Full Judgment Text
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CASE NO.:
Special Leave Petition (civil) 4436-4437 of 1998
Special Leave Petition (civil) 5241-5242 of 1998
Special Leave Petition (civil) 12654 of 1998
PETITIONER:
U.P. POLLUTION CONTROL BOARD AND OTHERS
Vs.
RESPONDENT:
M/S. KANORIA INDUSTRIAL LTD. AND ANOTHER
DATE OF JUDGMENT: 24/01/2001
BENCH:
S.V.Patil, S.R.Babu
JUDGMENT:
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J U D G M E N T
Shivaraj V. Patil, J.
In all these cases the controversy raised relates to
the claim of refund of the amount paid by the respondents as
water cess under the provisions of the Water (Prevention and
Control of Pollution) Cess Act, 1977 (for short the Act).
Briefly stated, the facts leading to the filing of these
petitions are: The respondents are the owners of industrial
units manufacturing sugar from sugarcane and liquor/alcohol
from molasses, a by- product. On demand made by the State
Government under the provisions of the Act they were
required to pay water cess. They protested against the
demand principally contending that sugar industry and
distillery were not industries covered by Entry No. 15 of
Schedule I of the Act and consequently they were neither
liable to submit any return nor to make any payment of water
cess; when their protests were not accepted and the demand
persisted for payment of water cess the respondents paid the
amount under protest. Some of them filed writ petitions
Nos. 3558 of 1980, 494 of 1980 and 17646 of 1986. The writ
petitions came to be dismissed. Thereafter, special leave
petitions were filed before this Court, which were disposed
by judgment in M/s. Saraswati Sugar Mills vs. Haryana
State Board and others [(1992) 1 SCC 418], reversing the
decision of the High Court and holding that the sugar
manufacturing industries did not fall within Entry 15 of
Schedule I of the Act. After the said judgment was rendered
by this Court representations were made to the Board and the
Cess Officer/Assessing Authority of the Board for refund of
the amounts illegally and without the authority of law
realized by them as water cess. Despite several
representations there was no response from the Board and its
authorities. Hence the writ petitions were filed consequent
upon law declared by this Court in Saraswati Sugar Mills
case (supra) seeking a mandamus to the petitioners to refund
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the amount collected from them as cess with interest @ 18%
per annum. In the writ petitions it was contended that the
writ petitioners themselves have paid the amount as water
under protest and they had not passed on the liability to
the customers. The petitioners contested the claim made by
the respondents before the High Court. They filed the
counter affidavit in the High Court, in short taking the
stand that the respondents were not entitled to refund of
any amount from the Board for the reasons that after
collection, the amount has been paid to the State
Government, which in turn has paid the amount to the
Government of India; referring to the representations of
the respondents it was stated that a reference had been made
to the State Government in the matter and their reply was
awaited; after the judgment in M/s. Saraswati Sugar Mills
case (supra) Entry 15 of Schedule I of the Act was amended
with effect from 2.1.1992 covering sugar industries and
distilleries and making them liable to pay water cess under
the amended provisions of Entry 15 of Schedule I of the Act.
In these petitions, we are not concerned with the said
amended Entry and the levy and collection of cess from
2.1.1992. The High Court, after considering the rival
submissions and relying few judgments of this Court,
disposed of the writ petitions directing the petitioners to
refund the sums realized from the respondents as water cess
after verification of the amount stated to have been paid by
them within the given time. Hence the petitioners have
filed these special leave petitions. Shri Altaf Ahmed,
learned Additional Solicitor General appearing for the
petitioners in special leave petitions 4436- 4437 of 1998,
contended (1) that in the absence of any specific direction
given by this Court in Saraswati Sugar Mills case for refund
of the amount collected under the provisions of law, the
respondents were not entitled for refund; (2) the
respondents having failed in the earlier writ petitions
challenging the very levy of cess before the High Court and
having not challenged the order of the High Court further
could not make claim for refund on the basis of subsequent
judgment of this Court; (3) in view of the decision of this
Court in Orissa Cement vs. State of Orissa [1991 Supp. 1
SCC 430] no direction could be given for refund of the
amount; mere prayer for grant of refund could not be
granted by issuing a writ of mandamus; and (4) the High
Court could not have entertained the writ petitions of the
respondents after inordinate delay of about 4 to 5 years
when their earlier writ petitions were dismissed in 1987.
