2025 (11) TMI 1741 - HC - Customs

Tax refund via writ under Article 226 denied absent prior demand; remedy lies in civil suit for monetary claims

M/s. DHL Express India Private Limited Versus Union of India

HC dismissed the writ petition seeking refund of taxes paid under a mistake of law, holding that a mandamus for refund is not maintainable without a prior ... Refund of taxes paid under mistake of law - Failure to to raise any demand for a refund - before instituting this Petition, the Petitioner had not filed any application for a refund or even raised a demand for justice - refusal of mandamus - HELD THAT:- A Coordinate Bench in the case of Sansar Texturisers Pvt. Ltd. v. Union of India [2024 (2) TMI 97 - BOMBAY HIGH COURT], where a mandamus was sought for the refund of anti-dumping duty without a preceding demand for justice, declined to entertain the writ Petition - The Coordinate Bench relied on the Constitution Bench decision in Suganmal v. State of Madhya Pradesh [1964 (11) TMI 7 - SUPREME COURT], in which it was held that a petition under Article 226 of the Constitution solely praying for issue of a writ of mandamus directing the state to refund the money, is not ordinarily maintainable for the simple reason that a prayer for such refund can always be made in a suit against the authority which had illegally collected money as a tax. In such matters, several issues typically require consideration, including, but not limited to, limitation, delay, and laches. In a given case, there may be issues of unjust enrichment and so on. Therefore, it is important that before a petitioner seeks such relief through a writ of mandamus, there is a demand for justice followed by a refusal. This will give the writ court an idea of the State’s defence. The petitioner’s claim and the State’s defence would bear on the question of exercising discretion to entertain a writ petition for a monetary claim simpliciter. We are not inclined to entertain this petition. However, this shall not prevent the petitioner from applying for a refund in accordance with the law, if the law so permits or from raising a demand for justice in accordance with the law. If such an application is made or a demand is raised, it should be dealt with in accordance with the law within a reasonable period of say three months or so. This observation is not intended to assist the petitioner in reviving some belated claim. The Hon’ble Supreme Court has cautioned the High Courts against issuing seemingly innocuous orders “to consider representations” based on which attempts are invariably made to revive stale claims or urge fresh accrual of cause of action. Therefore, it is clarified that this is not the intention, and the observation should not be construed in that manner. The purpose of this order is to assist the petitioner, if it has a legitimate claim, but not to enable the Petitioner to seek any revival of a time-barred or belated claim based on the response of the third respondent by urging that such a response creates a fresh cause of action - Petition disposed off. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether a writ of mandamus seeking refund of taxes alleged to have been paid under a mistake of law is maintainable in the absence of a prior refund application or a distinct demand for justice and its refusal. 1.2 Whether a writ petition under Article 226 seeking a money claim simpliciter, namely refund of tax, is ordinarily maintainable. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Maintainability of writ of mandamus for tax refund without prior demand for justice Legal framework 2.1 The Court relied on the principles governing writs of mandamus as discussed by the Supreme Court in decisions such as: (i) Mani Subrat Jain v. State of Haryana, on the requirement of a judicially enforceable and legally protected right for mandamus; (ii) Saraswati Industrial Syndicate Ltd. v. Union of India, on the necessity of a distinct 'demand for justice' and its refusal before mandamus can issue; (iii) Amrit Lal Berry v. Collector of Central Excise and Kamini Kumar Das Choudhury v. State of West Bengal, reiterating that a demand for justice and its refusal must precede a petition for mandamus. The Court also referred to a prior Division Bench decision which emphasized that approaching the writ court without averring and proving a prior demand for justice has become an impermissible practice. Interpretation and reasoning 2.2 The Court noted that the petitioner had not filed any refund application or made any prior representation or demand for refund before instituting the writ petition. 2.3 It was expressly admitted on behalf of the petitioner that no demand for refund had been raised with the concerned authorities. 2.4 The Court treated the requirement of a prior demand for justice, followed by refusal, not as a mere formality but as a substantive precondition for seeking a writ of mandamus. 2.5 The Court adopted and applied the reasoning of a Coordinate Bench in a recent decision involving refund of anti-dumping duty, where a similar writ for refund was rejected for lack of prior demand for justice, after a detailed survey of Supreme Court authorities on mandamus. 2.6 The Court emphasized that without such prior demand and refusal, there is no demonstrated failure by the authority to perform a mandatory duty, and hence the foundational requirement for mandamus is not met. Conclusions 2.7 The writ petition seeking mandamus for refund of tax paid under an alleged mistake of law was held to be not maintainable, inter alia, because the petitioner had not made any prior refund application or demand for justice and thus had not satisfied a basic requirement for invoking mandamus jurisdiction. Issue 2: Maintainability of a money claim simpliciter (tax refund) under Article 226 Legal framework 2.8 The Court referred to the Constitution Bench decision in Suganmal v. State of Madhya Pradesh, which holds that a petition under Article 226 solely praying for a writ of mandamus directing the State to refund money is not ordinarily maintainable, because such relief can appropriately be sought in a civil suit against the authority which allegedly collected tax illegally. Interpretation and reasoning 2.9 The Court relied on the Coordinate Bench decision which, after considering Suganmal and other Supreme Court rulings, held that a writ petition for a money claim simpliciter, such as refund of duty or tax, is generally not maintainable. 2.10 The Court observed that in matters of tax or duty refund, multiple issues typically arise, such as limitation, delay and laches, and in appropriate cases, unjust enrichment and other defences. 2.11 The Court reasoned that a prior demand for justice and the State's response thereto enable the writ court to understand the nature of the claim and the State's defence, and thereby inform the Court's discretion whether to entertain a writ petition involving a monetary claim simpliciter. Conclusions 2.12 The Court held that, consistent with the Constitution Bench ruling and the Coordinate Bench decision, a writ petition seeking only refund of money (tax) is not ordinarily maintainable, particularly when filed directly without any prior recourse to the appropriate authority for refund. Issue 3: Future course of action, limitation, and avoidance of revival of stale claims Interpretation and reasoning 2.13 While declining to entertain the writ petition, the Court clarified that the petitioner is not barred from applying for refund or raising a demand for justice before the appropriate authority, if permissible in law. 2.14 The Court directed that, if such an application/demand is made, the appropriate authority should decide it in accordance with law, on its own merits, within a reasonable period of approximately three months, after granting an opportunity of hearing in view of possible verification issues. 2.15 The Court expressly cautioned that its directions should not be construed as enabling revival of any time-barred or belated claims, and referred to the Supreme Court's warning against passing innocuous orders 'to consider representations' which are then used to revive stale claims or assert a fresh cause of action. 2.16 The Court explicitly kept open all contentions of all parties, including objections based on limitation, delay, and laches, to be urged before the appropriate forum, if necessary. Conclusions 2.17 The petition was disposed of without costs, with liberty to the petitioner to pursue a refund claim or demand for justice before the competent authority, subject to all applicable legal bars, and with a clear caveat that no fresh cause of action or revival of stale claims should be inferred from the Court's directions.