MAFATLAL INDUSTRIES LTD. ETC. ETC. v. UNION OF INDIA ETC. ETC.

"20. Save as is provided in s. 23, no assessment made and no order passed under this Act or the rules made thereunder by the Com- B missioner or any person appointed under s. 3 to assist him shall be called into question in any Civil Court, and save as it provided in sections 21 and 22, uo appeal or application for revision shall lie against any such assessment or order."

32Copy pinpoint32. The answers given by the seven-Judge Bench are to the following c effect :

(a) As held by this Court in Finn & Illuri Subbayya Chetty & Sons v. State of Andhra Pradesh, [1964]1 S.C.R. 752, the words "any assessment made under this Act" were wide enough to cover all assessments made by D the appropriate authorities under the Act. whether the assessments were correct or not. The words "an assessment made" cannot mean an assess- ment properly and correctly made. Since the appellant was calling in question the orders of assessment made against it, its challenge in the suit was plainly prohibited by Section 20. E (b) The provisions of the Bombay Act make it clear that all questions pertaining to the liability of the dealers to pay assessment in respect of their transactions are expressly left to be decided by the appropriate authorities under the Act as matters falling within their jurisdiction. Whether or not a return is correct and whether a transaction is exigible to tax, or not, are F all matters to be determined by the authorities under the Act. It is impos- sible to accept the argument of the appellant that the finding of the appropriate authority that a particular transaction is taxable under the provisions of the Act is a finding on a collateral fact and, therefore, the resort to civil court is open. On the contrary, the whole activity of assess- G ment beginning with the filing of the return and ending with the order of assessment falls within the jurisdiction of the appropriate authority and no part of it can be said to constitute a collateral activity not specifically and expressly included in the jurisdiction of the appropriate authority as such. Even if the appropriate authority,_ holds erroneously, while exercising its jurisdiction and powers under the Act that a transaction which is an H

660 SUPREME COURT REPORTS(l996] SUPP.10 S.C.R.

A 'outside' sale is not an 'outside' sale and proceeds to levy sales tax on it, it cannot be said that the decision of the appropriate authority is without jurisdiction.

( c) Where a statute creates a special right or a liability and also provides the procedure for the determination of the right or liability by the B Tribunals constituted in that behalf and provides further that all questions about the said right a liability shall be determined by the Tribunal so constituted, it becomes pertinent to enquire whether remedies normally associated with actions in civil courts are provided by the statute or not. In other words, if the court comes to the conclusion that the Act does not C provide any remedy to make a claim for recovery of illegally collected tax and yet Section 20 prohibits such a claim being made before an ordinary civil court, the court might hesitate to construe Section 20 as creating an absolute bar. If for any reason, Section 20 is construed strictly as constitl).t- ing an absolute bar, the question may arise with respect to its con- stitutionality. Looked at from the above angle, it cannot be said that the D Bombay Act does not provide an alternative remedy for the claim which the appellant put forward in the suit. Section 22-B empowered the appel- late/revisional authority under the Act to extend the period of limitation if they are satisfied that party applying for such extension had sufficient cause for not preferring the appeal and revision during the prescribed period. E Section 23-A further provided for rectification of mistakes. In this view of the matter, it cannot be said that the claim of the appellant could not have been agitated under and in accordance with the provisions of the Bombay Act.

(d) Section 20 was constitutionally valid on the same reasoning on F which Section 18-A of the Madras General Sales Tax Act was held to be valid in Finn & Illuri Subbayya Chetty & Sons.

(e) Insofar as the challenge to the constitutionality of Section 20 of the Bombay Act is concerned, the suit cannot be said to be barred. Section G 20 does not take in the challenge to the validity of the section itself. But inasmuch as Section 20 is found to be constitutional, the plaintiff cannot get any relief.

33Copy pinpoint33. Sri F.S. Nariman strongly emphasised the provision in Section 22-B of the Bombay Act and the absence of a similar provision in the H Central Excise Act/Customs Act. With respect, we are not able to ap-

MAFATLALINDS.LTD.v. U.O.I. 661

preciate this argument. Section 22-B merely empowered the appel- A late/revisional authorities to extend the time prescribed for filing an appeal or revision, as the case may be. Section 22-B did not provide for extension of the time prescribed for making an application for refund under Section 13 of the Act. Even in the Central Excise and Customs Act, there are provisions empowering the appellate authorities to extend the time prescribed for filing the appeal. (There is no provision for revision now.) Of course, there is no provision for extending the time limit prescribed in Section 11-B. But there was no such provision in the Bombay Act either. If so, we are unable to see any distinction between the Bombay Act the enactments concerned herein in this behalf. We must say that we are in respectful agreement with the propositions enunciated in this decision and propose to apply them to the provisions concerned in these matters.

34Copy pinpoint34. KS. Venkataraman & Co. v. State of Madras, [1966) 2 S.C.R. 229 is significant for the reason it differs from the decision of the Privy Council in Raleigh Investment Co. Ltd. v. The Governor General in Counci~ (1947) D L.R. 74 I.A. 50. The appellant was assessed to sales tax in respect of certain works contracts executed by them during the years 1948-49 to 1952-53. On 5th April, 1954, the Madras High Court declared that the relevant provisions of the Madras General Sales Tax Act, 1939 empowering the State to assess indivisible building contracts were beyond the competence of the State Legislature. On March 23, 1955, the appellant instituted a suit for recovery of the amount paid by it on building/works contracts. Both the trial court and the High Court dismissed the suit relying upon the decision of the Privy Council in Raleigh Investment Co. Ltd. and observing that the only remedy of the appellant was to pursue the machinery provided by the statute. This Court by a majority (Subba Rao, Wanchoo and Sikri, JJ. - Shah and Ramaswami, JJ. dissenting) did not agree with the proposition in Raleigh Investment Co. Ltd. that a contention relating to the validity of the Act can be raised before the authorities under the Act. The Court held that an authority created by a statute cannot question the vires of the statute or any of its provisions and that the authorities must act under the Act and not outside it. The Court further held that if the authorities act under a provision which is invalid being beyond the competence of the legislature enacting it, it cannot be said that the authorities are acting under the Act. The question relating to the validity of the Act, the Court held, cannot also be gone into by the High Court acting in its special advisory jurisdiction provided by Section 64 of the Madras Act. Accordingly, it was held that the suit for refund was maintainable and that the period of H

662 SUPREME COURT REPORTS[1996] SUPP. 10 S.C.R.

A limitation is three years from the date on which the mistake became known to the plaintiff. This again was a case where the provisions, under which the disputed tax was levied, were declared unconstitutional on the ground of lack of legislative competence.

35Copy pinpoint35. In Dhulabhai & Ors. .v. State of Madhya Pradesh & Anr., (1968] 3 B S.C.R. 662, a Constitution Bench of this Court discussed at length the question when does a suit lie for recovery of taxes imposed and collected under a taxing enactment, to wit, the Madhya Bharat Sales Tax Act, 1950 and enunciated seven propositions. Suits were filed by the appellants for recovery of certain taxes on the ground that the same were collected from them against the constitutional prohibition contained in Article 301. C Hidayatullah, CT., speaking for the Constitution Bench, summarised the position emerging from the decisions of this Court on the subject in the following words : #' "(1) Where the statute gives a finality to the orders of the special D tribunals the Civil Courts' jurisdiction must be held to be excluded if there is adequate remedy to do what the Civil Courts would normally do in a suit. Such provision, however, does not exclude those cases where the provisions of the particular Act have not been, complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure. E (2) Where there is an express bar on the jurisdiction of the court, an examination of the scheme of the particular Act to find the adequacy or ~he sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the civil court.

Where there is no express exclusion the examination of the remedies and the scheme of the particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive. In the latter case it is necessary to see if the statute creates a special right or a liability and provides for the determina- tion of the right or liability and further lays down that all questions about the said right and liability shall be determined by the tribunals so constituted, and whether remedies normally associated with actions in Civil Courts are prescribed by the said statute or not.

MAFA1LAL INDS. LTD. v. U.O.I. 663

(3) Challenge to the provisions of the particular Act as ultra vires cannot be brought before Tribunal constituted under that Act. Even the High Court cannot go into that question on the revision or reference from the decision of the Tribunals.

(4) When a provision is already declared unconstitutional or the constitutionality of any provision is to be challenged, a suit is open. B A writ of certiorari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit.

(5) Where the particular Act contains no machinery for refund of tax collected in excess of constitutional limits or illegally collected a suit lies.

(6) Questions of the correctness of the assessment apart from its constitutionality are for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there is an express prohibition in the particular Act. In either case the scheme of the particular Act must be examined because it is a relevant enquiry.

(7) An exclusion of the jurisdiction of the Civil Court is not readily to be inferred unless the conditions above set down apply."

36Copy pinpoint36. In the above summary, Proposition No. 5, however, requires a little elucidation. A reading of the judgment shows that the said proposition is based upon the earlier decisions of this Cou•t in KS. Venkataraman Bharat Kala Bhandar Ltd. v. M.C. Dhamangaon, [1965] 3 S.C.R. 499. KS. F Venkataraman, as pointed out hereinabove, was a case where the suit was filed for refund of amounts collected under provisions declared ultra vires the State Legislature, i.e., a case of what we have called 'unconstitutional levy. Bharat Kala Bhandar Ltd. was a case were there was no machinery provided in the Central Provinces and Berar Municipal Act for refund of tax assessed and recovered in violation of the constitutional limitations. It G was held that "one of the corollaries flowing from the principle that the • Constitution is the fundamental law of the land is that the normal remedy of a suit will be available for obtaining redress against the violation of a constitutional provision. The Court must, therefore, lean in favour of con- struing a law in such a way as not to take away this right and render illusory H

664 SUPREME COURT REPORTS[1996] SUPP. 10 S.C.R.

A the protection afforded by the Constitution". As a matter of fact, the tax levied in this case was found to be void being violative of the provisions in Article 276 of the Constitution and Section 142-A of the Government of India Act, 1935. The words "in excess of the constitutional limits" must, therefore, be understood in the. context of the ratio of the above two decisions. So for as the words" illegally collected" in Proposition No. 5 are concerned, it is obvious that they go along with the preceding words, i.e., where a tax is collected in disregard of the constitutional limitations, it will be a tax illegally collected and a suit lies. It would not be reasonable to understood the words "illegally collected" dissociated from their context or in a manner contrary to the ratio of Kamala Mills, which was expressly referred to and followed in thiS decision.

