Civil suit for refund upheld where licence fee lacked statutory basis and payment was made under mistake of law.

A civil suit for refund of licence fee collected under the Madras General Sales Tax Act was maintainable because section 51 did not bar relief where the levy had no statutory basis and the Act provided no lawful machinery to collect or retain the amount. The Court treated the payment as made under mistake of law, since it was induced by a demand backed by threat of recovery proceedings and was not a voluntary admission of liability. Applying the rule on exclusion of civil court jurisdiction, it held that illegally collected money may be recovered in civil court where the statute does not authorise the levy or provide an adequate refund mechanism. Section 72 of the Indian Contract Act supported restitution.

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Issues: Whether a suit for refund of licence fee collected under the Madras General Sales Tax Act was barred by section 51, and whether the civil court had jurisdiction to entertain the claim where the levy had no statutory basis and the payment was made under mistake of law.

Analysis: The objection under section 51 failed because the Act did not provide a lawful machinery to levy the licence fee in question or to retain money collected without authority. The levy was not a voluntary payment by the assessees, since the demand was backed by threat of recovery proceedings. The payment was therefore treated as one made under a mistake of law and not as an admission of liability. Applying the principles governing exclusion of civil court jurisdiction, the Court held that where a statute does not authorise the collection and contains no adequate machinery for refund of illegally collected money, a civil suit is maintainable. Section 72 of the Indian Contract Act, 1872 supported restitution of money paid under mistake of law.

Conclusion: The suits were maintainable in the civil court and the assessees were entitled to refund of the licence fee.

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