JUDGMENT
K.N. Saikia, C.J.
1. The petitioner-company impugns the notices of demand dated April 27, 1960, and April 7, 1975, issued by the Superintendent of Taxes, Jorhat, the former demanding the sum of Rs. 6,439.86, and the latter, issued after part payment, demanding the balance amount of Rs. 3,000, payable by it for the period ending December 31, 1959, as per the impugned assessment order dated March 24, 1960, made under the Assam Taxation (on Goods Carried by Roads or Inland Waterways) Act, 1954, and prays for refund of Rs. 3,439.86 already deposited by it pursuant to the demand notice dated April 27, 1960. The petitioner-company carries on the business of cultivation; manufacture and sale of tea in the Kamal-pur Tea Estate despatching some of its products to Calcutta.
2. In 1954, the Assam Taxation (on Goods Carried by Roads or on Inland Waterways) Act, 1954, was passed levying taxes on manufactured tea carried by road or inland waterways. The petitioner-company submitted a voluntary return for the period ending on December 31, 1959, but the return was not accompanied by any receipt showing the payment of the taxes in accordance with the return and it was filed beyond 30 days prescribed under Section 7(3) of that Act. The Superintendent of Taxes, Jorhat, made an assessment purportedly under Section 9(3) of that Act determining Rs. 6,439.86 as tax payable and, accordingly, the impugned notice dated April 27, 1960, was sent to the petitioner-company demanding payment on or before May 30, 1960, and the company deposited Rs. 3,439.86. Another letter dated August 11, 1960, from the Superintendent of Taxes damanded the balance by August 18, 1960.
3. Meanwhile, the validity of the Act of 1954 was challenged in Civil Rule Nos. 8, 9, 26 and 32 of 1955 and in H. P. Baruah v. State of Assam. AIR 1955 Assam 249, the Special Bench held the Act to be valid. However, in Atiabari Tea Co. Ltd and Khayerbari Tea Co. Ltd. v. State of Assam, AIR 1961 SC 232, decided on September 26, 1960, it was held that the Act of 1954 was passed by the Assam Legislature under entry 56 in List II to collect taxes on goods solely on the ground that they were carried by road or by inland waterways within the area of the State. That being so, the Act had put a direct restriction on the freedom of trade and since, in doing so, it had not complied with the provisions of Article 304(b), nor had it been validated by the assent of the President under Article 255(c), it must be declared to be void. Baruah v. State of Assam, AIR 1955 Assam 249, was reversed. Thereafter, the Assam Taxation (on Goods Carried by Road or on Inland Waterways) Act, 1961, hereinafter referred to as “the Act of 1961”, was enacted, and it received the assent of the President of India on April 6, 1961. It was published in the Assam Gazette Extraordinary dated April 15,
1961. Section 1(3) of the Act provided that the Act of 1961 should be deemed to have had effect on or before April 24, 1954, and should remain in force till March 31, 1962.
4. After 15 years thereof the second impugned notice dated April 7, 1975, was issued demanding the payment of the balance Rs. 3,000. This writ petition was moved on July 4, 1975, and rule was issued and interim stay granted on the same day.
5. The validity of the Act of 1961 was also challenged and this court, by a judgment and order dated August 1, 1963, declared the Act to be ultra vires. Against that judgment and order, the State of Assam and other respondents appealed before the Supreme Court. In the meantime, Khayerbari Tea Co. Ltd. also challenged the provisions of the Act directly before the Supreme Court by filing an application under Article 32 and the Supreme Court in Khyerbari Tea Co. Ltd. v. State of Assam, AIR 1964 SC 925, decided on 13th December, 1963, held the Act of 1961 to be valid.
6. Proceeding on that basis, we find that under Section 7(1) of the Act of 1961, every producer and dealer shall furnish returns of manufactured tea carried in tea containers in such form and to such authority as may be prescribed. Under Sub-section (2) of that section, in the case of any producer or dealer who, in the opinion of the Commissioner, is liable to pay any tax for any return period or a part thereof, the Commissioner may serve, within two years of the expiry of the aforesaid period, a notice in the prescribed form upon him requiring him to furnish a return of goods carried and such producer or dealer shall thereupon furnish the return within the date and to the authority mentioned in the notice. Under Sub-section (3) thereof, the returns during the first year of operation of this Act shall be forwarded for such period and within such time as may be notified by the Commissioner and thereafter quarterly and within thirty days of completion of the quarter in respect of which the returns are to be filed. Under Sub-section (1) of Section 20 of the Act, the tax payable under the Act shall be paid in the manner thereinafter provided. Under Sub-section (2) thereof, before any producer or dealer furnishes the return required by Sub-section (1) of Section 7, he shall, in the prescribed manner, pay into the Government treasury the full amount of tax due from him under this Act on the basis of such returns and shall furnish along with the returns the receipt of treasury in token of payment of such tax.
