STATE OF MADflYA PRADESH• v. VYANKATLAL & ANR.

The Judgment of the Court was delivered by

MISRA J. The present appeal by certificate is dire~ted , against the judgment de.led 28th April, 1969 of the Hig~ Court of ·. Madb~'Prajlesh,1ndore .Bench.·

The facts leading . , brief. .The respondents to this . appeal are '

are the 'owners of Jaora Sugar Mills situaied at Jaora in the earlier State of Madhya Bharat. The erstwhile State of Jaora .a : . .J merged in the State of Madhya Bharat.. After· the.- merger the Madhya Bharat. Essential Supplies (Temporary Powers) Act, 1948 came into force. By a notification No. 5163/XXX. (49) .dated 5th September,'1949 the Madhya Bharat Government in exercise of thC~?owe~s. veste~ under the, ~aid Act included 'sugar' in the list• of articles as an essential: commodity. By another notificatio~' No.

M.i>. S:r.-t TE v, VYANKATLAL (Misra, J.) 563 5166/XXX(49) dated the 5th September, 1949 the Madhya Bharat Government delegated its powers to issue orders under the sai~ Act in favour of the Director, Civil Supplies, Madhya Bharat.] In exercise of the p~wers conferred on hi "Ill \lnder the Madhya Bharat Sugar Control Order, 1949 the Director of Civil Supplise .issued a notification No. 7. C.S. 15/50 dated the 14th January, 1950 fixing ex- factory prices fordifferent sugar factories. Under the said notifi- cation· all suga( factories in Madhya Bharat were to supply and dcs)atch sugar of Grade E-27 at Rs. 32.4.0 permaund F.0.R~ destination. The supply price was a little higher than the ex-factory price. The difference between the supply price and the ex-factory price was .to bo credited of Madhya Bharat Government Sugar Fund. c, 'fhe appellaot made several demands on the respondents, the proprietors of the Jaora Sugar Mills, to credit such difference in ·th.e account of Madhya Bharat Government Sugar Fund and .the respondents ultimately deposited R•. 500 JO under prqtest.

On the 10th September, 1953 the respondents instituted a sui! in the court of Fifth Additional District Judge, Indore against ~he erstwhile State of Madhya Bharat for the refund Of the sum of Rs. 50,000 which the respondents had deposited towards Sugar Fund and Rs. 10,000 towards interest at the rate of 6 per cent per a.nnum from the date of deposit of the aforesaid sum of Rs. 50,000. The E· suit continued against the newly formed State of Madhya Pradesh as provided by law.

The grievance of the respondent in the main was that the change and modification made by the Madhya Bharat Government F ;1 in the definition of es>ential comodities given in the Act by includ- ing sugar therein was against the law, that the Director of Civil Supplies had no authority before 6tll September, 1949 .to issue the Sugar Control order, 1949 which had been issued on 5th September,' . 194.9 ; that the State Government or the Director of Ci vii supplies,. -,\ Madhya Bharat had no power under the Essential Supplies (Tem·- G porary Powers) Act and the Sugar Control Order to impos~ a levy styled as 'Sugar Fund' and to recover the same; that th~ levy ~nfi ; collecti~n of tax/impost styled as 'Sugar Fund' by the Director .of .. Civil Supplies being violative of Art. 265 of t'1e Constitutlo~. was illegal and invalid; tl1at the·provisions of Sugar Control Order 1949 . ' H ~i did not empower the Director of Civil Supplies to fix any price,

SUPREME COURT REPORtS [1985] :l s.c.il.

A other than ex-factory wholesale or retail price or to fix a price · which be called supply price or to impose and collect levy as 'Sugar Fund'; that is was illegal and unconstitutional for the Director of Civil Supplies to fix different ex-factory prices for different sugar mills in the same State ; that it was illegal and unconstitutional to collect money through certain mills for creating Sugar Fund when other factories in the same State were being exempted from doin·g so that there was clear difcrimination in fixing ex-factory price of sugar in respect of respondents' mill lower than ex-factory price fixed for· certain other mills in the State without there being a rational basi; for the same ; and that the levy and collection of certain money from the respondents being without lawful authority and without c. legislative competence, the State was bond to refound 'the same.

