# 6 S.C.R. SUPREME COURT. REPORTS STATE OF MADHYA PRADESH v. BHAILAL BHAI & ORS - **Citation:** [1964] 6 S.C.R. 261 - **Court:** Supreme Court of India - **Decided:** 1964-01-20 - **Case number:** Civil Appeah Nos. 362-377 of 1962 - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/6-s-c-r-supreme-court-reports-state-of-madhya-pradesh-v-bhailal-bhai-ors-3074 - **Pages:** 14 ## Headnote I 6 S.C.R. SUPREME COURT. REPORTS STATE OF MADHYA PRADESH v. BHAILAL BHAI & ORS. (P. B. GAJBNDRAGADKAR, K. N. WANCl{OO, K. c. PAS GUPTA, ]. C. SHAH AND N. RAJAGOPALA AYYANGAll JI.) COftltltution of India, 1950, A.rtl. 226, 301 and 304-luue of WrlfUnrewonahle delay in moving Coun-what iJ-Sale1 T~ lmpedint Inter Stolt trade-Validity-Tax paid under mistak~ Ordtr of np111me111-Jurildiction of High Court 1m4er A.rt. 221 The respondents are doalen iii tobaccp in the State of Madhya B))ant. The appellant imposed sales tu on the sale of imported tobacco by the respondents. But no such tax was imposed on the sale of indigcoot11 tobacco. The respondents filed petitions under Art. 226 of the Constiru. lion for the bsue of writ of mandamus 'directing the refund of sales tu: collected from them. They contended that the impugned tu violated Art. 301 (a) of the Constitution and they pru"d the tax under a mistake at law and the tax so paid was refundable under s. 72 of the Indian Contract Act, 1872. The appellant contended that there was no violation ol. Art. 301 of the Constitution, even if there was such violation the tu: came witllin the special provision under Art. 304(a), the High Court bu no power to direct refund of tax already paid and in any event the Hiaft Court should not exercise its discretionary power of issuing a writ of martllamus directing this to be done since there was unreasonable delay la tiling the petition. The High Court rejected all the contentions of the appellant and a writ of mandamus was issued as prayed for. The appellants appealed to this Court. Before this Court substantially the same contention:;. a11 were canvassed before the High Court were raised. Held: (i) Even though the liability to pay tax was crμted by the sale of tobacco in Madhya Pradesh and not by the import itself the facts and circumstances showed that trade and commerce. as between Madh11 Bharat and other parts of India was directly impeded by tb,o impulld wx and therefore the said tax violated Art. 30l(a) of the Constitution. Atiabarj Tea Co. Ltd. v. Statt of Assam. [1961) I S.C.R. 809, A.1110mnbileJ Transport (Ra/allhan) Ltd. v. State of Rajasthan, [1963) I S.C.R. 491 and Firm Mehtab Majid I Co. v. Stat• of MadrtU, A.l.jl. 1943 S.C. '21, referred to. (ii) Even thou'lb the tu contravened Art. ~OJ of the ConstituliGa it would he valid if it came within the saving provi•illtll ot Art. J04 pl tbe Constitution. (lii) Tobacco manufll!'!ured or produce4 in the appellant ~late, Ii niJac lo tho tobacco imported from outside bad no« been subl«tetl to lhe tu and therefore the tu wu noC l!lithin the saviiis provisipna ot Ad. 304 <•> ol the Comtitlllioa. SUPREME COURT REPORTS 1964 (iv) The tax which had already been paid was so paid under a mistake -- within s. 72 of the Indian Contract Act. The High Courts have power State po!uiMhdhya for the purpose of enforcement of fundamental rights and statutory rights "·v, ei to grant consequential reliefs by or'dering repayment of money realised by Bhailol Bhai. the Governn1ent without the authority of law. Firm Mehtab Majid & Co. Y. State of Madras, A.I.R. 1963 S.C. 921 and Sale& Tax Officer, Banaras v. Kanhaiya Lal Saraf, [1963] S.C.R. 1360, referred to. ( v) A~ a general rule if there has been unreason~ble delay the coutt ought n9t ordinarily to lend its aid to a party by the extraordinary remedy of manrlamuJ. Even if there is not such delay, in cues where th.e opposite party raises a prima facie issue as regards the availability of such relief on the merits on grounds like limitation the Court should ordinarily refuse to issue the writ of mandamus. (vi) Though the provisions of the Limitation Act do not as such .