In this case the petitioner has obtained a rule from the High Court calling upon the respondents to show cause why a writ in the nature of certiorari should not be issued to quash the order of assessment of sales tax made on the 10th of September, 1950, and also for a writ in the nature of mandamus directing the respondents to refund a sum of Rs. 69,478-8-0 illegally realised as sales tax.

Cause has been shown by the learned Government Pleader on behalf of the State of Bihar and the other respondents to whom notice of the rule was ordered to be given.

The petitioner is an incorporated company carrying on the business of manufacture and sale of M.S. rods, wires, wire products, nails, bolts etc. Its factory is situated at Indranagar in the district of Singhbhum. For the financial year 1949-50 the petitioner was assessed for the payment of tax of Rs. 2,94,131 with regard to sales outside Bihar and of Rs. 9,010-1-0 with regard to sales inside the territory of Bihar. Out of this assessment a sum of Rs. 69,478-2-0 was assessed as tax payable for sales outside Bihar for the period between the 26th of January, 1950, and the 31st of March, 1950. The taxable turnover for this period was Rs. 44,46,662-5-

6. The assessment was made by the Superintendent of Commercial Taxes on the 10th of September, 1950. The petitioner duly paid the amount of tax assessed soon afterwards. On the 30th of March, 1953, the Supreme Court pronounced its judgment in State of Bombay v. United Motors (India) Ltd. ([1953] 4 S.T.C. 133; [1953] S.C.R. 1069) holding that Article 286(1) of the Constitution, read with the Explanation thereto, prohibited the taxation of sales or purchases involving inter-State elements by all States except the State in which the goods are delivered for the purpose of consumption therein. The effect of this decision was that the petitioner was not liable to pay sales tax with regard to sales outside Bihar for the purpose of consumption in the other State with respect to the period from the 26th of January, 1950, to the 31st of March, 1950. On the 4th of September, 1953, the petitioner applied before the Commissioner of Sales Tax for a review of the assessment made on the 10th of September, 1950, and for the refund of the tax illegally collected. This application was rejected by the Commissioner of Sales Tax by his order dated the 18th of February, 1954. The contention of the petitioner is that the order of the Commissioner of Sales Tax is illegal and there is a statutory obligation on the part of the respondents to refund the tax illegally realised. It is argued on behalf of the petitioner that the imposition of tax was unconstitutional since there is a violation of the provisions of Article 286 and Article 265 of the Constitution. It was submitted on behalf of the petitioner that the order of assessment of the Sales Tax Officer, dated the 10th of September, 1950, should, therefore, be quashed by a writ in the nature of certiorari and there should be a further direction upon the respondents to refund the amount of tax illegally realised for the period in question.

The question presented for determination is whether the assessment of sales tax upon the petitioner for the period from the 26th of January, 1950, to the 31st of March, 1950, with regard to inter-State sales is illegal and ultra, vires. On behalf of the petitioner Mr. P. R. Das relied upon the express language of Article 286(1) and Article 286(2) of the Constitution, which state :-

"28

6. (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place -

(a) outside the State; or

(b) in the course of the import of the goods into, or export of the goods out of, the territory of India.

Explanation. - For the purposes of sub-clause (a), a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State, notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State.

(2) Except in so far as Parliament may by law otherwise provide, no law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of any goods where such sale or purchase takes place in the course of inter-State trade or commerce;

Provided that the President may by order direct that any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately before the commencement of this Constitution shall, notwithstanding that the imposition of such tax is contrary to the provisions of this clause, continue to be levied until the thirty-first day of March, 1951."

Reliance was also placed upon the decision of the Supreme Court in the United Motors case ([1953] 4 S.T.C. 133; [1953] S.C.R. 1069) in which it was held that Article 286(1) of the Constitution, read with the Explanation thereto, prohibited the taxation of sales or purchases involving inter-State elements by all States except the State in which the goods are delivered for the purpose of consumption therein. It was, however, submitted by the Government Pleader on behalf of the respondents that the President has made an order directing that any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately before the commencement of the Constitution shall continue to be levied until the 31st day of March, 1951, notwithstanding the bar of Article 286(2) of the Constitution. The order of the President was made under the proviso to Article 286(2) of the Constitution, and it is in the following terms :-

"THE SALES TAX CONTINUANCE ORDER, 1950.

In exercise of the powers conferred by the proviso to clause (2) of Article 286 of the Constitution of India, the President is pleased to make the following order, namely :-



1. (i) This order may be called the Sales Tax Continuance Order, 1950.

