# STATE OF BOMBAY v. M/S. JAGMOHANDAS AND ANOTHER

- **Citation:** [1966] 2 S.C.R. 279
- **Court:** Supreme Court of India
- **Decided:** 1965-10-19
- **Bench:** K. Subba Rao, K. N. Wanchoo, J. C. Shah, S. M. SrKRI, V. Ramaswami
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-bombay-v-m-s-jagmohandas-and-another-3536
- **Pages:** 7

## Headnote

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Bombay Sales Tax Act. 1946, ss. 13, 20-Sab of goods effected 011tside State-Advance Tax paid-Suit
for refu11d
of
tax-Li111i1atio11Sections 13 and 20_, if bar.
The respondents filed a suit for recovery of advance <ialcs-tax paid by
them in respect of sale of goods effected outside
the State, which they
claimed as covered by Art. 286(1)(a) of the Constitution before it was
amended by the Sixth Amendment
Act.
Though no orders of assessments had been mad.e by the sales-tax authorities, they had paid the tax
under a mistake of law.
They discovered their mistake when the Governor of the State promulgated Bombay Ordinance No. 2 of 1952. The
trial Court decreed the suit.
The High Court confirmed the decrne, rejecting the appellant-State's contentions that the suit was barred by the
law of limit1tion, and that the suit was barred by s. 13 and s. 20 of the
Bombay Sales Tax Act, 1946, later
replaced by ss. 19 and 20 of the
Bombay Sales Tax Act, 1952.
Jn ap~eal to this Court;
HELD : (per Full Court) : The appeal must be dismissed.
(i) The suits were not barred by
the law of limitation.
since the
.suits were filed within the period prescribed by art. 96 of the 1st Schedule of the Limitation Act i.e., \\'ithin three years from•the date ·on \Vhich
the mistake become known to the tax payers. [284 C-D; 285 BJ
State of Kera/a v. Alun1iniJnuni Industries Ltd., Kundara,
C.A. No.
· 720 of 1963. Devided on April 21, 1965, (unreported) followed.
(ii) Section 20 did not expressly bar the suit.
The word 'a·sscssn1ent' in s. 20 cannot be read to include a mere filing of return and payrne'nt by a registered dealer.
The word
'assessn1ent' has reference to assessments made
under ss. 11 and 11 A of the
Bombay Sales Tax Act, 1946. [282 EJ
State of Tripura v. The Province of Ea.\'/ Bengal, [1951]
S.C.R.
1,
followed.
(iii) Section 13 did not impliedly bar the suit.
(Per Subba Rao, Wanchoo and Sikri, JJ.) Section 13 does not conG
ten1plate objections being entertained regarding the constitutional validity
·of any provision of the Act.
Assuming that an appeal would lie against
an order made under s. 13, the appeal would
be only on the ground
q1at the computation made by the Sales-tax Officer is erroneous or not
justified by the provisions of the Act. [283 E-G; 285 A-BJ
H
(Per Shah and Ramaswami, JJ.) An objection that certain parts of
the statute were ultra vires the legislature could be raised
before
the
sales-tax authorities.
The question
v.rhether a transaction
which
faIJs
within the Explanation to Art. 286(1 )(a) before it was amended by the
Constitution (Sixth Amendment) Act does not affect the jurisdiction of
the taxing authority : it is merely a question of interpretation of the contract, in the light of the statute, and the sale5-tax authorities are entitled
2SO
SUPREME COURT REPORTS
[1966) 2 s.c.R.
to entertain the objection if raised before them, that the transaction was A
not taxable because the State had no power to legislate in respect of an
Explanation sale.
But in this case, that stage was never reach_ed,
the
tax-payers were seeking refund of payments made under a mistake of
law; they were not seeking to set aside any order of assessment. [285
C-Fl.
Mis. Kamala Mills Ltd. v .. State of Bombay, [1966] 1 S.C.R. 64
B

## Text

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STATE OF BOMBAY
v.