7. Admittedly, for the assessment period ending December 31, 1959, the return submitted by the petitioner-company was voluntary and the full amount or any amount of tax due from the assessee on the basis of that return was not deposited and no treasury receipt was, therefore, attached. Admittedly, no notice under Section 7(2) of the Act was served on the
petitioner-company by the authority in respect of the assessment period ending December 31, 1959. The respondents contend that as there was a voluntary return, the question of issue of notice under Section 7(2) of the Act of 1954 did not arise and that though the return was not accompanied by treasury receipt showing payment of the tax as per return, it was a valid return and that the petitioner-company was served notice dated March 10,
1960. under Section 9(2) of the 1954 Act, requiring it to produce the books of account in support of the return and that notice was within two years of the return period. The respondents also state that the petitioner-company complied with that notice by producing the accounts on verification of which the impugned assessment order dated March 24, 1960, under Section 9(3) of the 1954 Act, and the impugned notice of demand dated April 27, 1960, were issued. Admittedly, Section 33 of the Act of 1961 repealed the 1954 Act. As per the provisions of Section 34 of the Act of
1961, all action whatsoever taken or done under the repealed Act was validated. The respondents further state that the Act of 1961 was challenged by the petitioner-company in Civil Rule No. 81 of 1961, wherein that Act was declared invalid by this court by judgment dated August 1, 1963, which judgment was reversed by the Honourable Supreme Court by judgment dated April 1, 1968, and that thereafter only the letters dated April 7, 1975, and April 25, 1976, were issued to the petitioner-company. They contend that the assessment proceedings having been initiated within the period of limitation specified in the 1954 Act, the impugned assessment order and the notices of demand are legal and valid and there could be no question of any refund of the amount already paid and of not paying the balance of Rs. 3,000.
8. The first question to be decided, therefore, is whether the return submitted without depositing the tax due was a valid return. In Bormahjan Tea Company Ltd. v. Superintendent of Taxes [1974] ALR 115, it was held that a return under Section 7(1) must be submitted within the period of 30 days after the completion of the return quarter, as required under Section 7(3) of the Act, in order validly to initiate assessment proceedings based thereon and the returns submitted after the statutory period must be held to be non est for the purpose of initiating assessment proceedings based thereon. The requirement of payment of tax before furnishing a return under Section 7(1) of the Act is a mandatory one, inasmuch as failure to do so would defeat the object of the statute, namely, realisation of tax at the time specified in the Act and also because certain penalty is attached to such failure under Section 13(1)(a) and (d) of the Act. On the facts of that case, it was held that the return submitted, although within the prescribed period, was not a return within the meaning of Section 7(1) read with Section 7(3) and Section 20(2) of the Act, as, before it was furnished, the tax due on the basis of it had not been paid into a Government
treasury, contrary to the mandatory requirement to that effect in Section 20(2) of the Act. On appeal therefrom, the Supreme Court in Superintendent of Taxes v. Bormahjan Tea Co. Ltd. [1978] 1 SCC 513 found that the two appeals related to the assessment quarters ending on September 30, 1960, and December 31, 1960, under the Act of 1961. In one case, the return was filed within time but without payment of tax and in the other the return was filed out of time and without payment of tax. Admittedly, no notice either under Section 7(2) or Section 11 of the Act was served on the respondent for the submission of the return for the periods in question. Orders of assessments were, however, passed in both the cases in June, 1969, in pursuance of the provisions of Section 9(4) of the Act. Orders of assessments were challenged and the High Court held that as, under Section 7(1), the return must be submitted within a period of 30 days and the payment of tax was mandatory, the two returns were non est and as admittedly no proceedings were taken under Section 7(2), the assessment proceedings could, therefore, not be initiated based on such non-existent returns and the tax authorities were not competent to proceed with the assessment. In appeal therefrom to the Supreme Court, it was contended by the appellant that the assessee could not take advantage of his omissions to pay the tax and that it was not necessary that the tax should also have been paid before a valid return was submitted and hence the returns could be treated as valid returns and the assessment proceedings could be proceeded with on the returns submitted. Rejecting the contentions and dismissing the appeal, the Supreme Court held in Superintendent of Taxes v. Onkarmal Nathmal Trust [1976] 1 SCC 766, 776, that, before proceedings could be taken under Section 9(4), it is mandatory that notice under Section 7(2) will have to be issued. Therefore, the appellant-State was forced to contend that the returns filed by the respondent were not non est and the assessment proceedings were valid. But, in appeals, under Article 136 of the Constitution, the Supreme Court is not justified in permitting the State to contend that it can proceed on the basis that the returns were valid, especially when, before the High Court, the appellant’s contention was that the returns were invalid. The power under Article 136 is discretionary and even though there may be substance in the argument put forward on behalf of the appellant, the Supreme Court, taking the totality of the circumstances is justified in declining to interfere in an appeal by special leave. Thus, the contention that the returns are non est was not decided though the court, observed that the contention was not without substance. The decision of the High Court that such a return was non est was not disturbed. In the instant case, it has been contended by the petitioner-company that the return was non est. We find force in the contention.