(ii) It shall come into force at once.

2. Any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately before the commencement of the Constitution of India shall, until the thirty-first day of March, 1951, continue to be levied notwithstanding that the imposition of such tax is contrary to the provisions of clause (2) of Article 286 of the said Constitution."

It was, therefore, submitted on behalf of the respondents that sales tax has been validly imposed and collected from the petitioner with regard to inter-State sales for the period from the 26th of January, 1950, to the 31st of March, 1950. I am unable to accept this argument as correct. According to the decision of the majority of the learned Judges of the Supreme Court in Bengal Immunity Company Limited v. The State of Bihar and Others ([1955] 6 S.T.C. 446), the bans imposed by the several clauses of Article 286 of the Constitution with regard to the taxing powers of the States are independent and separate, and each one of the bans has to be surmounted and overcome before the State Legislatures can impose a tax on the transaction of sale or purchase of goods. These bans under Article 286 have been imposed from different standpoints; and even though the transaction of sale or purchase may overlap the different clauses of Article 286, each one of these bans is operative and has to be enforced. It is true that the Presidents Continuance Order has lifted the ban so far as Article 286(2) is concerned. But the Presidents Continuance Order cannot be projected into the sphere of any other ban. It cannot surmount or overcome the ban imposed by the Explanation to Article 286(1)(a) of the Constitution. According to the view of the majority of the learned Judges in the United Motors case ([1953] 4 S.T.C. 133; [1953] S.C.R. 1069), the correct interpretation of the Explanation to Article 286(1) is that the situs of the sale is determined with regard to the transactions falling within the Explanation to Article 286(1); and once a transaction of sale is determined to be an outside sale because of the legal fiction created by the Explanation to Article 286(1)(a), the ban imposed by the Article is immediately directed to that transaction and that ban cannot be lifted or removed by the Presidents Continuance Order. I, therefore, hold that the Government Pleader has failed to make good his submission on the point. I think the imposition of sales tax continues to be illegal so far as inter-State transactions are covered by the Explanation to Article 286(1)(a) of the Constitution. The same view has been expressed by the Supreme Court in Ram Narain Sons Ltd. v. Assistant Commissioner of Sales Tax and Others ([1955] 6 S.T.C. 627).

But the difficulty is that the order of the Sales Tax Officer in the present case does not show, on the face of it, whether the amount of Rs. 69,478-2-0 was assessed as sales tax with regard to the transactions of sale of goods which were consumed in the State of first destination. The order of the Sales Tax Officer is the second annexure to the application. In this order the Sales Tax Officer merely says "sales amounting to Rs. 1,92,08,554-11-0 were made to addressees outside Bihar". In paragraph 3 of the application the petitioner states that the gross turnover was computed to be Rs. 2,06,46,309-1-6 "for sales for consumption outside Bihar". But there is no finding of the Sales Tax Officer that sales outside Bihar for the period from the 26th of January, 1950, to the 31st of March, 1950, were sales as a result of which there was delivery and consumption in the State of first destination. It was argued on behalf of the petitioner that all the sales outside Bihar were exempt from tax whether the goods were consumed in the State of first destination or whether the goods were re-exported to other States where the consumption took place. I am unable to accept this argument. According to the principle laid down in the United Motors case ([1953] 4 S.T.C. 133; [1953] S.C.R. 1069) Article 286(1)(a) of the Constitution, read with the Explanation thereto, prohibited imposition of tax on sales or purchases involving inter-state elements by all States except the State in which the goods are delivered for the purpose of consumption therein. It was held in that case that the Explanation clearly determined by means of a legal fiction the situs of the sale in the case of transactions falling within that category, and when a transaction was determined to be inside a particular State, it necessarily became a transaction outside that State. This matter is clearly put by Patanjali Sastri, C.J., at page 1082 of the report as follows :-

"To solve the difficulty an easily applicable test for determining what is an outside sale had to be formulated, and that is what, in our opinion, the Explanation was intended to do. It provides by means of a legal fiction that the State in which the goods sold or purchased are actually delivered for consumption therein is the State in which the sale or purchase is to be considered to have taken place, notwithstanding the property in such goods passed in another State. Why an outside sale or purchase is explained by defining what is an inside sale, and why actual delivery and consumption in the State are made the determining factors in locating a sale or purchase will presently appear. The test of sufficient territorial nexus was thus replaced by a simpler and more easily workable test : Are the goods actually delivered in the taxing State, as a direct result of a sale or purchase, for the purpose of consumption therein Then, such sale or purchase shall be deemed to have taken place in that State and outside all other States. The latter States are prohibited from taxing the sale or purchase; the former alone is left free to do so."