M/S. JAGMOHANDAS AND ANOTHER
October 19, 1965
B
[K. SUBBA RAO, K. N. WANCHOO, J. C. SHAH, S. M. SrKRI AND
V. RAMASWAMI, JJ.J
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Bombay Sales Tax Act. 1946, ss. 13, 20-Sab of goods effected 011tside State-Advance Tax paid-Suit
for refu11d
of
tax-Li111i1atio11Sections 13 and 20_, if bar.
The respondents filed a suit for recovery of advance <ialcs-tax paid by
them in respect of sale of goods effected outside
the State, which they
claimed as covered by Art. 286(1)(a) of the Constitution before it was
amended by the Sixth Amendment
Act.
Though no orders of assessments had been mad.e by the sales-tax authorities, they had paid the tax
under a mistake of law.
They discovered their mistake when the Governor of the State promulgated Bombay Ordinance No. 2 of 1952. The
trial Court decreed the suit.
The High Court confirmed the decrne, rejecting the appellant-State's contentions that the suit was barred by the
law of limit1tion, and that the suit was barred by s. 13 and s. 20 of the
Bombay Sales Tax Act, 1946, later
replaced by ss. 19 and 20 of the
Bombay Sales Tax Act, 1952.
Jn ap~eal to this Court;
HELD : (per Full Court) : The appeal must be dismissed.
(i) The suits were not barred by
the law of limitation.
since the
.suits were filed within the period prescribed by art. 96 of the 1st Schedule of the Limitation Act i.e., \\'ithin three years from•the date ·on \Vhich
the mistake become known to the tax payers. [284 C-D; 285 BJ
State of Kera/a v. Alun1iniJnuni Industries Ltd., Kundara,
C.A. No.
· 720 of 1963. Devided on April 21, 1965, (unreported) followed.
(ii) Section 20 did not expressly bar the suit.
The word 'a·sscssn1ent' in s. 20 cannot be read to include a mere filing of return and payrne'nt by a registered dealer.
The word
'assessn1ent' has reference to assessments made
under ss. 11 and 11 A of the
Bombay Sales Tax Act, 1946. [282 EJ
State of Tripura v. The Province of Ea.\'/ Bengal, [1951]
S.C.R.
1,
followed.
(iii) Section 13 did not impliedly bar the suit.
(Per Subba Rao, Wanchoo and Sikri, JJ.) Section 13 does not conG
ten1plate objections being entertained regarding the constitutional validity
·of any provision of the Act.
Assuming that an appeal would lie against
an order made under s. 13, the appeal would
be only on the ground
q1at the computation made by the Sales-tax Officer is erroneous or not
justified by the provisions of the Act. [283 E-G; 285 A-BJ
H
(Per Shah and Ramaswami, JJ.) An objection that certain parts of
the statute were ultra vires the legislature could be raised
before
the
sales-tax authorities.
The question
v.rhether a transaction
which
faIJs
within the Explanation to Art. 286(1 )(a) before it was amended by the
Constitution (Sixth Amendment) Act does not affect the jurisdiction of
the taxing authority : it is merely a question of interpretation of the contract, in the light of the statute, and the sale5-tax authorities are entitled
2SO
SUPREME COURT REPORTS
[1966) 2 s.c.R.
to entertain the objection if raised before them, that the transaction was A
not taxable because the State had no power to legislate in respect of an
Explanation sale.
But in this case, that stage was never reach_ed,
the
tax-payers were seeking refund of payments made under a mistake of
law; they were not seeking to set aside any order of assessment. [285
C-Fl.
Mis. Kamala Mills Ltd. v .. State of Bombay, [1966] 1 S.C.R. 64
B
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos, 219 and
"
273 of 1964.
Appeals from the judgment and decrees dated March 25/
26th, 1960 of the Bombay (New Gujarat) High Court in First
Appeals Nos. 44 and 45 of 1959 respectively.
S. V. Gupte, Solicitor-General, R. Ganapathy Iyer, M. S. K.
Sastri, R. H. Dhebar and B. R. G. K. Achar, for the appellant.
G. S. Pathak, M. M. Vakil, J. B. Dadachanji, 0. C. Mathur
and Ravinder Narain," for the respondents.
c
The Judgment of Subba Rao, Wanchoo and Sikri, JJ. was
I)
delivered by Sikri, J. Shah, J. delivered a separate concurring
judgment on behalf of himself and Ramaswami J.
