Statutory ceiling on composition fee cannot be exceeded; excess collection remains refundable despite payment to avoid prosecution

Delay in filing a writ petition was not treated as fatal where the petitioner had first pursued an incompetent appeal in a bona fide attempt to invoke a remedy available in law. Under section 23 of the Entry Tax Act, the power to compound was capped by a statutory maximum, so collection above that ceiling was ultra vires and illegal. Payment said to be voluntary did not validate a demand not authorised by statute, and the excess amount remained recoverable as having been collected without authority of law.

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Issues: (i) Whether the writ petition should be declined on the ground of delay after the petitioner pursued an incompetent appeal; (ii) whether a composition fee collected under section 23 of the Entry Tax Act could exceed the statutory maximum and, if so, whether the excess amount was refundable despite the payment being stated to be voluntary.

Issue (i): Whether the writ petition should be declined on the ground of delay after the petitioner pursued an incompetent appeal.

Analysis: The filing of the writ petition was preceded by the pursuit of an appellate remedy that was ultimately held to be incompetent. The delay was therefore explained by a bona fide attempt to invoke a remedy available in law, and the lapse of time was not treated as inordinate or fatal to the exercise of writ jurisdiction.

Conclusion: The writ petition was not rejected on the ground of delay.

Issue (ii): Whether a composition fee collected under section 23 of the Entry Tax Act could exceed the statutory maximum and, if so, whether the excess amount was refundable despite the payment being stated to be voluntary.

Analysis: The statutory power to compound an offence was confined by section 23, which fixed an upper limit of Rs. 1,000. A demand beyond that limit was outside the authority conferred by the statute and therefore constituted an ultra vires and illegal levy. The assessee could not be placed in a worse position by compounding than by prosecution, and payment made to avoid prosecution did not validate a collection that the statute did not authorise. The excess amount could therefore be challenged and recovered.

Conclusion: The collection of Rs. 25,000 as composition fee was illegal to the extent it exceeded the statutory limit, and the excess amount was refundable.

Final Conclusion: The statutory ceiling on composition fee governed the respondent's power, and the excess collection could not be sustained merely because it had been paid to avoid prosecution; the writ petition accordingly succeeded with refund of the excess amount.

Ratio Decidendi: Where a taxing statute prescribes a maximum composition fee, the authority cannot exact a higher amount under the guise of compounding, and payment made to avoid prosecution does not bar challenge to the excess collection as being without authority of law.

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