Shri Sudhir Chandra, learned senior counsel and Ms. Indu
Malhotra and Shri H.K. Puri, learned counsel for the
respondents submitted that having regard to the facts and
circumstances of these cases and in the light of the law
laid down by this Court as referred to in the impugned
judgment, the High Court was quite justified in allowing the
claim of the respondents for refund of the amount; when the
collection of cess was wholly illegal and not authorized as
Entry 15 of Schedule I of the Act did not cover sugar
industry and distillery prior to the amendment of the
Schedule, the respondents were entitled for refund of the
amount; since the respondents had paid the cess under
protest the ground of delay could not be put against them;
the writ petitions filed by them earlier challenging the
validity of collecting cess under Entry 15 of Schedule I of
the Act were dismissed by the High Court following the
decision of the Division Bench of the same High Court in
Civil Miscellaneous Writ No. 21497 of 1986 (The Kisan
Sahkari Chini Mills Ltd. Badaun vs. State of U.P. and
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others), taken in appeal to this Court and was heard along
with Saraswati Sugar Mills case; since the appeal filed
against the judgment of the Division Bench of the High Court
was reversed in the Saraswati Sugar Mills case
aforementioned, the argument that the earlier orders passed
in some writ petitions had become final was only technical.
Shri Dushyant Dave, learned senior counsel for respondents
in special leave petitions 5241-5242 of 1998 supporting the
submissions made by the learned Additional Solicitor
General, added that writ petitions seeking writ of mandamus
only for refund of the amount were not at all maintainable.
He cited few decisions in support of this submission. The
arguments of the learned counsel for the respondents are
already noticed above in special leave petitions 4436-4437
of 1998. The learned counsel for the respondents in special
leave petition 12654 of 1998 submitted that when the
petitioners did not make refund in spite of several
representations a writ petition was filed and the same was
disposed of on 8.1.1998 following the common judgment
impugned in special leave petitions 4436-4437 of 1998 and
5241-5242 of 1998. He submitted that the respondents had
also paid the amount under protest and in the matter of
refund the respondents stand on the similar footing as the
respondents in other petitions. We have carefully
considered the submissions made by the learned counsel for@@
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the parties. On the question of maintainability of the writ@@
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petitions we may notice few decisions of this Court on the
very point as to claim for refund of money in a writ
petition under Article 226 of the Constitution of India. In
HMM Limited and another vs. Administrator, Bangalore City
Corporation and another [(1989) 4 SCC 640] it is held that a
tax or money realized without authority of law is bad under
Article 265 of the Constitution and that the money or tax so
collected are refundable. In that case octroi was levied
and collected in respect of goods on their mere physical
entry into the city limits, which were not used or consumed
or sold within the municipal limits. This Court, dealing
with the refund in para 12 of the judgment, held thus: -
We see no ground as to why amount should not be refunded.
Realisation of tax or money without the authority of law is
bad under Article 265 of the Constitution. Octroi cannot be
levied or collected in respect of goods which are not used
or consumed or sold within the municipal limits. So these
amounts become collection without the authority of law. The
respondent is a statutory authority in the present case. It
has no right to retain the amount, so far and so much.
These are refundable within the period of limitation. There
is no question of limitation. There is no dispute as to the
amount. There is no scope of any possible dispute on the
plea of undue enrichment of the petitioners. We are,
therefore, of the opinion that the Division Bench was in
error in the view it took. Where there is no question of
undue enrichment, in respect of money collected or retained,
refund, to which a citizen is entitled, must be made in a
situation like this.