The State resisted the claim of the plaintiff-respondents and refuted the allegation on the points. The trial court decided all the issues against the plaintiffs and consequently it dismissed the suit. D On appeal by the plaintiffs the High Cou.rt set aside the jµdgment and decree of the trial court and decreed the suit for refund of Rs. 50,000 deposited by plaintiffs under protest and Rs. I 0,000 as interest thereon calculated at the rate of 6 per cent from the date of suit till realisation. The High Court repelled the contention of the State that the impost was not intended to augment general revenues of the State bnt was meant for a special purpose, i.e., for creating a fund which could be utilised for augmenting the production of sugarcane in the State so that the supply of sugar might be increased. The High Court observed that legislative competence was necessary for such imposition irrespective of the fact whether the impost was intended to augment general revenues of the State or for a special purpose, i.e., for creating a fund for augmenting the production of sugar. It further held that Art. 277 of the Constitution only saves such taxes, cesses or fees which immediately before the commence- ment of the Constitution were being lawfully levied by the Govern- ment of any State notwithstanding that those taxes, duties, cesses or fees are mentioned in the Union List. But in the instant case levy of 'Sugar Fund' was imposed by means of an order which was published for the first time in the Madhya Bharat Government Gazette dated 28th January, 1950 two days after the Constitution came into force.

The High Couri proceeded further to hold that the power H1 conferred on the Director of Civil Supplies did not authorise him

M.i'. stArn v. VYANKATLAL (Misra,!,) 565 to fix different prices in his discretion in different parts of Madhya A Bharat under s. 5. of the Sugar Control Order which in the case of some mills was higher than ex-factory price. The fixing of supply price higher than ex-factory price had nothing to do with the en- forcement of the order as it does not deal with licensing, ex-factory sale price, movement or distribution of sugar. Nor did ss. 11 and 12 B justify the Director of Civil Supplies recovering additional amount apart from ex-factory price from the purchasers.

Thus, in the opinion of the High Court the State had levied and collected under the purported legal authority certain money from the plaintiffs for which it had no· legislative competence to do and therefore the State must restore the same to the persons from c whom it was collected and cannot keep the same on the ground that plaintiffs too .have been wrongly allowed to collect, and that the persons who could claim the same were the corresponding purchasers. The High Court 9mitted to decide the question whether the particular purchasers can recover hereafter from the D pl.aintiffs whatever they h'ad collected in excess of the ex-factory sale price on the. ground that it need not be determined in this case.

Feeling aggrieved the State has come up in appeal. It vainly tried to support its stand that the recovery of Rs. 50,000 E from the respondents was perfect! y lawful and proper and there was no discrimination as contemplated by Art. 14 of the Constitution.

On the question of refund of the amount to the plaintiffs- 11 respondents reliance was placed on The Orient Paper Mills Ltd. v. The State of Orissa & Ors (1). In that case the appellants who were registered dealers under the Orissa Sales Tax Act, 1947 used to collect sales tax from the purchasers on all sales effected by· them,, inclnding sales to dealers in other States. They wery assessed to and paid tax on their turnover which included sales outside the State ofOrissa. After the decision of this Conrt in State of Bombay v. G The United Motors(lndia) Ltd ('J. the dealers applied nnder .s.14 of the Act for refund of tax paid on the ground that sales outside the State were not taxable under cl. (!)(a) of Art. 286 of