37Copy pinpoint37. The facts of the decision in Tilokchand Motichand & Ors. v. H.B. Munshi &Anr., [1969] 2 S.C.R. 824 are rather interesting. They tell us how the Court viewed the attempt of a person who tried to take advantage of the decision in another person's case rendered several years later. The authorities under the Bombay Sales Tax Act refunded certain amounts to the petitioners-dealers on the condition that they should pass on the said amounts to their customers (these amounts were earlier collected by the dealers from their customers and paid to the State). On .the ground that the dealers have failed to pass on the said amounts to their customers, the authorities forfeited the said amounts under Section 21(4) of the Bombay Sales Tax Act, 1953. The dealers filed a writ petition in the Bombay High Court challenging the constitutional validity of Section 21(4). A learned Single Judge dismissed the writ petition holding that inasmuch as the petitioners-dealers have defrauded their customers, they were not entitled p to any relief under Article 226. The appeal preferred by the dealers was dismissed by the Division Bench of the High Court holding that even if there was a violation of petitioners' fundamental right, the High Court was not bound to come to their help in view of their conduct. The dealers accordingly paid up the said amount in instalments between August, 1959 and August, 1960. More than seven years later, i.e., on September 29, ).967, G this Court struck down Section 12(A)(iv) of the Bombay Sales Tax Act, 1946 corresponding to Section 21(4) of the 1953 Act in Kantilal Babula! v. H.C. Patel, 21 S.T.C. 174. On February 9, 1968, the petitioners filed a writ petition in this Court under Article 32 of the Constitution for refund of the aforesaid amounts on the assumption that Section 21(4) is uncon- H stitutional in view of the decision of this Court in Kantilal Babula/. They

MAFATLALINDS. LTD. v. U.0.¹. 665

submitted that though they had raised other grounds in support of their A .... attack upon the validity of Section 21(4) in the High Court, tht:y were not aware of the particular ground upon which the corresponding provision in the 1946 Act was struck down by this court in Kantilal Babula/. This Court, by majority, (Hidayatullah, CJ., Bachawat and Mitter, JJ.) dismissed the writ petition holding that the judgment of the High Court dismissing the B writ petition filed by the writ petitioner operates as res judicata and bars the petition under Article 32. Hidayal ullah, C.J. made the following relevant observations :

"The petitioner moved the High Court for the relief on the ground that the recovery from him was unconstitutional. He set out a C number of grounds but did not set out the ground on which ultimately in another case recovery was struck down by this Court. That ground was that the provisions of the Act were unconstitu- tional. The <[tlf!Sti<Jlt is : can the petitioner in this case take advantage, after a lapse oj d hUlhbet of years, of the decision of this Court? He D 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 dis- missed 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 uncon- E stitutionality. 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 he in his turn got the statute declared F unconstitutional, and got a favourable decision. If I were to hold otherwise, then the decision of the High Court in any case once adjudicated upon and acquiesced in may be questioned in a fresh litigation revived only with the argument, that the correct position was not known to the petitioner at the time when he abandoned his own litigation. I agree with the opinion of my brethren G Bachawat and Mitter, JJ. that there is no question here of a mistake of law entitling the petitioner to invoke analogy of the Article in the Limitation Act. The grounds on which he moved the Court might well have impressed this Court which might also have decided the question of the unconstitutionality of the Act as was H

666 SUPREME COURT REPORTS[1996) SUPP.10 S.C.R.

A done in the subsequent litigation by another party. The present petitioner should have taken the right ground in the High Court and taken it in appeal to this Court after the High Court decided against it. Not having done so and having abandoned his own litigation years ago, I do not think that this Court should apply the analogy of the Article in the Limitation Act and give him the relief now."

(Emphasis added)

38Copy pinpoint38. Bachawat, J. held that a writ under Article 32 will no doubt issue as a matter of course where infringement of fundamental right is estab- lished but that dc .ht mean that in giving relief under the said article, 0

this Court would -, x· , e all laws and procedure. The learned Judge also emphasised the disc! tionary nature of jurisdiction.

39Copy pinpoint39. Reference may also be made to the decision of K.K. Mathew, J. D (sitting with Alagiriswami, J.) in D. Cawasji & Co. Etc. v. State of Mysore & Anr., [1975) 2 S.C.R. 511. The appellant paid education cess levied under the Mysore Elementary Education Act, 1941 (as amended in 1968). The Mysore High Court struck down the relevant provisions levying the cess in 1968 on a writ petition filed by the appellant, which was affirmed by this E Court in 1971. In the middle of the year 1968, the appellant filed a writ petition claiming refund of the cess amount paid by him. The claim was rejected by the High Court on the ground of delay. On the matter being brought to this Court, this Court held following Bhailal Bhai and Aluminium Industries that taxes paid without the authority of law can be recovered by way of a writ petition and that by virtue of Section 17(1)(c) F of the Limitation Act, 1963, the period of limitation does not begin to run, in a suit for relief on the ground of mistake, until the plaintiff has dis- covered the mistake or could, with reasonable diligence, have discovered it. Mathew, J. did realise the implication of the said holding. The learned Judge make these perceptive observations : G "We are aware that the result of this view would be to enable a person 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 only a suit or writ petition is filed for refund by the H person within three years from the date of declaration of the

MAFATLALINDS.LTD. v. U.O.I. 667

invalidity of the law. That might both be inexpedient and unjust so A · far as the the State is concerned."

(Emphasis added)

The learned Judge proceeded to observe further : B "A tax is intended for immediate expenditure for the common good and it would be unjust to require its repayment after it has been in whole or in part expended, which would often be the case, if the suit or application could be brought at any time within three years, be it a hundred years' after the date of payment. Nor is there any provision under which the court 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 reason, it is impracticable to do so*.

40Copy pinpoint40. The appeals were, however, dismissed holding that since the appellant has failed to claim the relief of refund in the first writ petition filed by him, he is disentitled from doing so by way of a separate sub- sequent writ petiton. It was observed that it is not open to the appellant to split up his claim for refund and file writ petitons in a piece-meal fashion. The decision is significant for pointing out the irrational and unjust conse- quences of the holding in Bhailal Bhai and Aluminium Industries which implicitly followed Kanhaiyalal. The decision is also singificant for pointing out the adverse impact of public interest inherent in holding (See Kan- haiyalal again) that the plea that the State has expended the taxes on public purposes is no defence to a claim for .refund.

41Copy pinpoint41. We may at this juncture refer to a very significant decision in F R.S. Joshi v. Ajit Mills, (1978) 1 S.C.R. 338 rendered by a seven-Judge Constitution Bench. Section 46 of the Bombay Sales Tax Act, 1959 provided that no person shall collect any sum by way of sales tax which is not exigible according to law. Section 37 provided for penalties in case of violation of the provisions of Section 46. Not only the person so collecting G was liable to pay a penalty not exceeding Rupees two thousand but in It is a matter of regret that inspite of this clear enunciation as far back as 1975, Parliament took no steps, until 1991, to make a law providing that where the payer passes on the burden of the tax to another, he cannot recover the same from the State.Sri F.S. Nariman naturally stressed this inaction and n1ade it a basis for contend~ ing that any decision over-turning Kanhaiya/a/ must only have prospective effect. H

668 SUPREME COURT REPORTS[1996] SUPP.10 S.C.R.

A addition thereto, any sum collected by the person by way of tax in con- travention of Section 46 was also liable to be forfeited to the State Govern- ment. The constitutionality of the said provision was questioned on the basis of the earlier decision of this Court in R. Abdul Quader & Co.\ v. Sales Tax Officer, Hyderabad, (1964] 6 S.C.R. 867. The challenge was repelled. B The following observations of Krishna Iyer, J. are apposite :

"The professed object of the law is clear. The motive of the legislature is irrelevant to castigate an Act as a colourable device. The interdict on public mischief and the insurance of consumer interests against likely, albeit, unwitting or 'ex abundanti cautela' c excesses in the working of a statute are not merely an ancillary power but surely a necessary obligation of a social welfare state. On.e potent prohibitory process for this consummation is to penal- ize the trader by casting a no-fault or absolute liability to 'cough up' to the State the total 'unust' taking snapped up and retained by him 'by way of tax' where tax is not so due from him, apart from other punitive. impositions to deter and to sober the merchants whose arts of dealing with customers may include 'many a little makes a mickle'. If these steps in reasoning have the necessary nexus with the power to tax under Entry 54 List II, it passes one's comprehension how the impugned legislation can be denounced as exceeding legislative competence or as a 'colourable device' or as 'supplementary, not complimentary' ...... In our view, the true key of constitutional construction is to view the equity of the statute and sense the social mission of the law, language permitting, against the triune facets of justice high-lighted in the Preamble to the Paramount Parchment, read with a spacious signification of the listed entries concerned."