[emphasis supplied]
This case fully supports the submissions made on
behalf of the respondents. Similar view was taken by this
Court in Salonah Tea Company Ltd. Etc., vs. The
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Superintendent of Taxes, Nowgong and others, etc. [AIR 1990
SC 772]. Para 6 of the said judgment reads: - 6. The
only question that falls for consideration here is whether
in an application under Article 226 of the Constitution the
Court should have directed refund. It is the case of the
appellant that it was after the judgment in the case of
Loong Soong Tea Estate the cause of action arose. That
judgment was passed in July 1973. It appears thus that the
High Court was in error in coming to the conclusion that it
was possible for the appellant to know about the legality of
the tax sought to be imposed as early as 1963, when the Act
in question was declared ultra vires as mentioned
hereinbefore. Thereafter the taxes were paid in 1968.
Therefore the claim in November, 1973 was belated. We are
unable to agree with this conclusion. As mentioned
hereinbefore the question that arises in this case is
whether the Court should direct refund of the amount in
question. Courts have made a distinction between those
cases where a claimant approaches a High Court seeking
relief of obtaining refund only and those refund were sought
as a consequential relief after striking down of the order
of assessment etc. Normally speaking in a society governed
by rule of law taxes should be paid by citizens as soon as
they are due in accordance with law. Equally, as a
corollary of the said statement of law it follows that taxes
collected without the authority of law as in this case from
a citizen should be refunded because no State has the right
to receive or to retain taxes or monies realized from
citizens without the authority of law.
[emphnasis supplied]
In the para extracted above, in a similar situation as@@
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arising in the present cases relating to the very question
of refund, while answering the said question affirmatively,
this Court pointed out that the courts have made distinction
between those cases where a claimant 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 order of assessment etc. In these cases also
the claims made for refund in the writ petitions were
consequent upon declaration of law made by this Court.
Hence, High Court committed no error in entertaining the
writ petitions. This Court again in Shree Baidyanath
Ayurved Bhawan Pvt. Ltd. Vs. State of Bihar and others
[(1996) 6 SCC 86], held that such a writ petition even if
assumed to be only for money was maintainable under Article
226 of the Constitution observing thus in para 10 of the
judgment: - 10. The writ petition was not a run-of-
the-mill case. It was a case where the respondent-State had
not acted as this Court had expected a high constitutional
authority to act, in furtherance of the order of this Court.
That is something that this Court cannot accept. The
respondent-State was obliged by this Courts order to refund
to the writ petitioners, including the appellants, the
amounts collected from them in the form of the levy that was
held to be illegal. If there was good reason in law for
rejecting the refund claim, it should have been stated. Not
to have responded to the appellants refund claim for 11
years and then to have turned it down without reason is to
have acted disrespectfully to this Court. Even assuming,
therefore, that this was a writ petition only for money, the
writ petition fell outside the ordinary stream of writ
petitions and, acting upon it, the High Court should have
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ordered the refund.
This Court in Orissa Cement Ltd.. vs. State of
Orissa and others. [(1991) Supp. 1 SCC 430], in para 71
has stated thus: - Once the principle that the court has a
discretion to grant or decline refund is recognized, the
ground on which such discretion should be exercised is a
matter of consideration for the court having regard to all
the circumstances of the case.