&pply to the grantin& of relief under Art. 226 the maximum period fixed I by the legish•_ture as the time within which relief by a suit in a Civil Court must be claimed 1nay ordinarily be taken to be a reasonable standard by .wh~:;h delay in seeking remedy under Art. 226 can be measured. The Court may co ## Text I 6 S.C.R. SUPREME COURT. REPORTS STATE OF MADHYA PRADESH v. BHAILAL BHAI & ORS. (P. B. GAJBNDRAGADKAR, K. N. WANCl{OO, K. c. PAS GUPTA, ]. C. SHAH AND N. RAJAGOPALA AYYANGAll JI.) COftltltution of India, 1950, A.rtl. 226, 301 and 304-luue of WrlfUnrewonahle delay in moving Coun-what iJ-Sale1 T~ lmpedint Inter Stolt trade-Validity-Tax paid under mistak~ Ordtr of np111me111-Jurildiction of High Court 1m4er A.rt. 221 The respondents are doalen iii tobaccp in the State of Madhya B))ant. The appellant imposed sales tu on the sale of imported tobacco by the respondents. But no such tax was imposed on the sale of indigcoot11 tobacco. The respondents filed petitions under Art. 226 of the Constiru. lion for the bsue of writ of mandamus 'directing the refund of sales tu: collected from them. They contended that the impugned tu violated Art. 301 (a) of the Constitution and they pru"d the tax under a mistake at law and the tax so paid was refundable under s. 72 of the Indian Contract Act, 1872. The appellant contended that there was no violation ol. Art. 301 of the Constitution, even if there was such violation the tu: came witllin the special provision under Art. 304(a), the High Court bu no power to direct refund of tax already paid and in any event the Hiaft Court should not exercise its discretionary power of issuing a writ of martllamus directing this to be done since there was unreasonable delay la tiling the petition. The High Court rejected all the contentions of the appellant and a writ of mandamus was issued as prayed for. The appellants appealed to this Court. Before this Court substantially the same contention:;. a11 were canvassed before the High Court were raised. Held: (i) Even though the liability to pay tax was crμted by the sale of tobacco in Madhya Pradesh and not by the import itself the facts and circumstances showed that trade and commerce. as between Madh11 Bharat and other parts of India was directly impeded by tb,o impulld wx and therefore the said tax violated Art. 30l(a) of the Constitution. Atiabarj Tea Co. Ltd. v. Statt of Assam. [1961) I S.C.R. 809, A.1110mnbileJ Transport (Ra/allhan) Ltd. v. State of Rajasthan, [1963) I S.C.R. 491 and Firm Mehtab Majid I Co. v. Stat• of MadrtU, A.l.jl. 1943 S.C. '21, referred to. (ii) Even thou'lb the tu contravened Art. ~OJ of the ConstituliGa it would he valid if it came within the saving provi•illtll ot Art. J04 pl tbe Constitution. (lii) Tobacco manufll!'!ured or produce4 in the appellant ~late, Ii niJac lo tho tobacco imported from outside bad no« been subl«tetl to lhe tu and therefore the tu wu noC l!lithin the saviiis provisipna ot Ad. 304 <•> ol the Comtitlllioa. SUPREME COURT REPORTS 1964 (iv) The tax which had already been paid was so paid under a mistake -- within s. 72 of the Indian Contract Act. The High Courts have power State po!uiMhdhya for the purpose of enforcement of fundamental rights and statutory rights "·v, ei to grant consequential reliefs by or'dering repayment of money realised by Bhailol Bhai. the Governn1ent without the authority of law. Firm Mehtab Majid & Co. Y. State of Madras, A.I.R. 1963 S.C. 921 and Sale& Tax Officer, Banaras v. Kanhaiya Lal Saraf, [1963] S.C.R. 1360, referred to. ( v) A~ a general rule if there has been unreason~ble delay the coutt ought n9t ordinarily to lend its aid to a party by the extraordinary remedy of manrlamuJ. Even if there is not such delay, in cues where th.e opposite party raises a prima facie issue as regards the availability of such relief on the merits on grounds like limitation the Court should ordinarily refuse to issue the writ of mandamus. (vi) Though the provisions of the Limitation Act do not as such .&pply to the grantin& of relief under Art. 226 the maximum period fixed I by the legish•_ture as the time within which relief by a suit in a Civil Court must be claimed 1nay ordinarily be taken to be a reasonable standard by .wh~:;h delay in seeking remedy under Art. 226 can be measured. The Court may consider the delay unreasonable even if it is less than the period of limitation prescribed for a civil action for the remedy. Where the delay is more than this period it will almost always be proper for the court to bold that it is unreasonable. The period of limitation prescribed for recovery of money paid by mistake under the Limitation Act is three yeaN from the date when the mistake is known. In the result C.A. No!. 861-867 are allowed in part and the other appeals are di!iimhsed. CIVIL APPELLATE JURISDICTION : Civil Appeah Nos. 362-377 of 1962. Appeals from the judgment and orders dated December 16, 1959 of the Madhya Pradesh High Court in Miscella· aeous Petitions Nos. 144 to 158 and 160 of 1958. Civil Appeals Nos. 858 to 867 of 1962. Appeals from the judgment and orders dated 28th October, 1960, 16th September, 1960 and 29th July, 1960 of the Madhya Pradesh High Court in Miscellaneous Petltiom Nos. 110, 119 and 136 of 1960, 198, 199, 202 to 206 of 1959 respectively. · Civil Appeals Nos. 25 to 29 of 1963. Appeals from the judgment and orders dated 29th July, 1960, 26th September, 1960, 28th October, 1960, 16th September. 