Recovery of tax paid under mistake of law allowed where levy breached constitutional limits and limitation ran from final assessment.

Monthly returns and provisional assessments were treated as tentative, so limitation for a suit to recover sales tax ran from the final assessment date rather than earlier steps, and the limitation plea failed. Tax collected in breach of the constitutional restriction was treated as money paid under a mistake of law because Section 72 of the Indian Contract Act includes mistake of law; the statutory bar in Section 18 of the Madras General Sales Tax Act was held inapplicable to such a claim. The tax amounts were therefore recoverable, and the refund suit was maintainable.

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Issues: (i) Whether the suit for recovery of sales tax was barred by limitation; (ii) Whether tax collected under the Act could be recovered as money paid under a mistake of law.

Issue (i): Whether the suit for recovery of sales tax was barred by limitation.

Analysis: The monthly returns and assessments were treated as tentative and for convenience only, so the limitation period was held to commence from the date of the final assessment and not from earlier provisional steps.

Conclusion: The suit was within time and the plea of limitation failed.

Issue (ii): Whether tax collected under the Act could be recovered as money paid under a mistake of law.

Analysis: Applying the principle that mistake in Section 72 of the Indian Contract Act, 1872 includes mistake of law, the collection of tax contrary to Article 286(1)(a) of the Constitution of India was held to be illegal. The payments were therefore regarded as having been made under a mistake of law, and the statutory bar under Section 18 of the Madras General Sales Tax Act, 1939 was held inapplicable to this kind of claim.

Conclusion: The plaintiffs were entitled to recover the tax amounts collected from them.

Final Conclusion: The appeal succeeded, the suit for refund was maintainable, and the decree dismissing the claim was reversed.

Ratio Decidendi: Money collected as tax in breach of the constitutional limitation is recoverable when paid under a mistake of law, and limitation runs from the final assessment where earlier assessments are only tentative.

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