The learned counsel for the petitioners strongly relied
on a Constitution Bench judgment of this Court in Mafatlal@@
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Industries Ltd. and others vs. Union of India and others [(1997)
5 SCC 536]. That was a case where refund was claimed on the
ground that tax/duty had been collected by misinterpreting or
misapplying the provisions of the Central Excise and Salt Act,
1944 read with Central Excise Tariff Act, 1985 or Customs Act,
1962 and the Rules and Regulations or the notifications issued
under such enactments. In such cases claims for refund had to be
preferred under and in accordance with the provisions of the
respective enactments before the authorities specified and within
the period of limitation prescribed therein. Hence it was held
that petition under Article 226 of the Constitution could not be
entertained having regard to the legislative intention evidenced
by the provisions of the said Act and the writ petition, if any,
would be considered and disposed of in the light of and in
accordance with the provisions of Section 11-B of the Central
Excise and Salt Act, 1944 stating that power under Article 226
has to be exercised to effectuate the rule of law and not to
abrogate it. In the present cases there is no corresponding
section to Section 11-B of the Central Excise and Salt Act, 1944
for making claim for refund of money and, therefore, the
respondents could maintain the writ petitions under Article 226
of the Constitution. Further in para 108(ii) of the judgment it
is held that where, however, a refund is claimed on the ground
that the provisions of the Act under which it was levied is or
has been held to be unconstitutional, such a claim, being a claim
outside the purview of the enactment, can be made either by way
of suit or by way of writ petition.
In support of the submission that a writ petition
seeking mandamus for mere refund of money was not
maintainable, the decision in Suganmal vs. State of Madhya
Pradesh and others [AIR 1965 SC 1740] was cited. In para 6
of the said judgment, it is stated that we are of the
opinion that though the High Courts have power to pass any
appropriate order in the exercise of the powers conferred
under Article 226 of the Constitution, such a petition
solely praying for the issue of a writ of mandamus directing
the State to refund the money is not ordinarily maintainable
for the simple reason that a claim for such a refund can
always be made in a suit against the authority which had
illegally collected the money as a tax. Again in para 9,
the Court held :- We, therefore, hold that normally
petitions solely praying for the refund of money against the
State by a writ of mandamus are not to be entertained. The
aggrieved party has the right of going to the civil court
for claiming the amount and it is open to the State to raise
all possible defences to the claim, defences which cannot,
in most cases be appropriately raised and considered in the
exercise of writ jurisdiction.
This judgment cannot be read as laying down the law
that no writ petition at all can be entertained where claim
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is made for only refund of money consequent upon declaration
of law that levy and collection of tax / cess as
unconstitutional or without the authority of law. It is one
thing to say that the High Court has no power under Article
226 of the Constitution to issue a writ of mandamus for
making refund of the money illegally collected. It is yet
another thing to say that such power can be exercised
sparingly depending on facts and circumstances of each case.
For instance, in the cases on hand where facts are not in
dispute, collection of money as cess was itself without the
authority of law; no case of undue enrichment was made out
and the amount of cess was paid under protest; the writ
petitions were filed within a reasonable time from the date
of the declaration that the law under which tax/cess was
collected was unconstitutional. There is no good reason to
deny a relief of refund to the citizens in such cases on the
principles of public interest and equity in the light of the
cases cited above. However, it must not be understood that
in all cases where collection of cess, levy or tax is held
to be unconstitutional or invalid, the refund should
necessarily follow. We wish to add that even in cases where
collection of cess, levy or tax is held to be
unconstitutional or invalid, refund is not an automatic
consequence but may be refused on several grounds depending
on facts and circumstances of a given case.
Another reason to defeat the claim for refund put
forth is that the respondents have filed writ petitions
challenging unsuccessfully the validity of levy in question
and those orders have become final inasmuch as no appeal
against the same has been filed. The contention is put
forth either on the basis of res judica or estoppel. It is
no doubt true that these principles would be applicable when
a decision of a court has become final. But in matters
arising under public law when the validity of a particular
provision or levy is under challenge, this Court has
explained the legal position in M/s. Shenoy and Co. vs.