42Copy pinpoint42. The learned Judge also observed that social justice clauses in- tegrally connected with the taxing provisions cannot be viewed as a mere device. The Court held that since the forfeiture of the sums collected by way of tax contrary to law was by way of penalty, the legislation was within the purview of Entry 54 of List II and constitutionally valid. In our view, the approach adopted in this case in of great relevance in the matters before us.

H DECISIONS OF THIS COURT WHICH HAVE APPLIED THE

MAFATLAL INDS. LID. v. U.O.I. 669

DOCTRINE OF UNJUST ENRICHMENT A

43Copy pinpoint43. Shiv Shanker Dal Mills Etc. v. State of Haryana & Ors. Etc., [1980) 1 S.C.R. 1170 arose with reference to market fees collected under a provision which was strnck down by this Court in Kewal Krishan Puri v. State of Punjab & Ors., [1979) 3 S.C.R. 1217. The enhancement of market fee from two to three percent was held to be bad, whereupon the traders demanded refund of the excess market fee collected from them. This Court held that though refund of the fee so collected my be legally due to the traders, the traders may be repaid amount only to the extent they have not passed on the burden to their customers. To the extent they have passed on, it held, they were not entitled. This principle was deduced from the concept of distributory justice underlying Article 38 and 39 of the Constitu- tion of India as from the discretionary nature of the power under Article 226 of the Constitution. Following the Principle enunciated by this Court in Newabgunj Sugar Mills v. Union of India & Ors., [1976) l S.C.R. 803, the Court devised a scheme of refund by the market committees providing for refund of amounts to those from whom illegal collections had been made by the traders.

44Copy pinpoint44. Amar Nath Om Prakash v. State. of Punjab & Ors. Etc., [1985] 2 · S.C.R. 72 was also a case arising with reference to market fee, i.e., an indirect tax. Section 23-A of the Punjab Agricultural Produce Markets Act E 1 enabled the market committees to "retain the fee levied and collected by it from a licensee in excess of that leviable under Section 23, if the burden of such fee was passed on by the licensee to the next purchaser of the Agricultural Produce in respect whereof such fee was levied and collected". The validity of the said provision was called in question in this case. This F Court negatived the challenge holding that the primary purpose of the said section was to prevent refund of licence fee to dealers. who have already passed on the burden of such fee to purchasers and who want to. unjustly enrich themselves by obtaining refund from the market committee. The said provision, it was held, recognised that the consumer public who have G borne the ultimate burden are the persons really entitled to refund and since the market committee represents their interests, it is entitled to retain .the amount. It was pointed out that the provision for :retention by market committee had to be made because of the practical impossibility of tracing the individual purchasers and consumers who have ultimately borne the burden. It was held that it was "really a law returning to the public what it H

670 SUPREME COURT REPORTS(1996] SUPP.10 S.C.R.

A has taken form the public, by enabling the Cominittee to utilise the amount for the performance of services required of it under the Act. Instead of allowing middlemen to profiteer by illgotten gains, the legislature has devised a procedure to undo the wrong item 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 persons for whose benefit the Marketing legislation was enacted." The Court observed that Section 23-A was akin to the provision concerned in Orient Paper Mills Limited v. State of Olissa, (1962] 1 S.C.R. 549 which too disabled a dealer from claiming a refund of the fee paid by him, in case he has already passed on the burden to the next purchaser. The approach adopted by this Court in this case meets our respectful approval.

45Copy pinpoint45. State of Madhya Pradesh v. Vyankatlal & Anr., (1985] 3 S.C.R. 561 marks a definite milestone in the application of the doctrine of unjust emichment. In exercise of the powers conferred upon him by the Madhya D Bharat Essential Supplies (Temporary Powers) Act, the Director of Civil Supplies, issued a notification fixing ex-factory prices of sugar for different sugar factories. The supply price was a little higher than the ex-factory price. The notification required the difference between the supply price ~d the ex-factory price to be credited to the Madhya Bharat Government Sugar Fund. Pursuant to the demands made by the State, the sugar mills E deposited certain amounts into the said Fund under protest and then · instituted suits for refund of the amounts so deposited. The High Court upheld the plea of the sugar mills that the Director of Civil Supplies had no authority in law to fix the ex-factory prices. This meant that the sugar mills were entitled to the refund of the amounts paid by them into the p Fund. The State appealed to this Court against the said decision. Following the principle of Shiv Shankar Dal Mills and Amar Nath Om Prakash, this Court held that even though there is no specific provision in Madhya Bharat Act providing that the sugar mills are not entitled to refund in case they have passed on the burden to the purchasers, the said principle can safely be applied to the facts of the case before them. The Court observed: G "The burden of paying the amount in question was transferred by the respondents to the purchasers and, therefore, they were not entitled to get a refund. 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

MAFATLALINDS. LTD. v. U.O.l. 671

for the development of sugarcane. If it is not possible to identify the persons on whom had the burden been placed for payment towards the Fund, the amount of the Fund can be utilised by the Government for the purpose for which the Fund was created, namely, development of sugarcane. There is no question of refund- ing the amount to the respondents who had not eventually paid the amount towards the Fund. Doing so would virtually amount to allow the respondents unjust enrichment."

46Copy pinpoint46. We express our respectful agreement with the above approach.

47Copy pinpoint47. The same approach was adopted in the case of entry tax in Indian C Aluminium Company Ltd. v. Thane Municipal Corporation, [1992] Supp. 1 S.C.C. 480, Indian Oil Corporation v. Municipal Corporation, Jallandhar, [1992] 1 S.C.C. 333 and in Entry Tax Officer v. Chandanmal Champa/al, [1994] 4 s.c.c. 460.

DECISIONS OF THIS COURT DEALING DIRECTLY D WITH THE 1991 (AMENDMENTS) ACT:

48Copy pinpoint48. The first decision of this Court to consider the amended Section 11-B is in Union of India & Ors. v. Jain Spinners Ltd. & Anr., [1992] 4 S.C.C.

389. The validity of the 1991 (Amendment) Act was, however, neither raised nor considered by the court. The impugned orders of the High Court, made before the coming into force of the 1991 (Amendment) Act, directing refund of the excess duty collected to the manufacturers, this Court held, would defeat the provisions of amended Section 11-B which had come into force during the pendency of the, refund proceedings. The Court held that so long as the refund proceedings are pending, the amended provisions get attracted and disentitle the manufacturer-payer from claiming any refund contrary to the said provisions. In other words, the contention of the manufacturers that the amended Section 11-B applies only to claims of refund arising after the coming into force of the said Amendment Act was rejected. G

49Copy pinpoint49. In Union of India v. l. T.C., [1993) Suppl. 4 S.C.C. 326, it was held by this Court (Kuldip Singh and Dr. A.S. Anand, JJ.) that the amended Section 11-B applies to all pending cases, including those pending in appeal before the Supreme Court. It was held that the amended provisions do apply to such a case a well, notwithstanding the fact that the refund amount H

672 SUPREME COURT RE!'QRTS[1996] SUPP. 10 S.C.R.

A was drawn out by the manufacturer, under the orders of the Court, whether subject to furnishing of adequate gu!II'antees or otherwise. The Court held further that by virtue of the 1991 (Amendment) Act, the court is bound to . take notice of the change in law governing refunds and accordingly it called upon the manufacturer-assessee to furnish documentary or other evidence to establish that the amount of duty of excise in relation to which the refund is claimed had not been passed on by him to any other person. Since the manufacturer could not establish the said fact, the Court declined to grant refund in terms of the amended Section ll·B. It must be noted that the plea of unjust enrichment was not specifically raised before the High Court and was raised only in the appeal before this Court. The objection of the manufacturer on this court was repelled saying that since the 1991 Amend- ment was not there, the non-raising of the said defence cannot preclude the Revenue from raising the said plea after the coming into force of the Amendment Act. The Court also invoked the presumption contained in Secti.on 12-B holding that the said presumption is attracted to pending proceedings as well. DECISIONS OF FOREIGN COURTS ON THE SUBJECT:

50Copy pinpoint50. A number of decisions rendered by foreign courts have been brought to our notice, of which we may notice ·a few - only \vith a view to note how different constitutional courts are viewing the problem, of refund of taxes collected contrary to law.

51Copy pinpoint51. United Kingdom : Until 1992, the law in England was that taxes paid under a mistake or law were not recoverable whereas taxes paid under a mistake of fact or under compulsion were held recoverable. This position was redically altered by the decision of House of Lords in Woolwich Building Society v. Inland Revenue Commissioners (No.2), (1992) 3 All.E.R. 737 = (1993) 1 A.C. 70.

52Copy pinpoint52. The first thing to be noticed with respect to the decision in G Woolwich Building Society is that it deals with a direct tax, viz., income tax and not with a indirect tax. Secondly, it is a case where the Regulations under which taxes were demanded and collected, were held to be ultra vires and void. In other words, it was a case "in which an excessive assessment was made on a taxpayer due to some error of fact or law''. For this reason, it was held that the remedy of the taxpayer lay in common law and not the ones provided by the statute itself. The majority (Lord Goff, Lord Browne-

MAFATLAL INDS. LTD. v. U.O.I. 673

Wilkinson and Lord Slynn of Hadly), even while holding that taxes paid under a mistake of law are recoverable, hedged the rule with certain riders. Lord Goff held that where a tax or duty is paid by a citizen pursuant to an 7, unlawful demand "common justice seems to require that tax to be repaid, unless special circumstances or some principle of policy require otherwise; prima facie, the taxpayer should be entitled to repayment as of right" (P. · B 759). This principle he deduced from the Bills of Rights (1688) which proclaimed inter alia that taxes should not be levied without the authority of Parliament. The learned Law Lord indicated that same rule may also govern cases where excess tax is collected by misconstruction of law, though he declined to express a final opinion on the question. He also did not express any definite opinion on the question - what would be the position, if the plaintiff passes on the burden of tax to another. The learned Law Lord agreed that the law can place shorter time-limits for making such claims of restitution and referred in that connection to the position obtain- ing in German Law where formal objection has to be lodged within one month of the notification to enable a citizen to claim refund of amounts collected unlawfully. The German Law further provides that one citizen cannot benefit from the successful formal objection of another citizen; the rule is that the person should himself object and take proceedings within the prescribed time-limit. The minority (Lord Keith of Kinkel and. Lord Jauncey of Tullichettle), h(1\\cver, stuck to th¹ prevailing view that taxes paid under a mistake of law are not recover;,. E

53Copy pinpoint53. Strictly speaking, this decision is of little relevance to us. Firstly, it deals with a direct tax. In the case of a direct tax, there can be no question of passing on the burden of the tax to others as in the case of an indirect tax. All that the decision says, reversing the hitherto prevailing theory, that taxes paid under a mistake of law ought to be refunded.