9. Next arises the question of refund of the amount already deposited. The petitioner’s contention is that the voluntary return filed by it having been non est, the amount already deposited pursuant to the demand notice based on the assessment order on the voluntary return is to be refunded as the State had no authority to make any assessment on that return. The respondents sought to refute it submitting that the liability to pay tax under the Act was very much there and the assessment order, though not validly made, having now been validated by the Act of 1961, the question of refund would not arise, We are referred to the Special Bench decision in Salona Tea Co. Ltd. v. Superintendent of Taxes (Civil Rule Nos. 509 to 512 of 1973 decided on 14th June, 1979). Those petitions were directed against the orders of assessment made and demand notices issued under the Act of 1961 to declare the assessment ami demands as illegal and to direct the respondents to refund the tax collected pursuant to those orders. After holding that the assessment made was without jurisdiction, the question whether the court should direct refund of the amount was gone into. In this regard, the distinction between those cases where a petitioner approached a High Court seeking relief of obtaining refund only and those where refund was sought as a consequential relief after striking down of the orders of assessment, etc., was considered. In so far as the first tvoe of cases was concerned, reference was made to Suganmal v. State of Madhya Pradesh [1965] 16 STC 398 (SC), wherein it was not considered proper to extend the principle justifying consequential order directing the refund of amounts illegally realised when the order under which the amount had been collected, had been set aside, to the cases in which only orders for refund of money were sought and that when the claim for refund could not be brought within any statute or statutory rule, . no legal duty was cast on the State to refund the amount it had realised, because the right to claim refund was not founded on any statutory law. However, in the instant case, Section 23 of the Act of 1961 deals with refunds and the prayer for refund cannot, therefore, be said to be without any statutory basis. It is also to be noted that the petitioner has not come asking for the sole relief of refund, he having also prayed for a declaration that the assessment order was illegal. When aggrieved persons not only pray for striking down the order of assessment and consequential refund of the amount already paid, the High Court has jurisdiction to order refund. In State of Madhya Pradesh v. Bhailal Bhai [1964] 15 STC 450, 458 (SC), AIR 1964 SC 1006, it was held that it would hardly be reasonable to say that while the court will grant relief by making an order in the nature of an injunction where the invasion of a right has been merely threatened, the court must still refuse, when the right had been actually invaded, to give the consequential relief and content itself with merely a declaration that the right exists and it was invaded or with merely quashing the illegal
order made. This was approved in State of Kerala v. Aluminium Industries Ltd. [1965] 16 STC 689 (SC), wherein it was further observed that where a tax was levied by mistake of law, it was ordinarily the duty of the State to refund the tax. In Tilokchand Motichand v. H. B. Munshi, CST [ 1970] 25 STC 289 (SC), AIR 1970 SC 898, relief was refused, the payment having not been regarded as having been made under a mistake of law. Relief was also refused in D. Cawasji and Co. v. State of Mysore, AIR 1975 SC 813.
10. Section 23 of the Act of 1961 provides :
“23. Refunds.–The Commissioner shall, in the prescribed manner, refund to a producer or a dealer any sum paid or realised in excess of the sum due from him under this Act either by cash payment or, at the option of the producer or dealer, by set-off against the sum due from him in respect of any other period. Any penalty remitted by the Commissioner shall be refunded or adjusted in the like manner.”
11. This section speaks of any sum paid or realised in excess of the sum due from the assessee. Excess means that which exceeds ; the degree or amount by which one thing exceeds another. When the due tax is paid with something which exceeds it, the excess is to be refunded under Section 23 of the 1961 Act. But will it make any difference when no tax is payable but some has been paid ? In our view, this should not make any difference. The reason behind providing for refund of the excess is that the State should not be allowed to retain what is not due to it. This will cover any amount paid as tax when no tax is payable. We accordingly hold that under this provision, the amount of Rs. 3,439.86 paid by the petitioner-company . would be refundable.