1960 and 28th October, 1960 of the Madhya . . l 6 S.C.R. SUPREME COURT REPORTS Pradesh High Court in Miscellaneous Petition Nos. 27' cf 1958, 73, 74, 120 and 132 of 1960 respectively. M. Adhikari, Advocate-General, Madhya Pradesh and I. N. Shroff, for the appellants (in all the appeals). M. C. Setalvad, S. N. Andley, Rameshwar Nath and P. L. Vohra, for the respondent (in C.A. No. 362/1962). S. N. Andley, Rameshwar Nath and P. L. Vohra, for the respondents (in C.A. Nos. 363 to 377 and 858 to 867 of 1962 and 25 to 27 of 1963). January 20, 1964. The Judgment of the Court was delivered by ' 1964 Stat• of Madlt1fl Prad111h v. Bhailal BluJI DAS GUPTA J.-These 31 appeals by the State of Madhya o., Gurt• J. Pradesh are against the orders made by the High Court of Madhya Pradesh in 31 applications under Art. 226 of the Constitution by dealers in tobacco. All these petitioners carried on business in Madhya Bharat which later became part of the State of Madhya Pradesh. They were assessed to sales tax on their sales of tobacco in accordance with the notification issued by the State Government in exercise of pow'ers under s. 5 of the State Sales Tax Act and large amounts were collected by the Madhya Bharat Government and later by the Madhya Pradesh Government. The petitioners contended that the taxing pr9vi1ions under which the tax was assessed and collected from them was unconstitutional as it infringed Art. 301 of the Constitution and did not come Within the special provision of Art. 304(a). Accordingly, they prayed for appropriate writs or orders for refund of all the taxes that has been collected from them. In resisting these applications the Madhya Pradesh Government contended, first, that the taxing provisions did not offend Art. 301 of the Constitution and that in any case, they satisfed the requirements of Art. 304(a). It was further contended that even if tl)e taxing p10vision was unconstitutional and the assessment and collection of tax had been without any legal authority the petitioitiers were not en ti tied to the order for refund prayed for. ~ SUPREME COURT REPORTS (rg64] I~ The l:ligb Count was of opinion on a consideration of • ;;fita41iyo the notification under which the tax was assessed that it 'fOllull imposed a tax only on imported tobacco and not on home •. b AJJJoJ B/ioi grown to acco and so it did not come within the special ,,_ a;;;,. 1. provisions of Art. 304 (a) of the Constitution and consequently the infringement of Art. 301 of the Constitution which resulted from the imposition of a tax on import of goods made the provisions void in law. The prayer for refund was allowed in the applications out of which C.A. Nos. 362-377, C.A. Nos. 861-867 of 1962 and C.A. No. 25 of 1963 have arisen. The prayer was rejecr.ed in the remaining applicatiom. · · In the present appeals the State of Madhya Pradesh challenges the correctness of the High Court's decision that the taxirig provision was unconstitutional and void and also ~ ~rders for refund m34e in· some of the ~lions mentionC!( above. The liability to pay tax arose under s.3 of the Madhya Bharat Sales Tax Act. This Act came into force from ~e 1st day of May 1950. As originally enacted it 11rovided that (a) every dealer who imports goods into Madhya Bharat shall be liable to pay tax on his taxable turnover in respect of sales or supplies of goods effected from the lit day of May 1950 if his total turnover in the previous year in respect of sales or supplies of goods exceeded Rs 5,000; (I>) similarly every manufacturer or processor whose turnover in the previous year exceeded Rs. 5,000 was made liable to pay tax on his taxable turnover in respect of sales .Jf supplies of goods effected from the 1st day of May 1950; (c) every other dealer was made liable to pay tax on his taxable turnover in respect of sales or supplies or goods ellecOOd from the 1st day of May 1950, if the total turnover in the previous year exceeded Rs. 12,000. By later amendments the word "processor" was