Sikri, J.
These arc two appeals on certificates granted by
the High Court of Bombay and raise the same questions of law.
It is, therefore, only necessary to give factS in Civil Appeal No. 219 E
of 1964, which are as follows. M/s. Jagmohandas Masruwala, a
registered dealer under the Bombay Sales Tax Act, 1946 (Bombay
Act V of 1946) filed Original Suit No. 10 of 1956 against the
State of Bombay for recovery of Rs. 31,852/8/3 which they had
paid as advance sales-tax on various dates when submitting returns
for the period January 26, 1950 to March 31, 1951, and interest F
thereon at 4%, viz., Rs. 3,998. The suit was filed on the allegations that the amount was paid as advance tax in respect of sale
cif goods effected outside the State of Bombay. These sales were
taxable under the Bombay Sales Tax Act,
1946
(hereinafter
referred to as the Act). It was further alleged that the Act beG
came void by virtue of art. 286(1)(a) of the Constitution on
January 26, 1950, and this amount was paid under a mistake of
law and that the mistake was discovered when the Governor of
Bombay promulgated Bombay Ordinance No. 2 of 1952.
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The State of Bombay raised various pleas, but we are cont
cerned with two : ( 1) that the suit was barred by ss. 13 and 20
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of the Bombay Sales Tax Act, 1946, and ss. 19 and 29 of the
Bombay Sales Tax Act, 1952; and (2) that the suit was_ barred by
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STATE V. JAGMOHANDAS (Sikri, J.)
281!
limitation. The Second Joint Civil Judge, Senior Division, Surat,.
held that the suit was not barred under the statutory provisions
above mentioned and that it was filed
within limitation.
He·
passed a decree in favour of the
plaintiff for a sum of
Rs. 35,850/8/3 with future interest from the date of the suit at
4'C per annum on Rs. 31,852/8/3, together with the cost of the·'
suit.
The State of Bombay appealed to the High Court. It was
urged before the High Court, as has been urged before us, that the·
Act was a complete code and the issue of law relating to nonmaintainability of the suit was, for all practical purposes, answered·
by the conclusions reached by their Lordships of the Privy Council
in Raleigh Investment Co. Ltd.
v.
Governor-General in Council(1), in examining the provisions of s. 67 of the Income-tax Act
which are very similar to those of s. 20 of the Sales Tax Act, 1946.
The High Court held that the present case must be governed by
the opinion expressed by this Court in The State of Tripura v. -The
Province of East Benga/( 2 ).
On the question of limitation, the
High Court held that the case fell within the purview of art. 96
of the Limitation Act and the terminus quo of that article i9 the
date on which the mistake becomes known to the plaintiff.
It
expressed agreement with the Court below that the mistake of Jaw
bee ame known to the plaintiff on a date which brings the suit
within the period prescribed by the Law of Limitation. The High·
Court further held that the trial Court was in error in allowing
interest as damages.
In the result, the High Court varied the
decree by omitting the directions as regards
the payment of
interest as damages, but otherwise affirmed the decree.
Having
obtained the certificate of fitness from the Bombay High Court,
the State of Bombay has now come up on appeal to this Court.
The learned Solicitor-General has raised two points on behalf
of the appellant : First that the suit was either expressly barred
by s. 20 of the Bombay Sales Tax Act, 1946, or was imoliedly
G barred by virtue of s. 13 of the Bombay Sales Tax Act, 1946; and
(2) that the suit was barred by limitation.
We arc unable to·
appreciate how s. 20 expressly bars the suit. It is admitted that
no assessment has been made under the Act and the plaintiff has
not in his suit called into question any assessment or order made
under the Act. In our opinion, this part of the argument 1s
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covered by the decision of this Court in the Tripura case, and the--
High Court was right in so holding.
(1) (1947) 74 I.A. 50.
(2) [1951] S.C.R. l.
282
SUPREME COURT
REPORTS
[1966] 2 S.C.R.
