1965 (3) TMI 66 - HC - VAT and Sales Tax

Validity of Bihar Sales Tax Act Section 20A confirmed; retrospective application upheld; refund rights affirmed.

The court upheld the validity of Section 20A of the Bihar Sales Tax Act, 1959, confirming the competence of the Bihar Legislature to enact the provision. ... - Issues Involved:1. Validity of Section 20A of the Bihar Sales Tax Act, 1959.2. Competence of the Bihar Legislature to enact Section 20A.3. Violation of Articles 19(1)(f), 20, and 31 of the Constitution of India.4. Applicability of Section 72 of the Indian Contract Act.5. Retrospective application of the law.6. Right of customers to claim a refund from the State of Bihar.Detailed Analysis:1. Validity of Section 20A of the Bihar Sales Tax Act, 1959:The petitioner challenged the validity of Section 20A, which mandates that amounts realized by sellers as sales tax on goods supplied outside Bihar, which were not legally payable, must be deposited in the Government treasury. The petitioner argued that this provision violates Articles 19(1)(f), 20, and 31 of the Constitution, claiming that the money collected as sales tax, which was not legally payable, should be refunded directly to the customers by the dealers and not by the State.2. Competence of the Bihar Legislature to Enact Section 20A:The petitioner contended that the Bihar Legislature lacked the competence to enact Section 20A, as it dealt with amounts that were not legally payable as tax. The court referred to the Supreme Court decision in Abdul Quader & Co. v. Sales Tax Officer, which held that the State cannot make recoverable amounts collected as tax if they are not legally due. However, the court distinguished this case from the present one, noting that Section 20A was intended to ensure that the amounts collected as tax were refunded to the customers through the State treasury, rather than retained by the dealers.3. Violation of Articles 19(1)(f), 20, and 31 of the Constitution of India:The petitioner argued that Section 20A violated their fundamental rights under Articles 19(1)(f), 20, and 31 of the Constitution. The court rejected this argument, stating that since the amounts collected as sales tax were not legally payable, they belonged to the customers and not the dealers. Therefore, there was no violation of the dealers' right to hold property.4. Applicability of Section 72 of the Indian Contract Act:The petitioner argued that Section 20A conflicted with Section 72 of the Indian Contract Act, which deals with the recovery of money paid under a mistake of law. The court held that there was no conflict, as Section 72 is a general provision, whereas Section 20A was enacted under the specific legislative power conferred upon the State Legislature by Entry 54 of List II of the Seventh Schedule of the Constitution.5. Retrospective Application of the Law:The petitioner claimed that the retrospective application of Section 20A was invalid. The court found no substance in this argument, noting that the history of the Orissa Sales Tax Act, which had a similar provision, showed that it was intended to be retrospective. The court held that the retrospective application of Section 20A was valid and did not violate any constitutional provisions.6. Right of Customers to Claim a Refund from the State of Bihar:The customers, who were petitioners in a related case, argued that they were entitled to a refund of the sales tax collected by the dealers. The court held that the customers could claim a refund from the State of Bihar under Section 20A, but their application for a writ was not maintainable as there had been no refusal by the State to pay the amount. The court also upheld the provision in Section 20A regarding the period of limitation for claiming a refund, citing the Supreme Court decision in Burmah Construction Co. v. State of Orissa.Conclusion:The court dismissed the petitions, upholding the validity of Section 20A of the Bihar Sales Tax Act, 1959, and confirming the competence of the Bihar Legislature to enact the provision. The court found no violation of constitutional rights or conflict with Section 72 of the Indian Contract Act. The retrospective application of the law was also upheld, and the court affirmed the right of customers to claim a refund from the State of Bihar within the prescribed period of limitation.