# [1962] 1 S.C.R. 549

- **Citation:** [1962] 1 S.C.R. 549
- **Court:** Supreme Court of India
- **Decided:** 1960-08-03
- **Bench:** S. K. Das, J. L. Kapur, M. Hidayatullah, J. c. SHAH, T. L. Venkatarama Ayyar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1962-1-s-c-r-549-2146
- **Pages:** 7

## Headnote

Sales Tax--Tax imposed on sales outside the State-Refund, if
claimable by dealer or purchaser-Asscssee's fundamental rightReasonoble restriction-Orissa Sales Tax Act, r947 (XIV of r947),
ss. 98, ct. (3), r4-0rissa Sales Tax (Amendment) Act, r958 (28 of
1958), s. r4.1-Constitntion of India, Art. r9(r)(j).
The appellants who were registered as dealers under the
Orissa Sales Tax Act, 1947, used to collect sales tax from the
purchasers on all sales effected by them including sales to dealers in other states.
They were assessed to and paid tax on
their turnover which included sales outside the State of Orissa,
but after the decision of this Court in State of Bombay v. The
United i'>fotors (India) Ltd., [1953] S.C.R. 1069, they applied
under s. 14 of the Act for refund of tax paid on the ground that
sales outside the State were not taxable under cl. (r)(a) of Art.
286 of the Constitution read with the Explanation.
Refund
was refused by the Sales Tax Authorities and the Board of
Revenue.
In petitions moved by the appellants foe writs of
certiorari anrl 1nandamus against the orders of the Boa;d of
Revenue the High Court ordered refund of tax paid for certain
periods and refused it in regard to other periods.
The Orissa
Sales Tax Act \Vas, ho\.\·ever, amended in 1958 with retrospective effect incorporating s. 14-A which provided that refund
could be claimed only by the person from whom the dealer had
realised the amount by way of sales-tax or otherwise.
S. K. Das J.
Ig6I
March 24.
550
SUPREME COURT REPORTS
[1962)
r96r
Held, that under s. 14-A of the Orissa Sales Tax (Amendment) Act, 1958, refund of tax which the dealer was not liable
The Omni
to pay could be claimed by the person from whom the dealer
Paper Milts Ltd. had actually realised it whether as sales tax or otherwise, and
v.
not by the dealer.
The State 01
The legislature was competent to legislate for granting
Orissa ~ Others refund of sales tax in1properly collected; there is no reason to
exclude the power to declare that refund shall be claimable only
by the person from whom the dealer has realised the amount as
sales-tax or otherwise.
Shah ].
Under s. 9B, cl. 3 of the Act, if the amount realised by the
assessee exceeded the amount payable as tax such amount must
be deposited in the Government treasury, and the assessee having no beneficial interest in such amount the enactment that the
amount shall be claimable only by the persons who paid the
amounts to the dealers as sales-tax is a reasonable restriction
imposed on the right of the assessee to obtain refund in the
interest of the general public, and does not infringe the provisions of Art. r9(r)(f) of the Constitution. If the assessees discharge their statutory obligation to deposit the amount collected by them as sale tax in the Government treasury they cannot
be exposed to any claim for refund by the persons from whom
the tax is collected, even though such persons were in thP- first
instance not liable to pay the tax.
Civ1L APPELLATE JURISDICTION:
Civil Appeals
Nos. 273 to 277 of 1960.
Appeals by special leave granted by the Supreme
Court by its order dated December 15, 1958, from the
judgment and order dated February 4, 1957, of the
High Court of Orissa in 0. J. 0. Nos. 184 to 188 of
1955.
H. N. Sanyal, Additional Solicitor-General of India
and B. P. Maheshwari, for appellants (In 0. As. Nos.
273 and 274 of 1960) and respondents (In 0. As. Nos.
275-277 of 1960).
C. K. Daphtary, Solicitor-General of India, B. R. L.
Iyengar and T. 111. Sen, for respondents (In 0. As.
Nos. 273 and 274 of 1960) and appellants (In 0. As.
Nos. 275-277 of 1960).
llJ61.
March 24.
The Judgment of the Court was
delivered by
SHAH, J.-The Orient Paper Mills Ltd.,-hcreinafter
called the assessees-are a public limited company
having their registered office at Brajrajnagar in the
-
1 S.C.R. SUPREME COURT REPORTS
551
district of Sambalpur, Orissa State. The assessees
z96z
are manufacturers of paper and pa-per-boards and are
The Orient
registered as d

## Text

...