deleted from cl. (b) of the section and the meaning of the words "any other" in cl. ( c) was made clearer by substituting the w9rds "any goods of a dealer not falling in cl. (a) or cl. C)?)". There was also an amendment in 1950 making it clCM that the taxable turnover on which the tax liability 6 S.C.R. SUPREME COURT REPORTS 26S IH4 arose was in respect of sales or supplies ·of goods effected in Madhya Bharat. State oj M,,,,,,,_ ~iaUlh Section 5 of the Act provides that the tax payable by a dealer shall be at a single point and shalt not be less than Rs. 1/9/- per cent or more than 6! per cent of the taxable turnover, as notified from time to time by the Go\'ernment by publication in the Official Gazette. This is 5ubject to a proviso that the Government may in respect of a special class of goods charge tax upto 12!% on the taxable turnover. The second sub-section of s. 5 empowers the Government to notify at the time of notifying the tax payable by a dealer, the goods and the point of their sale at which the tax is payable. • The legal position therefore is that unless there is a valid notification under s. 5 no tax can be levied. The contention of the petitioners-dealers which has succeeded in the High Court is that the notifications on the strength of which the tax was asse.ssed on tbem were invalid. The first notification was issued on April 30, 1950. This provided that with effect from the Ist day of May 1950 sales tax shall be oolleoted in respect of goods specified in column 2 of the Schedule that was attached to tho notification at the point of sale mentioned in column 3 at lhe rates mentioned in column 4. The relevant portion of the Schedule ran thus:- SI Name of commadit7 The point of sale Rate of No. by dealers IU • • • '· Tobacco leaves, manufactu~ Importer 6-4-0 red tobacco \for eating and tr CCll1 amoking) and tobacco μscd alct~ for Jlldi manufacturing. This was followed by another notification dated May 22, 1950 under which a lower rate was prescribed fur tobacco used for Bidi manufacturers. But the point at which the tax was payable remained unaltered. Tho rclo- "· al#liW B,,_ D. a.,,. J. 266 SUPREME COURT REPORTS [1g64] l91U vant portion of the Schedule to this notification was in .ltate of Madh1• these words: Prade1h v. ----------~------------ ...., BhlzI .D-6 Gupta /. SI. No. Nainc of commodity IO. Tobacco leaves and manufactured tobacco (for eating, smoking and snuffing) I I. Tobacco used for Bidi manufacturing. Point of sale by the dealers inM.B. Importer Importer Rate per cent of tax ' 1-9-0 For a short period, i.e., from the 1st January 1954 to the ,21st January 1954 these two notifications remained inoperative in consequence of a notification dated the 24th Octoj>er, 1953, under which from the 1st January 1954 the point of sale at which the tax was payable was altered to "on a sale by a dealer direct to a consumer or to a dealer who does not hold a licence or registration certificate under the Sales Tax Act". This last notification was again superseded by a notification dated the 21st January, 1954 in consequence of which th:e old position was restored with effect from January 22, 1954. That is, with effect from 22nd January 1954 the point at which the tax was payable, again became a sale by an importer. There can be no doubt that the tax payable at the point of sale by the importer in Madhya Bharat directly impeded the freedom of trade and commerce guaranteed by Art. 30 l of the Constitution. It is true that the import by itself would not bring in the liability to tax and that if the imported goods were not sold in Madhya Bharat no tax would be payable. Quite clearly however by far the greater part of the tobacoo leaves, manufactured tobacco (for eating and smoking) and tobacco used for Bidi manufacturing that would be imported into the State would be sold in Madhya Bharat. That a very considerable amount was so sold is clear from the very assessment orders made .•in these several cases. There can be no doubt therefore 6 S.C.R. SUPREME COURT REPORTS that even though it is the sale in Madhya Bharat of the imported goods that creates the liability to tax and not the import by itself, the trade and commerce as between Madhya Bharat and other parts of India is directly impeded by this tax. On the authority of this Court's decision in Atiabari Tea Co., Ltd. v. State of Assam(') it must therefore be held that the tax contravenes the provisions of Art. 301 of the Constitution. It may be mentioned that the later decision of this Court in Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan(') which slightly modified the majority decision in Atiabari Tea Co.'s case does not alter this position. If the tax could have been claimed to be regulatory or compensatory it would have got the benefit of th~ latter decision. There is, however, no scope for such a claim (See Firm Mehtab Majid & Co. v. State of Madras)('). The tax could still be good if even though it contravened the provisions of Art. 301 'it came within the saving provisions of AI1. 