(i') [1962) l SCR 549. '. (2) [1953] SCR 1069 H

SUPkEME COURTS kEPORTS h9SSJ 1S.C.R. A the Constitution read. with the Explanation. Refund was refused by the Sales Tax Authorities and the Board of Revenue. The High Cqurt, however, ordered refund of tax paid for certain period but refused it in regard to other periods. The Orissa Sales Tax Act was, however, amended in 1958 with retrospective effect incorpora- IJ ting s.14A which provided that refund could be claimed only by the person from whom the dealer had realised the amount by way of sales tax or otherwise. On these facts it was held by this Court that under s.14A of the Act incorporated by the Orissa Sales Tax (Amendment) Act, 1958 refund of tax whicn the dealer was not liable to pay could be claimed by the person from whom c the dealer had actually realised it whether as sales tax or otherwise and not by the dealer. In Shiv Shankar Dal Mills etc. v. State of Haryana (1) the appellants and the petitioners who had paid under mistake the excess sums demanded a dirJctio1 to the effect that these amounts D be refunded. It, however, transpired that many of the traders had themselves recovered the c.tcess percentage from the next purchasers. It was held that to the extent the traders had paid out of their own, they were entitled to keep them, but not where they had in turn collected from elsewhere. In Newabganj Sugar Mills v. Union of India & Ors ('l. this Co~rt in a similar situation devised a new procedure to deal with a new situation where equity demanded redistrib.ution but procedural expensiveness and cumbersomeness effectively thwarted legal action. It directed the Registrar of the High Court to receive and dispose of claims from the ultimate consumers for excess price paid on proper proof, out of the security money. In Sales Tax Officer, Banaras & Ors. v. Kanhaiya Lal Mukundla/ Saraf(3 the levy of sales tax on forward transaction was held to be ultra vi res. The respondents, therefore, applied for a refund of the amounts paid by a petition under Art. 226 of the Constitution. This Court, however, took the view that the term 'mistake' under s. 72 of the' lndiHn Contract Act comprises within its scope a mistake of law as well as a mistake offact and that, under that section a party is entitled to recover

Ol 119so11 s.c.R. 1111. H (2) [1976) 1 S.C.R. 803. ((3)19591 s.c.R. mo.

.t.t.P. STATE v. VYANkATLAL (Misra, J.) money paid by mist11ke or unde,r coercion and if i! is established A; that the payment, even though it be of a tax, has been made by the party labouring µnder a mista~e of law, the party receiving the money is found to repay or return it though it might have been paid voluntarily .subject, however, to questions of estoppel, waiver, limitation or the like. B

Recently, this Court in.Mis Amar Nath Om·Parkash & Ors. v. ·The State of Puniab & .Ors (1). had -the occasion fo consider the question of refund to the dealers in a ·similar situation and it obsei,ved; · c " ... 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 amout 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 D, '. on. The primary pµrpose _of sec. 2;\A is seen on the.face ()f it; i_t prevel)ts the refund of license fee by . the market committee to dealers, who have already passed on the burden of such fee to the next purc\laser of the agricultural El produce and who went to unjustly enrich themselves by . obtaining the refund from the market committes. S. 23A in _truth,' recognises the consumer-public who have borne the 1,1ltimate bµrden as the persons who h~ve really paid the amount ·and so entitled ·to refund of any excess fee collected and therefore directs the market . F committee representing their inte;ests to retain the amount. · It has to be in this form becau_se it would, in practice, be a difficult and futile exercise to attempt to ·trace the individual purchasers and consumer who .. ultimatelely -bore the burden. It is really a law returning to the public what it has taken from the public, G py enabling the commitee to utilise the amount for the perfonnance of services required of it under the Act. · Instead of allowing middlemen to ·profiteer by illgotten

(I) [1984] 2 SCALE 769. H

stJPReME cioiia.t tlEPoRts h9ssi 3 s.c.a. A' gains, the legislature has ·devised a procedure to undo the wrong that has been done by the excessive levy by allowing the committees to retain the amount to be utilised hereafter for the benefit of the very person' for whose benefit the marketing legisl~tion was enacted." B The principles laid down in the aforesaid cases Y{ere based on the specific provisions in those Acts but the same principles can safely be applied to the facts of the present case inasmuch .as in the present case also the respondents had not to pay the amount from their coffers. The burden of paying the amount in question c was transferred by the respondents to the purchasers and, therefore, they were not entitled to get a refun!!. Only the persons on whom lay the ultimate burden to pay the amount would be entitled to get a refund of ·the same. The amount deposited towards the Fund was to be utilised for the development of sugarcane. If it D' is not possible to identify the persons on whom had the burden been placed fqr payment towards the Fund, the amount of the Fund can be utilised by the Government for the purpose for which the Fund WJS created, namely, development of s(!garcane. There is no question of refunding the amount. to the respondents who had not eventually paid the amount towards the Fu11d. Doing so would virtually amount to allow the respondents' unjust enrichment.

For ·the foregoing discussion. the appeal must succeed. It is accordingly allowed and the judgment and decree of the High .Court for the refund of the amount of Rs.so;ooo and interest thereon is set aside. Ill the circumstances of the case the parties shall bear their own costs.

G A.P.J . Appeal allowed. . '