1 S.C.R. SUPREME COURT REPORTS
549
on August 3, 1960. There was, in our opinion, a clear
r96r
violation of the requirement of cl. 10, which embodies
5
h G
. d .
the principles of natural justice. The cancellation
"' av'''" 1'
orders are, therefore, bad and must be quashed. We Deputy Chief conallow the writ petitions and order accordingly.
Thc1,,11er of Imports
petitioner is entitled to its costs; there will be one
.:~ Exports
hearing fee.
Pet it ions allowed .
THE ORIENT PAPER MILLS LTD.
v.
THE STATE O:F ORISSA AND OTHERS
(And Connected Appeal)
(S. K. DAS, J. L. KAPUR, M. HIDAYATULLAH,
J. c. SHAH and T. L. VENKATARAMA AYYAR,JJ.)
Sales Tax--Tax imposed on sales outside the State-Refund, if
claimable by dealer or purchaser-Asscssee's fundamental rightReasonoble restriction-Orissa Sales Tax Act, r947 (XIV of r947),
ss. 98, ct. (3), r4-0rissa Sales Tax (Amendment) Act, r958 (28 of
1958), s. r4.1-Constitntion of India, Art. r9(r)(j).
The appellants who were registered as dealers under the
Orissa Sales Tax Act, 1947, used to collect sales tax from the
purchasers on all sales effected by them including sales to dealers in other states.
They were assessed to and paid tax on
their turnover which included sales outside the State of Orissa,
but after the decision of this Court in State of Bombay v. The
United i'>fotors (India) Ltd., [1953] S.C.R. 1069, they applied
under s. 14 of the Act for refund of tax paid on the ground that
sales outside the State were not taxable under cl. (r)(a) of Art.
286 of the Constitution read with the Explanation.
Refund
was refused by the Sales Tax Authorities and the Board of
Revenue.
In petitions moved by the appellants foe writs of
certiorari anrl 1nandamus against the orders of the Boa;d of
Revenue the High Court ordered refund of tax paid for certain
periods and refused it in regard to other periods.
The Orissa
Sales Tax Act \Vas, ho\.\·ever, amended in 1958 with retrospective effect incorporating s. 14-A which provided that refund
could be claimed only by the person from whom the dealer had
realised the amount by way of sales-tax or otherwise.
S. K. Das J.
Ig6I
March 24.
550
SUPREME COURT REPORTS
[1962)
r96r
Held, that under s. 14-A of the Orissa Sales Tax (Amendment) Act, 1958, refund of tax which the dealer was not liable
The Omni
to pay could be claimed by the person from whom the dealer
Paper Milts Ltd. had actually realised it whether as sales tax or otherwise, and
v.
not by the dealer.
The State 01
The legislature was competent to legislate for granting
Orissa ~ Others refund of sales tax in1properly collected; there is no reason to
exclude the power to declare that refund shall be claimable only
by the person from whom the dealer has realised the amount as
sales-tax or otherwise.
Shah ].
Under s. 9B, cl. 3 of the Act, if the amount realised by the
assessee exceeded the amount payable as tax such amount must
be deposited in the Government treasury, and the assessee having no beneficial interest in such amount the enactment that the
amount shall be claimable only by the persons who paid the
amounts to the dealers as sales-tax is a reasonable restriction
imposed on the right of the assessee to obtain refund in the
interest of the general public, and does not infringe the provisions of Art. r9(r)(f) of the Constitution. If the assessees discharge their statutory obligation to deposit the amount collected by them as sale tax in the Government treasury they cannot
be exposed to any claim for refund by the persons from whom
the tax is collected, even though such persons were in thP- first
instance not liable to pay the tax.
Civ1L APPELLATE JURISDICTION:
Civil Appeals
Nos. 273 to 277 of 1960.
Appeals by special leave granted by the Supreme
Court by its order dated December 15, 1958, from the
judgment and order dated February 4, 1957, of the
High Court of Orissa in 0. J. 0. Nos. 184 to 188 of
1955.
H. N. Sanyal, Additional Solicitor-General of India
and B. P. Maheshwari, for appellants (In 0. As. Nos.
273 and 274 of 1960) and respondents (In 0. As. Nos.
275-277 of 1960).
C. K. Daphtary, Solicitor-General of India, B. R. L.
Iyengar and T. 111. Sen, for respondents (In 0. As.
Nos. 273 and 274 of 1960) and appellants (In 0. As.
Nos. 275-277 of 1960).
llJ61.
March 24.
The Judgment of the Court was
delivered by
SHAH, J.-The Orient Paper Mills Ltd.,-hcreinafter
called the assessees-are a public limited company
having their registered office at Brajrajnagar in the
-
1 S.C.R. SUPREME COURT REPORTS
551
district of Sambalpur, Orissa State. The assessees
z96z
are manufacturers of paper and pa-per-boards and are
The Orient
registered as dealers under the Orissa Sales Tax Act, Pap" Mills ud.