-- 54. CANADA : In Air Canada et al v. The Queen in Right of British Columbia et al, (59 D.L.R. (4th) 161), the learned Judges (including Wilson, J. who dissented on one issue to be indicated shortly) looked at the claim of refund of taxes recovered contrary to law from two standpoints, viz., Constitutional Law and Law of Restitution. They held that the distinction between mistake of fact and mistake of law should play no part in Law of Restitution and further that the rule that "taxes paid under a mistake of law are not recoverable" should have no place in Constitution- al Law. La Forest, J. put the position in the following words : H

674 SUPREME COURT REPORTS[1996) SUPP. 10 S.C.R.

A "In my view the distinction between mistake of fact and mistake of law should play no part in the law of restitution. Both species of mistake, if one can be distinguished from the other, should, in an appropriate case, be considered as factors which can make an enrichment at the plaintiffs expense 'unjust' or 'unjustified'. This does not imply, however, that recovery will follow in every case where a mistake has been shown to exist. If the defendant can show that the payment was made in settlement of an honest claim, or that he has changed his position as a result of the enrichment, then restitution will be denied. Even were I not of the opinion that this 'rule' should be abolished, I would not be prepared to extend to the constitutional plane a rule so replete with technicality and difficulty as the mistake of law rule. Constitutional adjudication invites the formulation of broad principles suitable to the accom- modation and resolution of broad social and political values, and this much criticized rule seems singularly unsuited for that pur- D pose."

55Copy pinpoint55. Even so, the learned Judge held that the claim of the Airlines should be denied on the ground that it passed on the burden to its customers notwithstanding tl1"e fact that by doing so, the province would be benefitted at the expense of the Airlines. The learned Judge, in fact, went E further and held that even if the Airlines could show that they themselves bore the burden of taxes, recovery of ultra vires taxes should be denied, at least in the case of unconstitutional statutes except wi).ere the relationship between the State and a particular taxpayer resulting in the collection of taxes is unjust or oppressive in the circumstances. This rule against p recovery, the learned Judge held, is based on concerns for the protection of the treasury and the recognition of the reality that if the taX was refunded, modern government would be driven to the inefficient course of re-imposing it either on the same or a new generation of taxpayers to finance the operations of the government. This rule, however, was held inapplicable where the tax is extracted from a taxpayer through a - G misapplication of law. The following observations from his opinion are relevant:

"While it will take some time for the courts to work out the limits of the developing law of restitution, it is useful on this point to H examine the American experience. Professor George C. Palmer, in

MAFATLALINDS. LTD. v. U.O.I. 675

his work, the Law of Restitution, makes the following comment A (1986) Supplement, at p. 255) :

There is no doubt that if the tax authority retains a payment to which it was not entitled it has been unjustly enriched. It has not been enriched at the taxpayer's expense, however, if he B has shifted the economic burden of the tax to others. Unless restitution for their benefit can be worked out, it seems preferable to leave the enrichment with the tax authority instead of putting the judicial machinery in motion for the purpose of shifting the same enrichment to the taxpayer. c In my view there is merit to this observation, and if it were necessary I would apply it to this case as the evidence supports that the airlines had passed on to their customers the burden of the tax imposed upon them. The law of restitution is not intended to provide windfalls to plaintiffs who have suffered no loss. Its D function is to ensure that where a plaintiff has been deprived of wealth that is either in his possession or would have accrued for his benefit, it is restored to him. The measure of restitutionary recovery is the gain the province made at. the airlines' expense. If the airlines have not shown that they bore the burden of the tax, then they have not made out their claim. What the province received is relevant only in so far as it was received at the airlines' expense.

This alone is sufficient to deny the airlines' claim. However, even if the airlines could show that they bore the burden of the tax, I would still deny recovery. It is clear that the principles of unjust enrichment can operate against a government to ground restitutionary recovery, but in this kind of case, where the effect of an unconstitutional or ultra vires statute is in issue, I am of the opinion that special considerations operate to take this case out of the nonnal restitutionary framework, and require a rule responding to the specific underlying policy concerns in this area...... A related concem, and one prevalent through many of the authorities and much of the academic literature is the fiscal chaos that would result if the general rule favoured recovery, particularly where a long-standing taxation measure is involved. That this is not an unfounded concern can be seen by reference to one incident in the United States. A H

676 SUPREME COURT REPORTS(1996) SUPP. 10 S.C.R.

A provision has been inserted in the United States Internal Revenue Code removing the distinction between mistakes of fact and mis- takes of law because of the harsh and unjust results that had occurred under the general rule. This, however, placed a severe strain on the United States Treasury when the Supreme Court in United States v. Butler, 297 U.S. 1, 80 L.Ed. 477 (1936), held B unconstitutional the Agricultural Adjustment Act making almost one billion dollars in invalid taxes (a respectable amount now but overwhelming during the depression) repayable by the govern- ment. Faced with this situation, Congress immediately passed an Act which provided that no refunds for such taxes would be c allowed unless the claimant could establish the burden of the tax."

(Emphasis added)

56Copy pinpoint56. Wilson, J., however, differed with the majority on the effect of passing on of the burden of tax by the plaintiff. The learned Judge opined D that where taxes are recovered under an unlawful statute, they must be returned irrespective of the fact whether the taxpayer has passed on the burden to its customers or not. The learned Judge refused to accept the plea of fiscal chaos, as a sufficient ground for denying the refund.

57Copy pinpoint57. It is brought to our notice by Sri F.S. Nariman that in another Judgment delivered on the same day by the Canadian Supreme Court in Cal1adian Pacific Airlines Limited v. British Columbia, (1989) 59 D.L.R. (4th) 218, the Court held that the C.P. Air could recover the social service tax paid on purchases of equipment and parts but that the tax paid by it on alcoholic beverages is not recoverable for the reason that the latter tax was imposed on passengers who consume the liquor - and not on C.P. Air. Sri Nariman has also placed a copy of the judgment in this case before us. It is evident from a reading of the judgment that it was not a case of tax levied and collected under an invalid statute but a case where the tax was collected wrongly by misinterpreting the provisions of the statute - in which situation, the taxes are refundable according to the decision inAir Canada. - In this view of the matter, it may not be necessary to refer to the opinions of learned Judges. It is not suggested that any contrary principle is enun- ciated in this case.

58Copy pinpoint58. The law in Canada appears rather paradoxical to an Indian H Lawyer. It says that while taxes collected under an unconstitutional statute

MAFA1LALINDS. LTD. v. U.O.I. 677

need not be refunded (even if the Burden of tax has not been passed on to a third party), taxes collected by mis-interpreting/mis-applying the provisions of the statute ought to be refunded. This circumstances em- phasises how the jurisprudence in each country has developed differently. We, on our part, have to evolve appropriate principle to meet the emerging situation, keeping in mind the development of law in our own country, our own circumstances and above all, our own constitutional philosophy. At the same time, we express our broad agreement with the approach and thinking of the majority Judges in Air Canada.

59Copy pinpoint59. AUSTRALIA : In Commissioner of State Revenue v. Royal In- surance Australia Ltd., (1995) 69 A.L.J. 51, the Australian High Court C rejected the plea of the State that inasmuch as the plaintiff has passed on the burden of illegally collected tax to others, it is not entitled to restitution, Mason, C.J. observed :

"The argument that a plaintiff who passes on a tax or charge will receive a windfall of will unjustly be enriched if recovery from a D public authority is permitted rests at bottom upon the economic view that the plaintiff should not recover if the burden of the imposition of the tax or charge has been shifted to third parties. In the context of the law ·of restitution, this economic view encounters major difficulties. The first is that to deny recovery when the plaintiff shifts the burden of the imposition of the tax or charge to third parties will often leave a plaintiff who suffers loss or damage without a remedy. That consequence suggests that, if the economic argument is to be converted into a legal proposition the proposition must be that, the plaintifPs recovery should be limited to compen- sation for loss or damage sustained. The third is that an inquiry into and a determination of the loss or damage sustained by a plaintiff who passes on a tax or charge is a very complex under- taking. And finally, it has long been thought that, despite Lord Mansfield's statement in Moses v. Macferian, the basis of restitu- tionary relief is not compensation for loss or damage sustained but restoration to the plaintiff of what has been taken or received from the plaintiff without justification."

(Emphasis supplied)

60Copy pinpoint60. It is obvious that the learned Chief Justice looked at the matter H

678 SUPREME COURT REPORTS[l996] SUPP. 10 S.C.R.

· A from the point of view of the law of restitution alone which fact would also be evidenct from the following observations (at P. 63) :

"As between the plaintiff and the defendant, the plaintiff having paid away its money by mistake in circumstances in which the defendant has no title to retain the moneys, the plaintiff has the superior claim. The plaintiffs inability to distribute the proceeds to those who recoup the plaintiff was, in my view, an immaterial consideration."