Commercial Tax Officer, Circle II, Bangalore & Ors., [1985
(2) SCC 512] that when the Supreme Court declares a law and
holds either a particular levy as valid or invalid it is
idle to contend that the law laid down by this Court in that
judgment would bind only those parties who are before the
Court and not others in respect of whom appeal had not been
filed. To do so is to ignore the binding nature of a
judgment of this Court under article 141 of the
Constitution. To contend that the conclusion reached in
such a case as to the validity of a levy would apply only to
the parties before the court is to destroy the efficacy and
integrity of the judgment and to make the mandate of Article
141 illusory. When the main judgment of the High Court has
been rendered ineffective, it would be applicable even in
other cases, for exercise to bring those decisions in
conformity with the decisions of the Supreme Court will be
absolutely necessary. Viewed from that angle, we find this
contention to be futile and deserves to be rejected. The
next case relied on by the petitioners is Municipal
Corporation of Greater Bombay vs. Bombay Tyres
International Ltd. & others [(1998) 4 SCC 100] to support
the contention that the claim for refund could be made only
within the period of limitation prescribed for filing suits
for recovery of the amount due. S. Rajendra Babu J., (one
of us) speaking for the Bench in para 9 of the judgment has@@
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stated thus:- Attacking this finding, the learned counsel@@
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for the petitioner relied upon the decisions of this Court
in Salonah Tea Co. Ltd. Vs. Supdt. Of Taxes [ (1998) 1
SCC 401 ] and Mahabir Kishore vs. State of M.P. [ (1989) 4
SCC 1 ] and submitted that levy of water charges itself
being illegal, the recoveries made pursuant to that
provision could not be retained but refunded in which event
the principles of limitation or laches would not apply.
This is not a case where the provisions of the rule which
enabled the levy of water charges was struck down on the
ground that it was incompetent but on a ground that such
rule had been framed inarticulately and was not clear
enough. Payments made by the petitioner should be treated
as having been made by mistake but once a declaration of law
had been made by the Bombay High Court on 16.9.1987, it was
open to the petitioner to claim for recoveries and the same
should have been made within a reasonable time thereafter.
In ascertaining what is the reasonable time for claiming
refund, the courts have often taken note of the period of
limitation prescribed under the general Law of Limitation
for filing of suits for recovery of amount due to them. In
the present case also that standard adopted by the High
Court is the same in ascertaining whether there has been
laches on the part of the appellant in seeking relief in due
time or not. The finding clearly recorded is that long
after the charges had been paid and law had been declared by
the Court, the writ petition has been filed and, therefore,
such a refund should not be allowed. We do not think such a
view taken by the High Court calls for interference under
Article 136 of the Constitution. Hence we dismiss the
petition.
It is clear from the said paragraph that a distinction
is made between the claims made for refund where collection
of tax was illegal and not authorized and the cases where
rule had been struck down on the ground that it had been
framed inarticulately and was not clear enough. Further it
is only noticed that in ascertaining as to what is the
reasonable time for claiming refund, the courts have often
taken note of the period of limitation prescribed under the
general Law of Limitation for filing suits for recovery of
the amount due to them. In exercise of writ jurisdiction,
facts and circumstances of each case are to be kept in mind
in ascertaining whether there have been laches on the part
of the parties seeking relief in due time or not. In these
cases having regard to the facts and circumstances already
stated above, it cannot be said that there were laches on
the part of the respondents or that they had abandoned their
claim for refund. In Sales Tax Officer, New Delhi vs. East
India Hotels Ltd. And another [(1998) 9 SCC 662] the
appellant authority charged sales tax on the sales thereof
prior to the judgment of this Court in Northern India
Caterers (India) Ltd. Vs. Lt. Governor, Delhi [(1978) 4
SCC 36]. A fresh assessment order was passed thereafter on
the basis of the revised return filed by the first
respondent. Ultimately an order was passed holding that the
first respondent had made application for refund of the
excess amount paid within the permissible period. When no
action was taken for long period, a writ petition was filed
praying for writ of mandamus directing the authority to
refund the amount with interest thereon. The High Court
allowed the writ petition finding that no further
consideration was required and that the defence of unjust
enrichment was not maintainable. On the facts of the case,
this Court allowed the appeal and directed the Sales Tax
authorities to hear the first respondent on the refund
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application and dispose of the same within a given time. It
appears that other cases referred to above were not brought
to the notice of this Court. Thus we find that the said
case governs its own facts. Hence we reject the contentions
advanced on behalf of the petitioner as to the
maintainability of the writ petitions. This Court in M/s.