The learned Solicitor-General then attempted to distinguish the
A
Tripura case by saying that there was in the Bengal Agricultural
Income Tax Act, 1944, no section like s. 13 and no reliance was
placed by this Court in that case on the existence of adequate
machinery as was done by this Court in Kamala Mills case('). In
effect he seemed to suggest that the Tripura case(') was inconsisB
tent with the decision of this Court in Kamala Mills case('). We
are unable to accede to this contention. The judgment of Faz!
Ali, .J., who dissented in the Tripura case, clearly shows that the
Court was fully aware of the existence of the machinery in the
Act enabling an assessee to challenge an eventual assessment. But
this Court, in spite of the existence of that machinery, gave effect
to the plain words of s. 65 of the Bengal Agricultural Income. Tax
Act, 1944. There is nothing in the Kamala Mills case( 1) which
is 'inconsistent with the Tripura case(').
Further Mr. Pathak,
ieamed counsel for the respondent, pointed out that a section
similar to· s. 13 existed in the Bengal Agricultural Income Tax Act,
1944.
Another point raised by the learned Solicitor-General was that
when a registered dealer files a return and calculates and pays tax
on the basis of the return, he in effect makes a self-assessment and,
therefore, brings himself within s. 20 of the Act. We are unable
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to read the word 'assessment' in s. 20 to include a mere filing of 'E
return and payment by a registered dealer. In our opinion, the
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word 'assessment' has reference to assessments made under ss. 11
~
. and llA of the Bombay Sales Tax Act, 1946.
Therefore, we
~
must overrule the contention of the learned Solicitor-General that
s. 20 expressly bars the present suit.
Coming now to the argument that s. 13 impliedly bars the suit, F
it iB necessary to set out s. 13 of the Act.
Section 13 reads as
follows:
"The Commissioner shall, in the prescribed manner,
refund to a registered dealer applying in this behalf any
amount of tax paid by such dealer in excess of the
amount due from him under this Act, either by cash
payment or, at the option of the dealer, by deduction of
such excess from the amount of tax due in respect of any
other period :
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Provided that no claim to refund of any tax paid
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under this Act shall be allowed unless it is made within
'(1) [1966] l S.C.R. 64.
(2) [1951] S.C.R. !.
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STATE v. JAGMOHANDAS (Sikri, J.)
twenty-four months from the date on which the order
of assessment was passed or within twelve months of
the final order passed on ·appeal, revision, or reference
in respect of the order of assessment, whichever period
is later.
Provided further that the Collector shall first apply
the excess paid in respect of any period towards the
recovery of any amount in respect of which a notice
under sub-section ( 4) of section 12 may have been
issued and shall then refund the balance remaining, if
any.
2s:i
The first part of the section in1poses a statutory obligation on the
Commissioner to refund any amount of tax paid by a registered
dealer in excess of the amount due from hinl under this Act. The
first proviso prescribes the period within which
the
registered
dealer can apply for refund.
The period is 24 months from the
date on which the order of assessment is passed or within 12
months of the final order passed on appeal in respect of the order
of assessment, whichever period is later. It is apparent that the
dealer cannot apply for refund under s. 13 till an order of assessment is passed. The prescribed form also shows the same thing.
The scheme of s. 13 appears to be that the Sales Tax Officer would
make first an order of assessment, arrive at the amount of tax due
according to the order and then work out the excess, if any, paid
by the dealer and refund that money.
It seems to us that s. l3
does not contemplate objections being entertained regarding the
constitutional validity of any payment made by the dealer. The
S~licitor-General contended that an appeal would lie against an
order made under s. 13. Assuming that it is so, the appeal would
be only on the ground that the computation made by the Sales
Tax Officer i~ erroneous and not on the ground that the tax paid
by the dealer was not constitutionally payable at all, under the
Act.
Therefore, if s. 13 is understood in the manner mentioned
above, it seems clear to us that no machinery is provided in s. 13
for dealing with the objection that the money paid was paid by
virtue of a void provision of the Act.
Further, we have held in M/ s. K. S. Venkataraman v.
The
State of Madras(') that the Sales Tax authorities created by the
Madras· General Sales Tax Act are not competent to entertain
questions as to the ultra vires of a provision of the Act. Similarly
the Commissioner appointed under the Bombay Sales Tax Act
(I) [1966) 2 S.C.R. 229.
