Sales Tax Officer, Banaras and Others vs Kanhaiya Lal Mukundlal Saraf
Bench: Justice S. R. Dass (CJI), Justice N. H. Bhagwati, Justice B. P. Sinha, Justice K. Subba rao and Justice K. N. Wanchoo
Issue:
The issue, in this case, was whether the Section 72 of the Indian Contract Act, 1872 includes within its ambit mistake of fact or not.
Facts:
- The respondent is a firm dealing in Bullion, Silver and Gold ornaments and also deals in forward transaction in Silver Bullion at Banaras (UP). The Appellant (Sales Tax Office, Banaras) assessed the respondent for assessment year 1948-49, 1949-50 and 1950-51 under the UP Sales Tax for forward transaction in silver bullion.
- The appellant paid the assessed sales tax sums for the three years against the sales tax liability of firm.
- The sales tax on forward transactions was held to be ultra vires, by the High Court of Allahabad by its judgment (Messrs. Budh Prakash Jai Prakash v. Sales Tax Officer, Kanpur) and the respondent asked for a refund for sales tax paid as aforesaid. The appellant, however, by his letter refused to refund the same.
- The respondent then filed in the HC of Allahabad the Civil Writ Petition under Art. 226 and asked to issue certiorari for quashing the sales tax assessment orders and a writ of mandamus for refund.
- The HC quashed the said assessment orders that assess the respondent in respect of forward contracts in silver and also issued a writ of mandamus directing the appellants to refund.
- The appellants filed a Special Appeal in the HC of Allahabad against order of the learned Judge.
- A Division Bench of the HC heard the appeal and held that Section 72 of the Indian Contract Act applies and the State Government must refund the money unlawfully received.
- The appellants then applied for a certificate under Art. 133(1)(b) of the Constitution which certificate was granted, on the undertaking that the State will in any scenario pay the costs, charges and expenses incurred by or on behalf of the respondent as taxed by this Court.
- Hence, the present appeal lies.
Argument raised by Appellant:
The appellant contended that the respondent shall have followed the procedure laid down in the U.P. Sales Tax Act and since the respondent has failed in doing so, the respondent shall be excluded from filing a suit in a civil court; and also contended that in any case the writ shall not lie for recovery of money.
Argument raised by Respondent:
The respondent relied upon the decision of the HC and stated that the HC was correct in dismissing the appeal of the appellant.
Judgment:
The court quoted many judgments of India and International origin namely America, UK and Australia. The court said that mistake in Section 72 has been used without any limitation to its scope and it covers both mistake of fact and mistake of law; and said what we have to do is to ascertain the meaning of plain terms of the section and understand the legislature's intention.
The respondent by mistake paid the assessed tax on forward transaction which he believed were due but they were not due and when the respondent came to the knowledge of it. He filed a writ in HC claiming his monies worth under Section 72 which the court granted him and the SC upheld the order of the HC while explaining Section 72.
