SALE TAX OFFICER, BANARAS &OTHERS V.KANHAIYA LAL MUKUNDLAL SARAF 25 SEPTEMBER, 1958

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Facts

The respondent is a firm registered under Indian Partnership Act that deals in bullion, gold, and silver ornaments. It was evaluated that the sale tax for the years 1948-49, 1949-50, and 1950-51 is a sum of Rs. 1,365 and this amount was duly paid by the respondent. Subsequently, this court held and Supreme Court affirmed the decision in the case of Sale Tax officer, Pilibhit v. Budh Prakash Jai Prakash that U.P. sale tax has performed the act which lies beyond the authority of cooperation to perform. Thus the respondent applied to the commissioner of sales tax U.P. to refund the sum of 1,365. The refund was refused due to which the respondent filed the petition in the High Court of Allahabad under Article 226 of the constitution for writ petition No. 355 of 1952. It is a writ of mandamus requiring the appellant to return the aforesaid amount paid by respondent which is 1,365

 Issue 

1. Whether the money was voluntarily paid as a tax by the responded?
2. Is the money refundable by the sales tax department of U.P.?
3. Whether section 72 is applicable in this case or not ?

PETITIONER ARGUMENTS 

Special appeal No.18 of 1955 was heard by the division of the bench against the order of the learned judge. It was argued by the Advocate general on behavior of the Appellant. It was said that the amount which was paid by the respondent was under the mistake of law and due to this it is irrecoverable. Moreover, section 72 does not apply to this case as money paid under the mistake of law could not be recoverable and that was also an amendment to section 72 of the Indian Contract Act.  As a general rule which was established in equity as well as law that money paid under a mistake of law with full knowledge of facts, is not recoverable. And the respondent made the payment voluntarily under the mistake of law wouldn’t be entitled to recover it

RESPONDENT ARGUMENTS 

Respondent claim that the amount paid under U. P. sale Tax act was successfully paid by him but these payment were in respect of forward transaction in silver which state of U. P. was not entitled to collect as this action lies beyond the authorities of cooperation. The respondent committed a mistake by thinking the money paid was due but in fact they were not. Due to mistake the money which was paid should be refund able under section 72 of Indian contract act that money paid due to mistake is refundable  

JUDGEMENT 

Court held that the payment was voluntarily made and parties paying the same were therefore not entitled to recover the same. On a true interpretation of section 72 of the Indian Contract Act the only two circumstances indicated as entitling the party to recover the money back are that the money must have been paid by mistake or under coercion. If mistake either of law or of fact is established, he is entitled to recover the monies and the party receiving the same is bound to repay or return them irrespective of any consideration whether the money had been paid voluntarily, subject however to questions of estoppels, waiver, limitation or the like. If once that circumstance is established the party is entitled to the relief claimed. If, on the other hand, neither mistake of law nor of fact is established, the party may rely upon the fact of the money having been paid under coercion in order to entitle him to the relief claimed and it is in that position that it becomes relevant to consider whether the payment has been a voluntary payment or a payment under coercion. 

ANALYSIS

The amount which  was paid by the respondent due to mistake in law is not recoverable as section 2 of Indian contract act defines the amount which is paid by mistake of correlation, is not applicable in this case as the amount that was paid was under the knowledge of fact and not by any one influence or pressure thus the cooperation/ state is not liable to pay the amount to the respondent and I respectfully agree with the rest of Walton J.’s judgment, particularly with his statement that a general rule that is if money is paid voluntarily, without compulsion, extortion, or undue influence, without fraud by the person to whom it is paid and with full knowledge of all the facts, it cannot be recovered, although paid without consideration, or in discharge of a claim which was not due or which might have been successfully resisted.” 

REFERANCE

http://www.scconline.com/DocumentLink/67zyaD9M

https://lawyerservices.in/Sales-Tax-Officer-Banaras-and-Others-Versus-Kanhaiya-Lal-Mukundlal-Saraf-1958-09-23

This Article is written by Priyanshi Bharti student of Vivekananda Institute of Professional Studies, GGSIPU; Intern at Legal Vidhiya.

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