61Copy pinpoint61. Dawson, J. also took the same view. The following observations of the learned Judge, however, indicate the nature of the violation in this case, which is of quite some significance :

"No question such as that which arose in Air Canada v. British Columbia, (1989) 59 DLR (4th) 161 would arise in the present case. In the Canadian case a majority of the Supreme Court held that, whilst moneys paid Uilder a mistake of law might be recovered upon the basis of unjust enrichment, that doctrine did not extent to moneys paid under unconstitutional legislation. No question of un- constitutionality arises in this case. The application of the common law would also raise the question whether the· principle of unjust enrichment can be invoked when moneys paid under a mistake of fact or law constitute an expense which has been passed on to someone else, as the respondent insurer is said to have passed on the overpayments of stamp duty to its insured in this case. The better view would seem to be that it is the unjust enrichment of the payee rather than loss suffered by the payer which should govern entitlement to restitution but, having regard to the view which I take, it is wmecessa1y to detennine that question in these proceedings."

(Emphasis supplied)

62Copy pinpoint62. E.E.C. : Amministrazione Delle Finanze Delio Stato (State Finance Administration) v. San Giorgio SPA, (1985) 2 C.M.L.R. 658 was decided by - the Court of Justice of the European Community.

63Copy pinpoint63. Italy, which is a member of a European Economic Community madt< a law, Section 10(1) whereof provided that a "person who has paid import duties, manufacturing taxes, taxes on consumption or State taxes

MAFATLALINDS. LTD. v. U.O.I. 679

which have been unduly levied, even prior to the entry into force of this decree, is not entitled to the repayment of the the sums paid when the charge in question has been passed on in any way whatsoever to other persons, except in cases of substantive error". Sub-section (2) further provided that "the charge is presumed to have been passed. on whenever the goods in respect of which payment was effected have been transferred B eveI,1 after processing, transformation, erection, assembly or adaptation in the absence of documentary proof to the contrary". The question before the Court was whether the said provision was contrary to Article 12 of the E.E.C. Treaty (Treaty of Rome) which prohibited imposition of any cus- toms duties between the member States. It was held that it does. The entire discussion in the judgment revolves around the incompatibility of both the C provisions. We do not, therefore, see any relevance of the decision to the question at issue before us.

64Copy pinpoint64. U.SA. : In this context, we may refer to a decision of the Supreme Court of the United States of America in United States v. Jefferson Electric D Manufacturing Co., 78 L.Ed. 859. Section 424 of the Revenue Act, 1928 provided that "no refund shall be made of any amount paid by or collected from any manufacturer, producer, or importer in respect of tli.e tax im- posed by subdivision (3) of s. 600 of the Revenue Act of 1924, or sub- division(3)of S.900 of Revenue Act of 1921, or of the Revenue Act of 1918, unless ...... (2) It is established to the satisfaction of the Commissioner that E such amount was in excess of the amount properly payable upon the sale or lease of an article, subject to tax, or that such amount was not collected, directly or indirectly, from the purchaser or lessee, or that such amount although collected from the purchaser or lessee, was returned to him". The said provisio? was attacked as violative of the due proce~s clause in the F Fifth Amendment to the United States Constitution. The attack was repelled holding that the provision being based upon equitable principles which underlie an action in assumpsit for money had and received is not an unreasonable provision. The Court further observed that an action in assumpsit for money and received is of equitable character aiming at the G abstract justice of the case and is less restricted and fettered by technical rules and formalities than any other form of action. The Court conceded that if the tax was illegally levied, under the system then in force, the taxpayer had acquired a right to have it refunded without showing whether he bore the burden of the tax or had shifted it to the purchases. Even so, it was held that the requirements imposed by Section 424 which the H

680 SUPREME COURT REPORTS(1996] SUPP.10 S.C.R.

A taxpayer should satisfy before he can claim refund were ;easonable and equitable. The following observations of the Court are apposite :

"But it cannot be conceded that in imposing this restriction the section strikes down prior rights, or does more than to require that it be shown or made certain that the money when refunded will B go to the one who has borne the burden of the illegal tax, apd therefore is entitled in justice and good conscience to such relief. This plainly is but another way of providing that the money shall go to the one who has been the actual sufferer and therefore is the real party in interest. c We do not perceive in the restriction any infringement of due process of law. If the tax payer has borne the burden of the tax, he readily can show it; and certainly there is nothing arbitrary in requiring that he make such a showing. If he has shifted the burden to the purchasers, they and not he have been the actual sufferers and are the real parties in interest; and in such a situation there is nothing arbitrary in requiring, as a condition of refunding the tax to him, that he give a bond to use the refunded money in reimbursing them ....The present contention is particularly faulty in that it overlooks the fact that the Statutes providing for refunds and for suits on claims therefor proceed on the same equitable principles that underlie an action in assumpsit for money had and received. Of such an action it rightly has been said : 'This is often called an equitable action and is less restricted and fettered by technical rules and formalities than any other form of thereon. It aims at the abstract justice of the case, and looks solely to the inquiry, whether the defendant holds money, which ex aequo at bona belbngs to the plaintiff. If was encouraged and, to a great extent, brought into used by that great and just judge, Lord Mansfield, and from his day to the present, has been constantly resorted to in all cases coming within its broad principles. It approaches nearer to a bill in equity than any other common law action."

65Copy pinpoint65. We express our broad agreement with the approach adopted by the United State Supreme Court.

66Copy pinpoint66. Sri Nariman, however, referred to the second alternate condition imposed by Section 424 which provided that if the manufacturer gives a

MAFA1LAL INDS. LTD. v. U.O.I. 681 bond undertaking to refund the same to purchaser within a particular period, he \YOuld be entitled to claim refund. Learned counsel submitted that such a condition could have been imposed in the Central Excises and customs Act as well. He ~ubmitted that even if it is legitimate for the Parliament to prescribe that in case the money was passed on, it must be made over to the person from whom it was collected, all this should be done through the medium of the manufacturer/taxpayer and not through any other medium. We must say that we are not concerned with the question of desirability of a provision which could have been made but with the legality of the provision which has been made. It cannot be suggested that the Parliament should necessarily have made such a provision or that in the absence of such a provision, the provisions made are violative of C Article 365 ·of the Constitution.

PART-II

WAS KANHAIYALAL CORRECTLY DECIDED AND IF NOT, IN WHAT RESPECTS : D

67Copy pinpoint67. The first question that has to be answered herein is whether Kanhaiyalal has been rightly decided insofar as it says (1) that where the taxes are paid under a mistake of law, the person paying it is entitled to recover the same from the State on establishing a mistake and that this consequence flows from Section 72 of the Contract Act; (2) that it is open to an assessee to claim refund of tax paid by him under orders which have become final - or to re-open the orders which have become final in his own case - on the basis of discovery of a mistake of law based upon the decision ' of a court in the case of another assessee, regardless of the time-lapse involved and regardless of the fact that the relevant enactment does not provide for such refund or re-opening; (3) whether equitable considera- tions have no place in situations where Section 72 of the Contract Act is applicable and (4) whether the spending away of the taxes collected by the State is not a good defence to a claim for refund of taxes collected contrary to law. G

68Copy pinpoint68. Re. : (I) : Hereinbefore, we have referred to the provisions relating to refund obtaining from time to time under the Central Excise and Salt Act. Whether it is Rule 11 (as it stood from time to time) or Section ll-B (as it obtained before 1991 or subsequent thereto), they invariably purported to be exhaustive on the question of refund, Rule 11, H

682 SUPREME COURT REPORTS[1996] SUPP.10 S.C.R.

A as in force prior to August 6, 1977, stated that "no duties and charges which have been paid or have been adjusted ........shall be refunded unless the claimant makes an application for such refund under his signature and lodges it to the proper officers within three months from the date of such payment or adjustment, as the case may be". Rule 11, as in force between August 6, 1977 and November 17, 1980 contained sub-rule (4) which B expressly declared : "(4) Save as otherwise provided by or under this rule, no claim of refund of any duty shall be entertained". Section 11-B, as in force to April, 1991 contained sub-section (4) in identical words. It said : "(4) Save as otherwise provided by or under this Act, no claim for refund of any duty of excise shall be entertained". Sub-section (5) was more c specific and emphatic. It said: "Notwithstanding anything contained in any other law, the provisions of this Section shall also apply to a claim for refund of any amount collected as duty of excise made on the ground that the goods in respect of which such amount was collected were not excisable or were entitled to exemption from duty and no court shall have any jurisdiction in respect of such claim." It started with a non-obstante clause; it took in every kind of refund and every claim for refund and it expressly barred the jurisdiction of courts in respect of such claim. Sub-section (3) of Section 11-B, as it now stands, it to the same effect - indeed, more comprehensive and all-encompassing. It says, "(3) Notwithstanding any- thing to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any court or in any other provision of this Act or the rules made thereunder or in any law for the time being in force, no refund shall be made except as provided in sub-section". The language could not have been more specific and emphatic. The exclusivity of the provision relating to refund is not only express and unambiguous but is in addition to the general bar arising from the fact that the Act creates new rights and liabilities and also provides forums and procedures for ascer- taining and adjudicating those rights and liabilities and all other incidental and ancillary matters, as will be pointed out presently. This is a bar upon a bar - an aspect emphasised in Para 14, and has to be respected so long as it stands. The validity of these provisiorts has never been seriously doubted. Even though in certain writ petitions now·before us, validity of the 1991 (Amendment) Act including the amended Section 11-B is ques- tioned, no specific reasons have been assigned why a provision of the nature of sub-section (3) of Section 11-B (amended) is unconstitutional. Applying the propositions enunciated by a seven-Judge Bench of this H Court in Kamala Mills, it must be held that Section 11-B (both before and