304( a) of the Constitution. That Article provides in its cl. (a) that notwithstanding anything in Article 301 or Art. 303 the legislature of a State may by law impose on goods imported from other States any tax to which similar goods manufactured or produced in that State are subject so however as not to discriminate between goods so itnported and goods so manufactured or produced. An attempt was made on behalf of the State befl""e the High Court and also before us to construe the notification mentioned above to mean that not only the tobacco imported from other States but also similar goods manufactured or produced in Madhya Bharat were subject to this tax and at the same rate. It was argued that a dealer in these goods who was an importer and so sold goods imported by him into Madhya Bharat would also be selling goods not so imported but manufactured and produced in the State. We are prepared to agree that that may well be so. What we are unable to see, however, is that in respect of sales of such other goods this person would be liable to (') [19611 I S.::;.R. 809. (' ; [1963] I S.C.R. 491. (') \.I.R. 1963 S.C. 928. 1964 State of Madhya Pu11J8'11 T. BhaiW Bh4i Das Gupta/. 268 ST TPREME COURT REPORTS [rg64] 1964 any tax under the notification. We are informed that in Shot• of Madh1• tact where importers dealt with goods other than imported _?,..,. goods the sales of such other goods were in fact excluded llhaiW. IJ!wi from tax. The learned Advocate-General of Madhya DtU G•pt• J. Pradesh who appeared before us in support of these appeals suggested that tha~ was done by the State Sales Tax Authorities on a mistaken interpretation of the law. We do not think so. In our opinion, the only reasonable interpretation of the. notification as it stands, viz., that tax on tobacco leaves, manufactured tobacco and tobacco used for Bidi manufacturing would be payable at the point of sale by the importer, is that only the sale of goods which the importer had imported would be liable to tax and not &ale of any other goods by him. If the intention had bCCll as. suggested by the learned Advocate-General that though . the tax is payable at the point of sale by an importer the iiale by the same person of good> manufactured or produced in Madhya Bharat would also be liable to tax, the word "importer" would not have been used in column 3 ·but the word "dealer" would have been used and the point of sale would have been indicated by some othec words as the "first sale in Madhya Bharat" or "the sW. t.o the retailer in Madhya Bharat" as the rule-1p.aking authority chose. The matter becomes even more clear if in column 3 we read for "importer" the definition of "importer of goods" in s. 2 ( i) of the Act. Reading this we find that the point of sale in Madhya Bharat at which the tax is payable i.s the sale "by the dealer who brings or causes to be brought into Madhya Bharat any goods from outside for the purpose of processing, manufacturing br sale" or ''who purchases goods in Madhya Bharat for the purpose of sale from a dealer who does not ordinarily carry on business iD Madhya. Bharat." When only such a sale is being made the point at which the tax is payable, there is hardly any scope for a serious argument that the notification was intended to make sales by that same dealer of goods manufactured or· produced in Madhya Bharat liable to tax. It may not be out of place to illOtice in this connection the distinction made by s.3 of·the Madhya Bharat Sales ' 6 S.C.R. SUPREME WURT REPORTS Tax Act between sales bY. a dealer who imports gooda 1'64 lcl.(a)] and other dealers [els. (b) and (c)]. It is not un- St•t• ., lltullrya .!Casonable to think that the Act itself contemplated the '"*"' Bales by an importer of goods as meaning only sab by him .frd!i •i..1 of goods imported by him into Madhya Bharat. Apart - from this, it has to be noticed that admittedly the notificaDIM le even if it is less than the period of limitation prescribe