalf of the plaintiff. Hence are entitled to deduct the amount on both counts i.e. interest and costs. Defendant never admitted or acknowledged its liability to pay sales tax. (3) On the pleadings of the parties following issues were framed:-- 1. Whether the plaint is signed and verified by a duly authorised person on behalf of plaintiff (OPP) 2. Whether the sums of Rs 4.97,538.69 p and Rs. 69,196.26 P (total Rs. 5.66.734.95 P) were placed by the plaintiff with the defendant by way of deposit and in trust, as alleged? (OPP) 3. Whether the said sum of Rs. 5,66,734.95 P was paid by the plaintiff to the defendant for the specific purpose of Madras Sales Tax and Central Sales Tax. claimed by the State of Tamil Nadu, under the Madras General Sales Tax Act and Central Sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the Hon'ble Supreme Court, at the instance of. the State of Tamil Nadu. it was not liable to refund the suit amount to the plaintiff ,unless the plaintiff gave an undertaking to reimburse the defendant in respect of the various amount paid by it or that may be found due from it towards the .Madras General Sales-Tax or Central Sales-Tax, On the said element of packing charges, or on account of the pendency of the said appeal. in the Hon'ble Supreme Court, the cause of action for refund of the suit amount, arose to the plaintiff firstly on 22nd November, 1977 when the Supreme Court upheld the judgment to the Madras High Court? 14. Whether in view of the defendant's stand, after the judgment of the Hon'ble Supreme Court dated 22nd November, 1972, that since proceeding in respect of the subject assessment years, pertaining to the said liability of sale.-tax, on the said element of packing charges ,were still pending before the Sales Tax Appellate Tribunal (Additional Bench), Madurai. under the Madras General Sales Tax Act, 1956. and until the said cases were decided, it could not be said that the question of levy of sales tax in respect of the said clement, of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord that this amount was paid by the plaintiff to the defendants vide letter Ex. D-3 with the conditions stipulated therein as mentioned in paras 4, 5 & 6 of the said letter which are reproduced as under: 4. Taking into consideration all file view points raised by you in your various communications from time to time and as a special case, we agree to the reimbursement of the above mentioned sales tax amount as well as the amount of penalty imposed subject to the following conditions:- (i) You would contest the appeals etc. with one diligence and in the manner required by us and would keen us posted with the developments from time to time. (ii) If ultimately the imposition of tax and/or penalty is quashed, you would refund such amounts of tax and/or penalty to us without demur. (iii) In the event of default on your part in refunding the amount to us, we would be entitled to recover such amounts from any moneys that may be due to you from us or that may become due to you. (6) We are advising our. Finance & Accounts division by forwarding a copy or this letter to arrange payment to you of the amounts mentioned above. In the meantime, we would request you to kindly let us have you ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned and defendants were bound to pay the same. Since it was contested by the defendant hence it became illegal exaction. The question, Therefore, for consideration is that the amount of sales tax deposited with the Deptt., whose responsibility it was? In this regard reference can be made to the evidence adduced. To a Court question Mr. Bhatnagar stated that in case the High Court and the Supreme Court had decided against the defendant, the plaintiff would have recovered this amount from the defendant. On the other hand Mr. N. Ramachandran, DW-1 and Mr. S. N. Mittal Law Officer of the defendant, DW-2, have testified that it was the duty of the plaintiff to pay the sales tax because the plaintiff had been allocating the cement to various dealers under the Cement Control Order. The sale voucher? used to be prepared by the Sales Manager of the plaintiff It was plaintiff's representative who used to prepare the sales vouchers in favor of the dealers Paying the price in accordance with the said Control Order. The Sales Manager of the plaintiff used to collect the sales tax of both kinds from the dealers separately. The element of sales tax went into the account of the dealers. Defen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clear that it was the plaintiff who had been directing the defendant to contest the case and what pleas should be taken. In this regard reference can be had to Exs. D-l to D-5, D-6, D-7, D-10 and D-14. Vide Ex. D-14, directions were given by the plaintiff to the defendant to file the Revisions before the Deputy Commissioner of Commercial Taxes against provisional assessments and was also intimated that after the decision of the said application, the question of reimbursement would be considered. The said letter is dated 1-3-66, followed by letters E.x. D-15, D-18, D-23 & D-25. From the perusal of these letters it is apparent that the plaintiff had been intimating to the defendant as to what pleas are to be taken and whether the appeal was to be filed or writ was to be filed or revision was to be filed. Therefore, it is apparent that the defendant had been contesting the case, up to the Apex Court, for and on behalf of the plaintiff and' under the instructions and guidance of the plaintiff. Mr. Vohra, Sr. Counsel for the defendant.. contended that there was no need for the defendant to contest these litigations and to deposit the money with the sales tax authorities. H the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the cement in gunny bags till it was decided as to who was liable to pay the tax. I find force in this submission of Mr. Vohra. the correspondence exchanged between the parses and the advise rendered by the plaintiff to the defendants' as io how