1947-hereinafter referred to as the Act. The assesv.
sees used to collect tax from the purchasers on all sales
The State of
effected by them including sales to dealers in other Orissa & Others
States. For the quarters ending March 31; 1950,
June 30, 1950, September 30, 1950, December 31, 1950
and March 31, 1951, the assessees paid Sales-tax which
they were assessed by the Assistant Collector of Salestax to pay, on their turnover which included sales
outside the State of Orissa.
After this court delivered the judgment in The
State of Bombay and Another v. The United Motors
(India) Ltd. and Others(') the assessees applied for
refund under s. 14 of the Act of tax paid in respect of
goods despatched for consumption outside the State
of Orissa contending that according to the law expounded by this court, the transactions of sales outside the State were not taxable under the Act because
of the prohibition imposed by Art. 286(1) (a) of the
Constitution read with the Explanation. Refund was
refused by the Assistant Sales Tax Officer and the
order was confirmed by the Board of Revenue. In
the view of the taxing authorities, the orders of assessment in respect of the five periods had become final
on the diverse dates on which they were made and
were not liable to be reopened merely because the law
applicable to the transactions was not correctly appreciated by the taxing authorities. In petitions moved
by the assessees for writs of certiorari and mandamus
against the orders of the Board of Revenue, the High
Court of Orissa held that the only restriction upon the
right of a dealer to apply for refund which "is found
within the four corners of s. 14 of the Act" being the
law of limit.ation prescribed by the proviso to that
section, transactions in question not being liable to tax
as they were inter-State transactions, the tax collected
must be refunded on applications submitted within
the period prescribed. The High Court then proceeded
to hold that the recovery of tax paid for the first two
(r) [1953] S.C.R, 1069,
Shah J.
552
SUPREME COURT REPORTS
[1962]
'96'
quarters was barred by limitation but not recovery of
n:o;ieut
tax paid f~r the remaining three quarters, and issued
Paper Mills Ltd. an order m the nature of mandamus directing refund
v.
of tax in respect of the last three quarters. The State
The State of of Orissa and the assessees have appealed with special
Onssa & Others leave against the judgment of the High Court by these
-
five appeals.
Shah ].
Counsel for the State of Orissa contends that no
refund could be granted because the orders of assessment had become final and s. 14 of the Act applied
only to cases of refund in which a superior taxing
authority in appeal or revision against the order of
assessment directs or declares that the tax has not
been properly collected, and it does not apply to cases
of assessment which have become final, even if made
on an erroneous view of the law. The assessees support the view of the High Court that s. 14 applies to all
elaims for refund and also contend that the re.covery
of tax paid for the first two quarters was not barred
by the law of limitation.
It is unnecessary for the purposes of these appeals
to consider the respective contentions of the parties. In
our view the claim of the assessees must fail because
of the retrospective amendment of the Act by the
Orissa Legislature. Bys. 14A which was incorporated
by the Orissa Sales Tax (Amendment) Act, 28 of 1958,
it was provided:
"Notwithstanding anything contained in this Act
where any amount is either deposited by any person
under sub-section (3) of s. 9B or paid as tax by a
dealer and where such amount or any part thereof
is not payable by such person or dealer, a. refund of
such amount or any part thereof can be claimed
only by the person from whom such person or
dealer has actually realised such amounts whether
by way of sales-tax or otherwise and the period of
limitation provided in the proviso to s. 14 shall apply
to the aforesaid claims."
,
In terms, the section provides that refund of tax
paid which the dealer was not liable to pay can only
be claimed by the person from whom the dealer ~as
actually realised it whether as sales-tall: or otherwise.
'
l "'
•
-.
··.
•
.•
/
•
1 S.C.R. SUPREME COURT REPORTS
553
The section therefore deprives the assessees of the
I96I
common law right to claim refund of the amounts paid
TM Odent
as tax under an error of law that it was recoverable Paper Mills Ltd,
by the taxing authority. Counsel for the assessees
v.
does not dispute that by the amending provision, the
The Sta" of
.right to obtain refund of tax is denied to him by the Odssa & Others
Legislature. He contends that the Act is beyond the
competence of the State Legislature and in any event,
it is void because it imposes an unreasonable restriction upon the assessees' fundamental right guaranteed
und~r Art. 19(1)(f) of the Constitution.
By ite.i:n 54 of List II of Schedule 7 to the Constitution, the State Legislature was indisputably competent to legislate ~ith respect to taxes on sale or purchase of papers and paper-boards.