Dehri Rohtas Light Railway Company Ltd. Vs. District@@
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Board, Bhojpur and others [(1992) 2 SCC 598], dealing with a@@
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case where demand was made for refund in somewhat similar
circumstances on the question of delay and laches, in para
13, has stated thus: - The rule which says that the Court
may not enquire into belated and stale claim is not a rule
of law but a rule of practice based on sound and proper
exercise of discretion. Each case must depend upon its own
facts. It will all depend on what the breach of the
fundamental right and the remedy claimed are and how delay
arose. The principle on which the relief to the party on
the grounds of laches or delay is denied is that the rights
which have accrued to others by reason of the delay in
filing the petition should not be allowed to be disturbed
unless there is a reasonable explanation for the delay. The
real test to determine delay in such cases is that the
petitioner should come to the writ court before a parallel
right is created and that the lapse of time is not
attributable to any laches or negligence. The test is not
to physical running of time. Where the circumstances
justifying the conduct exists, the illegality which is
manifest cannot be sustained on the sole ground of laches.
The argument that the relief should be denied to the
respondents on the ground of delay and laches in approaching
the High Court by filing writ petitions claiming refund is
equally unsustainable. The claims for refund were made by
the respondents within a reasonable time after the judgment
was rendered by this Court in Saraswati Sugar Mill case
aforementioned. The respondents have paid water cess under
protest. The collection of water cess in view of law laid
down by this court was clearly illegal and without authority
of law. It is also not the case that where the rights are
created in third parties on account of delay, if any, in
approaching the court and that by entertaining the writ
petitions rights of third parties are prejudiced. In this
view there was no question of delay and laches on the part
of the respondents on the facts found and circumstances
stated. The respondents had specifically pleaded that they
did not pass on the liability of the water cess on their
customers; it appears this contention was not denied by the
petitioners before the High Court. On the other hand the
only plea taken by the petitioners was that money had been
passed to the Central Government under Section 8 of the Act.
It was brought to the notice of the Court by the respondents
that 65% of the sugar was sold by the respondents through
public distribution system under the Essential Commodities
Act. Hence there was no question of unjust enrichment also
in these cases. The stand of the petitioners that the
respondents were not entitled for refund on the ground that@@
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the amount of cess collected was passed on to the State@@
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Government, which in turn gave it to the Central Government
and the Central Government has appropriated the same by
passing on money back to various State Pollution Control
Boards does not help them. Before the High Court, they only
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stated that they made reference to the Government in regard
to the claim made by the respondents for refund and they
were waiting for response. It was also not made out by the
petitioners as to how they had difficulties in making the
refund to the respondents. It may also be kept in view that
immediately after the notices were issued demanding water
cess they were challenged. Even in some cases interim
orders were also passed in the High court; the amount of
water cess was paid under protest. So, in this situation
when finally this Court held that the very collection of
water cess was without the authority of law, the claim of
the respondents for refund cannot be denied merely on the
ground that the petitioners passed on the money to the State
Government and in turn the money was sent to the Central
Government and later the Central Govt. appropriated the
same by passing it back to the various State Pollution
Control Boards. The High Court in our view having taken all
aspects into consideration was right in allowing the claims
of the respondents made for refund in the writ petitions.
We do not see any good ground or valid reason to interfere
with the judgments and orders of the High Court impugned in
these petitions. Hence the special leave petitions are
dismissed. The parties shall bear their own costs.