to draft the appeals and writs and what pleas were to be taken, clearly establishes that the plaintiff through the defendant was challenging its liability to pay the sales tax. (12) From the evidence discussed above, it is apparent that, bad Courts not set aside the order, the supply of cement by defendant to plaintiff would have amounted to sale. In that case purchaser would be liable to pay the tax. plaintiff being the purchaser would have to pay the tax. But after the Supreme Court judgment when it was held that this- transaction was not sale, the liability of paying tax on element of packing did not arise. Since defendant was forced to deposit the sales tax, ft can be stated that the defendant by doing so was acting as an agent of the plaintiff. Therefore, if the sales tax authority's order had not been quashed, to my mind, the responsibility would have been that of the plaintiff, to pay the sales tax on the sale of cement as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority for the deposit of the amount. There is no doubt that the defendant was to refund ibis amount to the plaintiff and the defendant has expressed its desire to refund the same, but subject to adjustment of the expenses incurred by it by way of litigation expenses and on account of the interest lost by depositing the amount, with the sales tax authorities. Admittedly the defendant is not justified to keep the full amount of Rs. 5,66,734.95 P. But has a right to adjust the same which right has not been challenged before me, rather this adjustment was accepted by the plaintiff vide its letter Ex. DW-2/l dated 28-7-77, whereby plaintiff intimated to the defendant that the plaintiff was prepared for the settlement with the defendants. plaintiff was also prepared to pay interest on the amounts deposited by the defendants with the sales tax authorities from the date of deposit till the date of refund by the said authority and the rate of interest payable was as per prevalent and fixed by the Reserve Bank of India, during the relevant time. (14) Mr. Watal, on the other hand contended that since the plaintiff had never acknowledged its liability, the defendant ought not to have paid th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the tide in the cement manufactured by the defendant passed on to the plaintiff without there being any sale because- of compulsory acquisition in favor of the plaintiff, I find force in the submission of the defendant that the entire contest was made by the defendant at the instance of and for the benefit of the plaintiff. Hence these issues are decided against the plaintiff. (15) Issues No. 6 to 9 : These issues are also interlinked and are disposed of by one order. As already observed by me against issues from 2 to 5 that the responsibility to pay the sales tax was that of the plaintiff and the question now for consideration is can the defendant claim interest on the amount deposited by it with the sales tax authorities with respect to element of packing charges or expenses incurred by it in contesting plaintiff's liability ?The claim for reimbursement, to my mind, will include the claim for interest as well as for litigation expenses. These are incidental facts and the plea of adjustment is fully covered by the provisions of Sections 69 & 70 of the Contract Act. which are reproduced as follows : 69. Reimbursement of person paying money due by another, in payment of whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law and the true obligor in this case for the payment was the plaintiff. Therefore, the defendant would be entitled for the reimbursement and adjustment of the sum spent by it by way of litigation expenses as well as of the element of interest which it had lost on account of deposit of amount with the sales tax authorities. These issues are accordingly decided in favor of the defendant and against the plaintiff (18) As regards the question of limitation., the defendant hart been asking for the reimbursement of the sum ever since the show cause notice was received by it and this fact find support from the documentary evidence exchanged between the parties. Vide letter dated 21-5-69, Ex. D-33, D-34, l.)-35, DW-1/1 dated 14th July, 1965 the defendant claimed interest at the rate of 12 percent per annum on the amount deposited by the defendant with the sales tax authorities followed by Ex. DW-1/2 to DW-U3 which are all of the period from February 1965 to November, 1975 vide which the defendant claimed interest at the rate of 12 per cent for the amount deposited by it as well as the litigation expenses vide Ex. D-30 & D-34. The statement of account was also showing the interest due an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be entitled to proportionate costs on the amount due from the defendant. (21) Issue NO. 12: The suit of the plaintiff Is within time. The claim by the plaintiff was lodged immediately after the decision of the Madras High Court. The defendant had been admitting its liability to refund the amount subject to adjustment. Tins admission has been made even up to 19th November. 1975 when the defendant wrote a letter that now no matter with regard to the levy of tax on the element of packing is pending. In view of the admission on the part of the defendant, regarding its liability, it cannot be said that the suit is barred by time. This issue is accordingly decided in favor of the plaintiff. (22) Issue NO. 15 : It is an admitted case on record that the defendant deposited a sum of Rs. 15,23,793.26? towards the levy of sales tax and penalty on the element of packing charges. The amount was paid from time to time under intimation to plaintiff. Defendant also submitted the debit note to the plaintiff. It is on this amount, which the defendant deposited with the sales tax authorities, it is claiming interest at the rate of 12 per cent. I see no reason why the plaintiff should not pay t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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