12. Again, a decision of this question has to be based on an accepted principle of law, When tax is paid in accordance with an assessment order made under a statute and the order is set aside and no further assessment can be made under the law, the fiction of quasi-contract may be applied. The fiction of quasi-contract was useful historically in creating a remedy for certain cases of unjust enrichment, but Lord Wright considers that the time has come at which the fiction should be abolished and the law placed on the firm ground of reasonable principle of unjust enrichment. “The fiction is the algebra of law and a picturesque form of algebra besides”.
13. Quasi-contract means that a man in certain cases is bound as if he had made a contract, though, in fact, no contract was made. “Unjust enrichment” or “restitution” are suggested as alternative expressions.
14. The doctrine of unjust enrichment is founded on a broad principle that unjust enrichment should not be retained at the expense of one who has suffered. In French law, the principle is known as actio de in rem
verso which is founded on the principle of equity which forbids one man to enrich himself at the expense of another. It applies in every case in which the estate of one person being enriched without lawful cause at the expense of another person, the latter, in order to obtain what is due to him, does not enjoy the benefit of any action based on contract, quasi-contract, delict or quasi-delict. The Polish Code (Article 123), C. C. of Japan (Article 703), Soviet Russia (Articles 399-402), Chinese Code (Article 179) and the Swiss Federal Code of Obligation (Article 62) contain a general principle providing that unjust benefit must be returned.
15. The same principle has been often discussed under the subject “restitution”, where a person holding title to property is under an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it, Lord Wright is of the view that the basis of the law should be restitution where it is unreasonable and unjust for the defendant to retain the benefit which he has received. However, the theory of implied contract still persists in law.
16. Restitution is the writ by which a defendant, successful in an appeal, is restored to all he has lost by the execution of the judgment which is reversed ; the writ by which stolen goods were formerly restored to their true owner. Restitution means the restoring of anything unlawfully taken from another. It is most frequently used in the common law for setting them in the possession of lands and tenements that has been unlawfully disseised of them.
17. Article 265 of the Constitution of India provides that no tax shall be levied or collected except by authority of law. Where an executive authority has been empowered to collect a tax by an invalid law or rules made thereunder, the court is entitled to interfere. Acquiescence cannot take away from a party, the relief he is entitled to in case of contravention of Article 265. This article embodies the principle of “no taxation without representation”. “Authority of law” refers to a valid law, which means that the Legislature making the law must have been competent at the time when the taxing law was validly enacted [Firm Ghulam Hussain Haji Yakoob and Sons v. State of Rajasthan, AIR 1963 SC 379, 384, Bharat Kala Bhandar Ltd. v. Municipal Committee [1966] 59 ITR 73 (SC), State of Mysore v. Cawasji [1970] 3 SCC 710, 715], “Rex hoc solum non potest facere quod non potest injuste agere”. The King can do everything but an injustice. It will be unjust to allow the tax collected by an invalid law to be retained by the State.
18. Under Section 72 of the Indian Contract Act, a person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it. When a railway refuses to deliver up certain goods to
the consignee, except upon the payment of an illegal charge for carriage and the consignee pays the sum charged in order to obtain the goods, he is entitled to recover so much of the charge as was illegally excessive. There is no question of coercion in case of payment of a tax. But the onerous consequences of non-payment are always there. So the same principle of refund should apply.
19. Section 72 of the Contract Act includes payment made under a mistake of law. In case of payment of a tax which is ultra vires or unconstitutional, the party is entitled to have a refund of it from the Government, whether he had paid it under protest or not as was held in STO v. Kanhaiya Lal Makund Lal Saraf [1958] 9 STC 747 (SC) ; AIR 1959 SC 135, Orient Paper Mills v. State of Orissa [1961] 12 STC 357 (SC) ; AIR 1961 SC 1438, settled the proposition that a direction for refund may be made in a proceeding for mandamus under Article 226 of the Constitution. The prayer for refund cannot be held to be time-barred inasmuch as we have held the assessment to be ultra vires only today. The question of having acquiesced for a long time does not arise as the assessment order was purportedly made under a statute.
20. A question may arise as to whether the refund should have been claimed by the petitioner-company within three years of the Act having been declared ultra vires on September 26, 1960. But the Act of 1961 received the assent of the President of India on April 6, 1961, and it provided that the Act should be deemed to have had effect on or before April 24, 1954, and should remain in force till March 31, 1962. The assessment was for the period ending December 31, 1959. Until the assessment order was set aside the period of limitation could not run and hence the question of refund being barred by limitation does not arise in this case.
21. In the result, the impugned assessment order and the notices of demand are set aside. The respondents are directed to refund the amount of Rs. 3,439.86 only which was deposited by the petitioner-company in response to the impugned notice dated April 27, 1960. The petition is allowed and the rule made absolute. We, however, leave the parties to bear their own costs.
S.N. Phukan, J.
22. I agree.