MAFA1LALINDS. LTD. v. U.0.¹. 683

after amendment)is valid and constitutional. In Kamala Mills, this Court A upheld the constitutional validity of Section 20 of the Bombay Sales Tax Act (set out hereinbefore) on the ground that the Bombay Act contained adequate provisions for refund, for appeal, revision, rectification of mis- take and for condonation for delay in filing appeal/revision. The Court pointed out that had the Bombay Act not provided these remedies and B yet barred the resort to civil court, the constitutionality of Section 20 may have been in serious doubt, but since it does provide such remedie~, its validity was beyond challenge. To repeat - and it is necessary to do so - so long as Section 11-B is constitutionally valid, it has to be followed and given effect to. We can see no reason ort which the constitutionality of the said provision - or a similar provision - can be doubted. It must c also be remembered that Central Excises and Salt Act is a special enactment creating new and special obligations and rights, which at the same time prescribes the procedure for levy, assessment, collec- tion, refund and a.JI other incidental and ancillary provisions. As pointed out in the Statement of Objects and Reasons appended to the Bill which became the Act, the Act along with the Rules was intended to "form a complete central excise code". The idea was "to consolidate in a single enactment all the laws relating to central duties of excise". The Act is a self-contained enactment. It contains provisions for collecting the taxes which are due according to law but have not been collected and also for refunding the taxes which have been collected contrary to law, viz., Sections 11-A and ll·B and its allied provisions. Both provisions contain a uniform rule of limitation. viz., six months, with an exception in each case. Sections 11-A and 11-B are complimentary to each other. (To such a situation, Proposition No. 3 enunciated in Kamala Mills becomes applicable, viz.,) where a statute creates a special right or a F liability and also provides the procedure for the determination of the right or liability by the; Tribunals constituted in that behalf and provides further that all questions about the said right and liability shaJl be determined by the Tribunals so constituted, the resort to civil court is not available - except to the limited extent pointed out in Kamala Mills. Central Excise Act specifically provides for refund. It expressly declares that no refund G shall be made except in accordance therewith. The jurisdiction of a civil Court is expressly barred - vide sub-section (5) of Section 11-B, prior to its amendment in 1991, and sub-section (3) of Section 11-B, as amended in 1991. It is relevant to notice that the Act provides for more than one appeal against the orders made under Section 11-B/Rule 11. Since 1981, H

684 SUPREME COURT REPORTS[1996J SUPP. 10 S.C.R.

A an appeal is provided to this Court also from the order of the Tribunal. While Tribunal is not a departmental organ, this court is a civil court. In this view of the matter and the express and additional bar and exclusivity contained in Rule 11/Section 11-B, at all points of time, it must be held that any and every ground including the violation of the principles of natural justice and infraction of fundamental principles of judicial proce- B dure can be urged in these appeals, obviating the necessity of a suit or a writ petition in matters relating to refund. Once the constitutionality of the provisions of the Act including the provisions relating to refund is beyond question, they constitute "law" within the meaning of Article 265 of the Constitution. It follows that any action taken under and in accordance with c the said provisions would be an action taken taken under the "authority of law", within the meaning of Article 265. In the face of the express provision which expressly declares that no claim for refund of any duty shall be entertained except in accordance with the said provisions, it is not permis- sible to resort to Section 72 of the Contract Act to do precisely that which D is expressly prohibited by the said provisions. In other words, it is not permissible to claim refund by invoking Section 72 as a separate and independent remedy when such a course is expressly barred by the provisions in the Act, viz., Rule 11 and Section 11-B. For this reason, a suit . for refund would also not lie. Taking any other view woul~ amount to nullifying the provisions in Rule 11/Section 11-B, which, it needs no em- E phasis, cannot be done. It, there/ore, fallows that any and every claim for refund of excise duty can be made only under and in accordance with Rule JI or Section 11-B, as the case may be, in the forums provided by the Act. No suit can be filed for refund of duty invoking Section 72 of the Contract Act. So far as the jurisdiction of the High Court under Article 226 - or for F that matter, the jurisdiction for this Court under Article 32 · is concerned, it is obvious that the provisions of the Act cannot bar and curtail these remedies. It is, however, equally obvious that while exercising the power under Article 226/Article 32, the Court would certainly take'note of the legislative intent manifested in the provisions of the Act and would exercise their jurisdiction consistent with the provisions of the enactment. G

69Copy pinpoint69. There is, however, one exception to the above proposition, i.e., where a provision of the Act whereunder the duty has been levied is found to be unconstitutional for violation any of the constitutional limitations. This is a situation not contemplated by the Act. The Act does not con- H template any of its provisions being declared unconstitutional and there-

MAFAlLALINDS. LTD. v. U.O.I. 685

fore it does not provide for its consequences. Rule 11/Section 11-B are premised upon the supposition that the provisions of the Act are good and valid. But where any provision under which duty is levied is found to be unconstitutional, Article 265 steps in. In other words, the person who paid the tax is entitled to claim refund and such a claim cannot be governed by the provisions in Rule 11/Section 11-B. The very collection and/or retention of tax without the authority of law entitles the person, from whom it is collected, to claim its refund. A corresponding obligation upon the State to refund it can also be said to flow from it. This can be called the right to refund 01ising under and by virtue of the Constitutional provisions, viz., Article

265. But, it does not follow from this that refund follows automatically. Article 265 cannot be read in isolation. It must be read in the light of the concepts of economic and social justice envisaged in the Preamble and the guiding principles of State Policy adumbrated in Articles 38 and 39 - an aspect dealt with at some length at a later stage. The very concept of economic justice means and demands that unless the claimant (for refund) establishes that he has not passed on the burden of the duty/tax to others, he has no just claim for refund. It would be a parody of economic Justice to refund the duty to a claimant who has already collected the said amount from his buyers. The refund should really be made to the persons who have actually borne its burden - that would be economic justice. Conferring an unwarranted and unmerited monetary benefit upon an individual is the very anti-thesis of the concept of economic justice and the principles underlying Articles 38 and 39. Now, the right to refund arising as a result of declaration of uncon- stitutionality of a provision of the enactment can also be looked at as a statl!tory right of restitution. It can be said in such a case that the tax paid has been paid under a mistake of law which mistake of law was discovered by the manufacturer/assessee on the declaration of.invalidity of the provisions by the court. Section 72 of the Contract Act may be attracted to such a case and a claim for refund of tax on this score can be maintained with reference to Section 72. This too, however, does not mean that the taxes paid under an unconstitutional provision of law are automatically refundable under Section 72. Section 78 contains a rule of equity and once it is a rule of equity, it necessarily follows that equitable considerations are relevant in applying the said rule - an aspect which we shall deal with a little later. Thus, whether the right to refund of taxes paid under an unconstitutional provision of law is H

686 SUPREME COURT REPORTS[1996] SUPP.10 S.C.R.

A treated as a constitutional right following from Article 265 or as a statutory right/equitable right affirmed by Section 72 of the Contract Act, the result is the same - there is no automatic or unconditional right to refund.

70Copy pinpoint70. Re. : (II) : We may now consider a situation where a manufacturer B · pays a duty unquestioningly - or he questions the levy but fails before the original authority and keeps quite. It may also be a case where he files an · appeal, the appeal goes against him and he keeps quiet. It may also be a case where he files a second appeaVrevision, fails and then keeps quiet*. The orders in any of the situations have become final against him. Then what happens is that after an year, five years, ten years, twenty years or even much later, a decision rendered by a High Court or the Supreme Court in the case of another person holding that duty was not payable or was payable at a lesser rate in such a case. (We must reiterate and emphasise that while dealing with this situation we are keeping out the situation where the provision under which the duty is levied is declared unconstitutional by a court; that is a separate category and the discussion in this paragraph does not include that situation. In other words, we are dealing with a case where the duty was paid on account of mis- construc- tion, mis-application or wrong interpretation of a provision of law, rule, notification or regulation, as the case may \Je.) Is it open to the manufac- turer to say that the decision of a High Court or the Supreme Court, as the case may be, in the case of another person has made him aware of the mistake of law and, therefore, he is entitled to refund of the duty paid by him? Can he invoke Section 72 of the Contract Act in such a case and claim refund and whether in such a case, it can be held that reading Section 72 of the Contract Act along with Section 17(1)(c) of the Limitation Act, p 1963, the period of limitation for making such a claim for refund, whether by way of a suit or by way of a writ petition, is three years from the date of discovery of such mistake of law? Kanhaiyalal is understood as saying that such a course is permissible. Later decisions commencing from Bhailal Bhai have held that the period of limitation in such cases is three years from the date of discovery of the mistake of law. With the greatest respect to the learned Judges who said so, we find ourselves unable to agree with the said proposition. Acceptance of the said proposition would do violence to several well-accepted concepts of law. One of the important principles of law, based upon public policy, is the sanctity attaching to the finality of Situation would be the same where he fights upto High Court and failing therein, he keeps quiet.

