| Citation | STO v. Kanhaiya Lal Makund Lal Saraf, 1959 SCR 1350 |
| Date of Judgment | 23rd September 1958 |
| Court | Supreme Court of India |
| Case Type | Civil |
| Petitioner | Sales Tax Officer, Banaras and others |
| Respondent | Kanhaiya Lal Mukundlal Saraf |
| Bench | S.R Das, N.H Bhagwati, B.P Sinha, K Subba Rao, K.N Wanchoo |
| Referred | Indian Contract Act,1872 |
FACTS OF THE CASE
The respondent in the above case is a business firm based in Banaras, Uttar Pradesh, engaged in the trade of Bullion, Silver and Gold ornaments. They faced assessments by the Sales Tax Office in Banaras for the years 1948-1951, concerning the sales tax on their transactions in silver bullion. The firm duly paid the assessed sales tax amounts for these three years. However, in the case, Budh Prakash Jai Prakash v. Sales Tax Officer, Kanpur, the High Court of Allahabad ruled that imposing sales tax on these forward transactions was beyond legal authority and hence was ultra vires. Subsequently, the firm requested a refund of the sales tax they had paid, but their request was declined by the Sales Tax Office.
In response, the firm initiated legal action by filing a Civil Writ Petition under Article 226 of the Constitution in the Allahabad High Court. They sought a writ of certiorari to invalidate the sales tax assessment orders and a writ of mandamus to secure a refund. The High Court granted their request, nullifying the assessment orders related to forward contracts in silver and compelling the Sales Tax Office to refund the collected funds.
Dissatisfied with this decision, the Sales Tax Office lodged a Special Appeal with the Allahabad High Court. A Division Bench of the High Court heard the appeal and determined that Section 72 of the Indian Contract Act was applicable. Consequently, they ruled that the State Government must reimburse the funds that had been unlawfully collected. Subsequently, the Sales Tax Office applied for a certificate under Article 133(1)(b) of the Constitution. This certificate was granted, with the understanding that the State would cover all costs, charges, and expenses incurred by or on behalf of the firm, as determined by the Supreme Court.
ISSUES
1) If section 72 of the Indian Contract Act, 1872 would be applicable in the present case?
ARGUMENTS
The appellant argued that the respondent should have adhered to the procedures specified in the U.P. Sales Tax Act and that their failure to do so should disqualify them from pursuing a civil court suit. In response, the respondent upheld the High Court’s decision, asserting that it was correctly upheld when the appellant’s appeal was dismissed.
JUDGEMENT
The Honorable Supreme Court relied upon various Indian and international judgements to determine and interpret the scope and ambit of section 72 of the Indian Contract Act, 1872. The Supreme Court upheld the High Court’s decision while clarifying that even though the State of U.P. had already spent the mistakenly paid funds in the regular course of its business, this did not affect the respondent’s right to seek a refund under Section 72. The Court affirmed that, according to the plain terms of Section 72, the respondent was entitled to recover the funds paid to the State of U.P. due to a mistake of law.
REFERENCES
Online sources:
1)SCC online
2)Indian Kannon
3) https://www.lawyersclubindia.com/judiciary/does-mistake-of-facts-falls-under-section-72-or-not–4382.asp
This Article is written by Thanmaya Reddy, School of Law, CHRIST (Deemed to be University) Intern at Legal Vidhiya.