2il4
SUPREME GOURT
REPORTS
[1966] 2 S.C.R.
would not be competent to go into the question whether s. 6 or
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the Act under which the transactions were apparently taxable, was
.ultra vires or not.
Therefore, in our opinion, s. 13 of the Act does not create
.an implied bar and the High Court is right in holding that the
;;uit was competent.
This Court has recently held that art. 96 applies to suits like
1he present. [See State of Kerala v. Aluminium Industries Ltd.
Kunda(').]
B
The only point that remains is regarding the date of the
knowledge of the plaintiff.
Both Courts below have found that c·
1he plaintiff came to know of the mistake on December 22, 1952,
1the date of the promulgation of Governor's ordinance. This is a
concurrent finding of fact and the learned Solicitor-General has
11ot shown us any good ground for disturbing this concurrent find-
'ing of fact.
Accordingly, agreeing with the High Court, we hold that the D
·suit is not barred. In the result'the appeals fail and are dismissed
·with costs. One hearing fee.
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Shah, J.
These appeals aris~ out of suits filed by the two
Tespondents for recovery of sums of money paid by
them
as
11dvance sales-tax under a mistake of Jaw. The suits were decreed
E
by the Court of First Instance and the decisions were confirmed
in appeals by the High Court of Judicature at Bombay.
There were no orders of assessment made by the taxing
-aut110rities, but the tax-payers being of the view that the tax on
their turnover was payable submitted returns under the Bomb3'
·sales Tax Act, 1946 and paid advance tax. The sales were in F
respect of goods consigned to purchasers outside the State of
lfombay and for consumption outside the State. These sales were
apparently covered by the tenns of Art. 286(1) (a) before it was
amended by the Sixth Amendment Act and could not be taxed
under a statute enacted by a State. The tax-payers claimed that
thev had discovered their mistake when the Governor of Bombay
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pro'mulgated Bombay Ordinance No. 2 of 1952 after the decision
of the Bombay High Court in The United Motors (India) Ltd. v.
The State of Bombay('). The trial Court and the Hicli Court
have rejected the contention raised by the State that the suits were
barred by ss. 13 and 20 of the Bombay Sales Tax Act, 1946, H
which were later replaced by ss. 19 and 20 of the Bombay Sales
(1) C.A. 720 of 1963 Decide,d on April 21, 1963 (unreported)
·(2) (1952) 55 Bom. L.R, 246.
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STATE V. JAGMOHANDAS (Shah, J.)
28 5
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Tax Act, 1952, and that the suits were barred by the law of
limitation.
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We agree with the judgment of our brother Sikri, J., that the
suits were not barred either expressly by the provisions of s. 20 or
impiiedly by s. 13 of the Bombay Sales Tax Act, 1946. We
also agree with him that the suits were not barred by the law of
limitation, since the suits were filed within the period prescribed by
Art. 96 of the 1st Schedule of the Limitation Act i.e., within three
years fron1 the date on which the mistake became known to the
~ax-payers. We are unable, however, to agree with the observations that before the sales-tax authorities an objection that certain
parts of the statute were ultra vires the Legislature could not be
raised. As held by this Court in M/s. Kamala Mills Ltd. v. The
State of Bombay(') the question whether a transaction which falls
within the Explanation to Art. 286(1)(a) before it was amended
by the Constitution (Sixth Amendment) Act does not affect the
jurisdiction of the taxing authority : it is merely a question of
interpretation of the contract in the light of the statute and the
sales-tax authorities are entitled to entertain the objection, if it
be raised before them, that the transaction was not taxable because
the State had no power to legislate in respect of an Explanation
sale. But in this case, that stage was never reached.
The taxpayers in the belief that they were liable to pay tax paid advance
tax before any orders of assessment were made. Thereafter realising that they had committed a mistake filed suits for refund.
Thereby they were seeking to obtain orders of refund of payments
made under a mistake of law : they were not seeking to set aside
any order of assessment.
We agree therefore that the appeals should be dismissed with
costs.
Appeals dismis.ied .
(I) [1966] 1 S.C.R. 64.