Invalid tax declaration rule cannot defeat concessional rate; refund remains available when tax is paid under mistake of law

A rule-made restriction that prevented a single declaration from covering more than one transaction beyond the prescribed limit was treated as invalid because the State rule-making authority could not impose a limitation reserved to the Central Government under the Central Sales Tax framework. Tax collected by applying that invalid proviso was therefore recoverable as money paid under a mistake of law. The Court also held that a refund writ was not barred by delay or laches, since limitation ran from discovery of the mistake and the petition was filed within three years of the relevant Supreme Court ruling. Relief in refund was accordingly available.

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Issues: (i) Whether the proviso to Rule 8 of the M. P. Sales Tax (Central) Rules, 1957, requiring that a single declaration should not cover more than one transaction beyond the prescribed limit, could validly deprive the assessee of the concessional rate and justify assessment at the higher rate; (ii) whether the writ petition for refund was liable to be rejected on the ground of delay or laches.

Issue (i): Whether the proviso to Rule 8 of the M. P. Sales Tax (Central) Rules, 1957, requiring that a single declaration should not cover more than one transaction beyond the prescribed limit, could validly deprive the assessee of the concessional rate and justify assessment at the higher rate.

Analysis: The concession depended upon declarations in the prescribed form under the Central Sales Tax Act, 1958. A similar restriction in the corresponding rule had already been held by the Supreme Court to be beyond the competence of the State rule-making authority because such a restriction could be imposed only by the Central Government under its power to prescribe the form and particulars of declaration. The impugned proviso stood on the same footing and was, therefore, inconsistent with the governing Act and unenforceable. The tax collected by applying that proviso was treated as money paid under a mistake of law and recoverable under Section 72 of the Indian Contract Act, 1872.

Conclusion: The proviso was invalid and unenforceable, and the assessee was entitled to refund of the tax collected at the higher rate.

Issue (ii): Whether the writ petition for refund was liable to be rejected on the ground of delay or laches.

Analysis: For money paid under mistake, limitation runs from discovery of the mistake. The Court treated the assessee's knowledge as arising, at the earliest, from the Supreme Court's decision striking down the corresponding rule, and held that the petition was filed within three years of that date. In the circumstances, the Court declined to deny relief on the ground of laches and held that resort to a civil suit was not necessary.

Conclusion: The writ petition was not barred by delay or laches.

Final Conclusion: The assessee succeeded in obtaining quashing of the assessment to the extent it denied the concessional rate and secured a direction for refund of the excess tax collected.

Ratio Decidendi: A rule-made restriction that exceeds the delegated rule-making power and conflicts with the parent taxing statute is unenforceable, and tax paid under such an invalid provision may be recovered as money paid under a mistake of law; writ relief for refund will not be denied where the petition is filed within a reasonable time after discovery of the mistake.

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