MAFA1LAL INDS. LTD. v. U.0.¹. 687

any proceeding, be it a suit or any other proceeding. Where a duty has been collected under a particular order which has become final, the refund of that duty cannot be claimed unless the order (whether it is an order of • assessment, adjudication or any other order under which the duty is paid) is set aside according to law. So long at that order stands, the duty cannot be recovered back nor can any claim for its refund be entertained. But B what is happening now is that the duty which has been paid under a proceeding which has become final long ago - may be an year back, ten years back or even twenty or more years back - is sought to be recovered on the ground of alleged discovery of mistake of law on the basis of a decision of a High Court or the Supreme Court. It is necessary to point out in this behalf that for filing an appeal or for adopting a remedy provided by the Act, the limitation generally prescribed is about three months (little more or less does not matter). But according to the present practice, writs and suits are being filed after lapse of a long number of years and the rule of limitation applicable in that behalf is said to be three years from the date of discovery of mistake of law. The incongruity of the situation needs no emphasis. And all this because another manufacturer or assessee has obtained a decision favourable to him. What has indeed been happening all these years is that just because one or a few of the assessees succeed in having their interpretation or contention accepted by a High Court or the Supreme Court, all the manufacturers/assessees all over the country are filing refund claims within three years of such decision, irrespective of the fact that they may have paid the duty, say thirty years back, under similar provisions - and their claims are being allowed by courts. All this is said to be flowing from Article 265 which basis, as we have explained hereinbefore, is totally unsustainable for the reason that the Central Excises Act and the F Rules made thereunder including Section 11-B/Rule 11 too constitute "law" within the meaning of Article 265 and that in the face of said provisions - which are exclusive in their nature - no claim for refund is maintainable except under and in accordance therewith. The second basic concept of law which is violated by permitting the above situation is the sanctity of the provisions of the Central Excises and Salt Act itself. G The Act provides for levy assessment, recovery, refund, appeals and all incidental/ancillary matters. Rule 11 and Section 11-B, in particular, pro- . vide for refund of taxes which have been collected contrary to law, i.e., on account of a mis-interpretation or mis-construction of a provision of law, rule, notification or regulation. The Act provides for both the situ~- H

688 SUPREME COURT REPORTS[l996) SUPP.10 S.C.R.

A tions represented by Sections 11-A and 11-B. As held by a seven-Judge Bench in Kamala Mills, following the principles enunciated in Finn & llluri Subbaiya Chetty, the words "any assessment made under this Act" are wide enough to cover all assessments made by the appropriate authorities under the Act whether the assessments are correct or not and that the words "an assessment made" cannot mean an assessment properly and correctly B made. It was also pointed out in the said decision that the provisions of the Bombay Sales Tax Act clearly indicate that all questions pertaining to the liability of the dealer to pay assessment in respect of their transactions are expressly left to be decided by the appropriate authorities under the Act as matters falling within their jurisdiction. Whether or not a return is c correct and whether a transaction is exigible to tax or not are all matters to be determined by the authorities under the Act. The argument that the finding of the authority that a particular transaction is taxable under the Act is a finding on a collateral fact and, therefore, resort to civil court is open, was expressly rejected and it was affirmed that the whole activity of assessment beginning with the filing of the return and ending with the D order of assessment falls within the jurisdiction of the authorities under the Act and no part of it can be said to· constitute a collateral activity not specifically or expressly included in the jurisdiction of the authorities under the Act. It was clarified that even if the authority under the Act holds erroneously, while exercising its jurisdiction and powers under the Act that E a transaction is taxable, it cannot be said that the decision of the authority is without jurisdiction. We respectfully agree with the above propositions and hold that the said principles apply with equal force in the case of both the Central Excises and Salt Act and the Customs Act. Once this is so, it is ununderstandable how an assessment/adjudication made under the Act F levying or affirming the duty can be ignored because some years later another view of law is taken by another court in another person's case. Nor is there any provision in the Act for re-opening the concluded proceedings on the aforesaid basis. We must reiterate that the. provisions of Central Excise Act also constitute "law" within the context of Bombay Sales tax Act and the meaning of Article 265 and any collection or retention of tax in G accordance or pursuant to the said provisions is collection or retention under "the authority of law" within the meaning of the said article. In short, no claim for refund is permissible except under and in accordance with Rule 11 and Section 11-B. An order or decree of a court does not become ineffective or unenforceable simply because at a later point of time, a H different view of law is taken. If this theory is applied universally, it will

MAFATLALINDS.LTD.v. U.O.I. 689

lead to unimaginable chaos. It is, however, suggested that this result follows only in tax matters because of Article 265. The explanation offered is untenable, as demonstrated hereinbefore. As a matter of facts, the situation today is chaotic because of the principles supposedly emerging from Kan- haiyalal and other decisions following it. Every decision of this Court and of the High Courts on a question of law in favour of the assessee is giving rise to a wave of refund claims all over the country in respect of matters. which have becomes final and are closed long number of years ago. We · are not shown that such a thing is happening anywhere else in the world. Article 265 surely could not have been meant to provide for this. We are, therefore, of the clear and considered opinion that the theory of mistake of law and the consequent pe1iod of limitation of three years from the date of discovery of such mistake of law cannot be invoked by an assessee taking advantage of the decision in another assessee's case. All claims for refund ought to be, and ought to have been, filed only under and in accordance with Rule 11/Section 11-B and under no other provision and in no other forum. Ar;i assessee must succeed or fail in his own proceedings and the finality of the proceedings in his own case cannot be ignored and refund. ordered in his favour just because in another assessee's case a similar point is decided in favour of the manufacturer/assessee. (see the pertinent obser- vations of Hidayatullah, CJ. in Tilokchand Motichand extracted in Para 37). The decisions of this Court saying to the contrary must be held to have been decided wrongly and are accordingly overruled herewith. E

71Copy pinpoint71. Re. : (III) : For the purpose of this discussion, we take the situation arising from the declaration of invalidity of a provision of the Act under which duty his been paid or collected, as the bases, inasmuch as that is the only situation surviving in view of our holding on (I) and (II). In such cases the claim for refund is maintainable by virtue of the declaration contained in Article 265 as also under Section 72 of the Contract Act as explained hereinbefore subject, to one exception : where a person ap- proaches the High Court or Supreme Court challenging the constitutional validity of a provision but fails, he cannot take advantage of the declaration of unconstitutionality obtained by another person on another ground; this is for the reason that so far as he is concerned, the decision has become final and cannot be re-opened on the basis of the decision on another person's case; this is the ratio of the opinion of Hidayatullah, CJ. in Tilokchand Motichand and we respectfully agree with it. In such cases, the H

690 SUPREME COURT REPORTS(1996] SUPP.10 S,C.R.

A plaintiff may also invoke Section 17(1)(c) of the Limitation Act for the purpose of determining the period of limitation for filing a suit. It may also be permissible to adopt a similar rule of limitation in the case of writ petitions seeking refund in such cases. But whether the right to refund or restitution, as it is called, is treated as a constitutional right flowing from Article 265 or a statutory right arising from Section 72 of the Contract Act, B it is neither automatic nor unconditional. The position arising under Article 265 is dealt with later in Paras 75 to 77. Here we shall deal with the position under Section 72. Section 72 is a rule of equity. This is not disputed by Sri F.S. Nariman or any of the other counsel appearing for the appellants- petitioners. Once it is a rule of equity, it is un-understandable how can it c be said that equitable considerations have no place where a claim is made under the said provision. What those equitable considerations should be is not a matter of law. That depends upon the facts of each case. But to say ·that equitable considerations have no place where a claim is founded upon Section 72 is, in our respectful opinion, a contradiction in terms. Indeed, D in Kanhaiyalal, the Court accepts that the right to recover the taxes - or the obligation of the State to refund such taxes - under Section 72 of the Contract Act is subject to "questions of estoppel, waiver, limitation or the like", but at the same time, the decision holds that equitable considerations canno.t be imported because of the clear and unambiguous language of Section 72. With great respect, we think that a certain amount of inconsis- E tency is involved in the aforesaid two propositions. "Estoppel, waiver.... or the like", though rules of evidence, are yet based upon rules of equity and good conscience. So is Section 72. We are, therefore, of the opinion that equitabie considerations cannot be held to be irrelevant where a claim for - refund is made under Section 72. Now, one of the equitable considerations may be the fact that the person claiming the refund has passed on the burden of duty to another. In other words, the person claiming the refund has not really suffered any prejudice or loss. If so, there is no question of reimbursing him. He cannot be recompensated for what he has not lost. The loser, if any, is the person who has really borne the burden of duty; the manufacturer who is the claimant has certainly not borne the duty notwithstanding the fact that it is he who has paid the duty. Where such a claim is made, it would be wholly permissible for the court to call upon the · petitioner/plaintiff to establish that he has not passed on the burden of duty to a third party and to deny the relief of refund if he is not able to establish the same, as has been done by this Court in l.T.C. In this connection, it

MAFA1LALINDS. LTD. v. U.0.¹. 691

is necessary to remember that whether the burden of the duty has been passed on to a third party is a matter within the exclusive knowledge of the manufacturer. He has the relevant evidence - best evidence - in his posses- sion. Nobody else can be reasonably called upon to prove that fact. Since the manufacturer is claiming the refund and also because the fact of passing on the burden of duty is within his special and exclusive knowledge, it is for him to allege and establish that he has not passed on the duty to a third party. This is the requirement which flows from the fact that Section 72 is an equitable provision and that it incorporates a rule of equity. This requirement flows not only because Section 72 incorporates a rules of equity but also because both the Central Excises duties and the Customs duties are indirect taxes which are supposed to be and are permitted to be passed on to the buyer. That these duties are indirect taxes, meant to be passed on, is statutorily recognised by Section 64A of the Sale of Goods Act, 1930 (which was introduced by Indian Sales of Goods (Amendment) Act, 1940 and substituted later by Act 33 of 1963). As originally intro- duced, Section 64-A read : D "64A. In the event of any duty of customs or excise on any goods being imposed, increased, decreased or remitted after the making of any contract for the sale of such goods without stipulation as to the payment of duty where duty was not chargeable at the time of the making of the contract, or for the sale of such goods duty-paid where duty was chargeable at that time -