The power to
legislate with respect to a tax comprehends the power
to impose the tax, to prescribe machinery for collecting the tax, to designate the officers by whom the
liabihty may be enforced and to prescribe the authority, obligations and indemnity of those officers. The
divers'1 heads of legislation in the Schedule to the
Constitution demarcate the periphery of legislative
competence and include all matters which are ancillary or subsidiary to the primary head. The Legislature of'the Orissa State was therefore competent to
exercise power in respect of the subsidiary or ancillary
matter of granting refund of tax improperly or illegally collected, and the competence of the Legislature
in this behalf is not canvassed by counsel .for the
assessees. If competence to legislate for granting
refund of sales-tax improperly collected be granted,
is there any reason to exclude the power to declare
that refund shall be claimable only by the person from
whom the dealer has actually realised the amounts by
way of sales-tax or otherwise? We see none. The
question is one of legislative competence and there is
no restriction either express or implied imposed upon
the power of the Legislature in that behalf.
Art. 19(l)(f) of the Constitution prescribes the right
to freedom of citizens to acquire, hold and dispose of
property; but the right is by cl. (5) subject to the
Shah j.
554
SUPREME COURT REPORTS
[1962]
I96z
operation of any law, existing or prospective, in so far
0 .
as it imposes reasonable restrictions on the exercise
The
rient
f h
, ht .
h
.
f h
1
bl'
Paper Mills Ltd. o t at ng
rn t e rnterest o t e genera pu
IC.
v.
Assuming that by enacting that refund of tax shall
The Staie of only be made to the purchasers from whom the tax has
Orissa & Others been collected by the dealers and not to the dealers
Shah j.
who have paid the tax the fundamental right under
Art. 19(l)(f) is restricted, we are unable to hold that
the restriction imposed by s. 14A of the Act is not in
the interest of the general public. The Legislature by
s. 9B(l) of the Act authorised registered dealers to
collect tax from the purchasers which they may have
to pay on their turnover. The amounts collected by
the assessees therefore primarily belonged not to the
assessees but to the purchasers. On an erroneous
assumption that tax was payable, tax was collected by
the assessees and was paid over to the State. Under
s. 9B, cl. (3) of the Act as it stood at the material time,
the amounts realised by any person as tax on sale of
any goods shall, notwithstanding anything contained
in any other provision of the Act, be deposited by him
in a Government treasury within such period as may
be prescribed if the amount so realised exceeded the
amount payable as tax in respect of that sale or if no
tax is payable in respect thereof. As the tax collected
by the assessees was not exigible in respect of the
sales from the purchasers, a statutory obligation arose
to deposit it with the State and by paying that tax
under the assessment, the assessees must be deemed
to have complied with this requirement. But the
amount of tax remained under s. 9B of the Act with
the Government of Orissa as a deposit. If with a
view to prevent the assessees who had no beneficial
interest in those amounts from making'a profit out of
the tax collected, the Legislature enacted that the
amount so deposited shall be claimable only by the
persons who had paid the amounts to the dealer and
not by the dealer, it must be held that the restriction
on the right of the assessees to obtain refund was
lawfully circumscribed in. the interest of the general
public.
Counsel for the assessees contended that they stood
•
1 S.C.R. SUPREME COURT REPORTS
555
in danger of being compelled at the instance of the
I96I
purchasers to repay the amount collected as tax even
.
after it is deposited with or paid by them to the State P
The;:~;ent d
Government, and a statutory provision which deprives aper v'. ' Lt ·
them of their right to claim refund amounts to an
The state of
unreasonable restriction, because they are under an Orissa & Others
obligation to pay the amount to purchasers but they
cannot reimburse themselves by recourse to the State
Shah J.
which holds the amounts. But by s. 9B, the assessees
were liable to deposit the amount in excess of what
was lawfully recoverable from the purchasers as tax.
When under the orders of assessment they paid
amounts to the State, requirements of s. 9B were com.
plied with and the amount remained with the State
in deposit, subject to the obligation, if a demand was
made within the period prescribed, to restore the same
to the persons from whom the assessees had recovered
it. We do not think that there is any reason to hold
that the assessees would be exposed to any enforceable
claims at the instance of the purchasers to refund the
tax collected by them if they have deposited it with
the State in discharge of the statutory obligation
incurred by them.
Appeals Nos. 273 and 274 of 1960 will therefore be
dismissed and Appeals Nos. 275 to 277 ofl960 will be
allo1Ved.
As the State succeeds relying upon a statute
enacted after the judgment was pronounced by the
High Court, we direct that there shall be no order as
to costs of the appeals in this court.
Appeals Nos. 273 and 274 of 1960 dismissed .
Appeals Nos. 275 to 277 of 1960 allowed.