(a) if such imposition or increase so takes effect that the duty or increased duty, as the case may be, or any part thereof, is paid, the seller may add so much to the contract price as will be equivalent to the amount paid in respect of such duty or increase of duty, and he shall be entitled to be paid and to sue for and recover such addition; and

(b) if such decrease or remission so takes effect that the decreased duty only or no duty, as the case may be, is paid, the buyer may deduct so much from the contract price as will be equivalent to the decrease of duty or remitted duty, and he shall not be liable to pay, or be sued for or in respect of, such deduction." H

692 SUPREME COURT REPORTS[1996] SUPP.10 S.C.R.

72Copy pinpoint72. As substituted in 1963, and as it stands today, Section 66-A reads thus:

"64-A. In contracts of sale, amount of increased or .decreased taxes ·.. to be added or deducted. - (1) Unless different intention appears from that terms of the 'contract in the event of any tax of the nature B described in sub-section (2) being imposed, increased, decreased or remitted in respect of any goods after the making of any contract for the sale or purchase of such goods without stipulation as to the payment of tax where tax was not chargeable at the time of the making of the contract, or for the sale or purchase of such goods c tax paid where tax was chargeable at that time, --

(a) if such imposition or increase so takes effect that the decreased tax or increased tax, as the case may be, or any part of such tax is paid or is payable, the seller may add so much to the contract price as will be equivalent to the amount paid or payable in respect of such tax or increase of tax, and he shall be entitled to be paid and sue for and recover such addition, and

(b) if such decrease or remission so takes effect that the decreased tax only, or no tax, as the case may be, is paid or is payable, the buyer may deduct so much from the contract price as will be equivalent to the decrease of tax or remitted tax, and he shall not be liable to pay, on be sued for, or in respect of, such deduction.

(2) The provisions of sub-section (1) apply to the following taxes, namely: F (a) any duty of customs or excise on goods ;

(b) any tax on the sale or purchase of goods."

73Copy pinpoint73. Sub-section (2), it may be noted, expressly makes the said provisions applicable to duty of customs and duties of excise on goods. This G fact was also recognised by the Federal Court in The Province of Madras v. Mis. Boddu Paidanna & Sons, (1942) F.C.R. 90 and by this Court in R.C. fall v. Union of India, [1962] suppl. S.C.R. 436. In such a situation, it would be legitimate for the court to presume, until the contrary is established, that a duty of excise or a customs duty has been passed on. It is a H presumption of fact which a court is entitled to draw under Section 114 of

MAFATIALINDS. LTD. v. U.0.¹. 693

the Indian Evidence Act. It is undoubtedly a rebuttable presumption but A the burden of rebutting it lies upon the person who claims the refund (plaintiff/pWtioner) and it is for him to allege and establish that as a fact he has not passed on the duty and, therefore, equity demands that his claim for refund be allowed. This is the position de hors 1991 (Amendment) Act and as we shall point out later, the said Amendment _B Act has done no more than to give statutory recognition to the above concepts. This is the position whether the refund is claimed by way of a suit or by way of a writ petition. It needs to be stated and stated in clear terms that the claims for refund by a person who has passed on the burden of tax to another has nothing to commend itself; not law; not equity and certainly not a shred of justice or morality. In the case of a C writ petition under Article 226, it may be noted, there is an additional factor : the power under Article 226 is a discretionary one and will be exercised only on furtherance of interests of justice. This factor too obliges the Hig]! Court to inquire and find out whether the petitioner has in fact suffered any loss or prejudice or whether he has passed on the burden. In the latter event, the court will be perfectly justified in refusing to gr ant relief. The power cannot be exercised to unjustly enrich a person.

74Copy pinpoint74. Re. : (W) : We are also of the respectful opinion that that Kanhaiyalal is not right in saying that the defence of spending away the amount of tax collected under an unconstitutional law is not a good defence to a claim for refund. We think it is subject to this rider : where the petitioner- plaintiff alleges and establishes that he has not passed on the burden of the duty to others, his claim for refund may not be refused. In other words, if he is not able to allege and establish that he has not passed on the burden to others, his claim for refund will be rejected whether such a claim is made in a suit or writ petition. It is a case of balancing public interest vis-a-vis private interest. Whether the petitioner-plaintiff has not himself suffered any loss or prejudice (having passed on the burden of the duty to others), there is no justice or equity in refunding the tax (collected without the authority of law) to him merely because he paid it to the State. It would be a windfall to him. As against it, by refusing refund, the monies would continue to be with the State and available for public purposes. The money really belongs to a third party - neither to the petitioner/plaintiff nor to the State - and to such third party it must go. llut where it cannot be so done, it is H

694 SUPREME COURT REPORTS(1996] SUPP. 10 S.C.R. ..

75Copy pinpoint75. In this connection, Sri K. Parasaran has rightly emphasised the

MAFATLAL INDS. LTD. v. U.O.I. 695

distinction between the constitutional values obtaining in countries like A United States of America, Canada and Australia - or for that matter, United Kingdom - and the values obtaining under our Constitution*. Unlike the economically neutral - if not pro-capitalist - Constitutions governing those countties, the Indian Constitution has set before itself the goal of "Justice, Social, Economic and Political" - a total re-structuring of our society - the goal being what is set out in Part-IV of the Constitution B and, in particular, in Articles 38 and 39. Indeed, the aforesaid words in the preamble constitute the motto of our Constitution. If we can call it one. Article 38 enjoins upon the State to "strive to .promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political shall inform all the institutions c of the national life". Article 39 lays down the principles of policy to be followed by the State. It says that the State shall, in particular direct its policy towards securing "(b) that the ownership and control of the material resources of the community are so distributed as best to subserve the common goods; and (c) that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment". Refunding the duty paid by a manufacturer/assessee in situations where he himself has not suffered any loss or prejudice (i.e., where he has passed on the burden to others) is no economic justice; it is the very negation of economic Justice. By doing so, the State would be conferring an unearned and unjustifiable windfall upon the manufacturing community thereby contributing to concentration of wealth in a small class of persons which may not be consistent with the common good. The preamble and the aforesaid articles do demand that where a duty cannot be refunded to the real persons who have bore the burden, for one or the other reason, it is but appropriate that the said amounts are retained by the State for being used for public good (See Amar Nath Om Prakash). Indeed, even in an economically neutral Constitution, like that of United States of America, such a course has been adopted by the State and upheld by the Courts. It would be rather curious - nay, ridiculous - if such a course were held to be bad under our Constitution which speaks of economic and distributive justice, opposes concentration of wealth in a few hands and when the Forty - Second (Amendment) Act describes our Republic as a Socialist Republic.

This discussion, we n1ay reiterate, it also relevant on the nature of the constitutional right to refund or restitution as it is called - flowing from Article 265 referred to in Paras 71 to 73. H

696 SUPREME COURT REPORTS[l996) SUPP. 10 S.C.R.

76Copy pinpoint76. It is true that some of the concepts now affirmed by us, e.g., effect of passing on and the relevance of our Constitutional values in the matter of judging the legitimacy of a claim for refund were not presented to the Bench which decided Kanhaiyalal but that can be no ground for not entertaining or accepting those concepts. As obseived by Thomas Jeffer- B son, as far back as 1816, "laws and institutions must go hand-in-hand with the progress of the human mind ..... as new discoveries are made, new truths are discovered and manners and opinions change with the change of circumstances, institutions must advance also and keep pace with the time ...... ". The very same thought was expressed by Krishna Iyer, J. in State of Kamataka v. Ranganath Reddey, [1978) 1 S.C.R. 641 with particular reference to our Constitutional philosophy and values :

"Constitutional problems cannot be studied in a socio- economic vacuum, since socio-cultural changes are the source of the new values, and sloughing off old legal thought is part of the process of the new equity-loaded legality...... .It is right that the rule of law enshrined in our Constitution must and does reckon with the roaring current of change which shifts our social values and shrivels of feudal roots, invades our lives and fashions our destiny."

The learned Judge quoted Granville Austin, saying : E "The Judiciary was to be the arm of the social revolution, upholding the quality that indians had longed for in colonial days .....The courts were also idealised because, as guardians of the Constitu- tion, they would be the expression of the new law created by Indians for Indians." F

77Copy pinpoint77. That "the material resources of the community" are not confined to public resources but include all resources, natural and man-made public and private owned" is repeatedly affirmed by this Court. (See Ranganatl¹ Reddy, Sanjeev Coke Manufacturing Co. v. Bharat Coking Coal, (1983] 1 G S.C.R. 1000 and State of Tamil Nadu Etc. Etc. v. L. Abu Kavur Bai & Ors. Etc., [1984] 1 S.C.R. 725. We are of the considered opinion that Sri Parasaran is right in saying that the philosophy and the core values of our Constitution must be kept in mind while understanding and applying the provisions of Article 265 of the Constitution of India and Section 72 of the H Contract Act (containing as it does an equitable principle) - for that

MAFATLALINDS. LTD. v. U.0.¹. 6CJ7

matter, in construing any other provision of the Constitution and the laws. A Accordingly, we hold that even looked at from the constitutional angle, the right to refund of tax paid under an unconstitutional provision of law is not an absolute or an unconditional right. Similar is the position even if Article 265 can be invoked - we have held, it cannot be - for claiming refund of taxes collected by misinterpretation or misapplication of a provision of law, B rules notifications or regulation.

PART-III

VALIDITY AND MEANING OF THE PROVISIONS INTRO- DUCED BY THE 1991 (AMENDMENT) ACT: c