I am, therefore, of the opinion that in the present case the petitioner is exempted from the payment of tax only if there is proof that the goods were delivered and consumed in the State of first destination. I further hold that the sales would not be exempted if the goods are not consumed in the State of first destination but they are re-exported from the State of first destination to other States. In my opinion the proper direction in this case would be that the order of the Sales Tax Officer dated the 10th of September, 1950, should be set aside and that the matter should go back to the Sales Tax Officer to make re-assessment of sales tax upon the petitioner according to law for the period in question. I think there should also be a direction upon the respondents calling upon them to refund to the petitioner so much of the tax as has been paid by the petitioner in excess of the amount of re-assessment to be now made by the Sales Tax Officer.

A point was taken by the learned Government Pleader on behalf of the respondents that no order for refund should be made because the petitioner had paid the amount of tax voluntarily and not under protest. In support of this argument the learned Government Pleader referred to Robert A. Chasebrough v. United States (192 U.S. 253). I do not think that the argument is valid. In the present case the order of the Sales Tax Officer making assessment was an order which compelled obedience on the part of the assessee. There are coercive provisions in the statute for the realisation of the tax assessed. I consider that the payment of tax upon the demand of an officer colore officii or acting under the colour of authority is an involuntary payment. I am, therefore, unable to hold that the payment of sales tax on behalf of the petitioner was a voluntary payment and the question of protest or no protest is immaterial. A similar view has been expressed in two English authorities, Hooper v. Mayor and Corporation of Exeter (56 L.J.Q.B. 457) and Steele v. Williams (155 E.R. 1502). In the former case it was held by the Queens Bench Division that payment of harbour dues was not voluntary as the Collector was acting under the provisions of a statute which gave a power of absolute and immediate distress. In the other case, namely Steele v. Williams (155 E.R. 1502), it was held that payment can never be voluntary when money is paid under an illegal demand, colore officii. At page 1505 Baron Martin states :-

"As to whether the payment was voluntary, that has in truth nothing to do with the case. It is the duty of a person to whom an Act of Parliament gives fees, to receive what is allowed, and nothing more. This is more like the case of money paid without consideration - to call it a voluntary payment is an abuse of language. If a person who has occupied a considerable time in a search gave an additional fee to the parish clerk, saying I wish to make you some compensation for your time, that would be a voluntary payment. But where a party says, I charge you such a sum by virtue of an Act of Parliament, it matters not whether the money is paid before or after the service is rendered; if he is not entitled to claim it, the money may be recovered back."

In the present case the claim of the petitioner for refund of tax is based not on the ground that the payment was involuntary or made under coercion or duress, but upon the ground that payment was made under a mistaken notion of law. In this respect the position in Indian law is different from the English law. It is well settled in the English law that the money paid under a mistake of law cannot be recovered in an action for money had and received, but money paid under a mistake of fact may be recovered. The position in Indian law is markedly different. The Indian doctrine is embodied in section 72 of the Indian Contract Act which states : "A person to whom money has been paid, or anything delivered by mistake or under coercion, must repay or return it." There was a difference of opinion between the Indian High Courts as regards the interpretation of this section, but it has now been authoritatively held by "the Judicial Committee in Sri Sri Shiba Prasad Singh v. Maharaja Srish Chandra Nandi ((1949) 76 I.A. 244) that the word "mistake" in section 72 of the Indian Contract Act includes a mistake of law and that money paid under a mistake of law could be recovered and that section does not conflict with the provisions of section 21 of the Indian Contract Act. At pages 253-54 Lord Reid states :-

"If a mistake of law has led to the formation of a contract, section 21 enacts that that contract is not for that reason voidable. If money is paid under that contract, it cannot be said that that money was paid under a mistake of law : it was paid because it was due under a valid contract, and if it had not been paid payment could have been enforced. Payment by mistake in section 72 must refer to a payment which was not legally due and which could not have been enforced; the mistake is in thinking that the money paid was due when in fact it was not due. There is nothing inconsistent in enacting on the one hand that if parties enter into a contract under mistake in law that contract must stand and is enforceable, but, on the other hand, that if one party acting under mistake of law pays to another party money which is not due by contract or otherwise, that money must be repaid. Moreover, if the argument based on inconsistency with section 21 were valid, a similar argument based on inconsistency with section 22 would be valid and would lead to the conclusion that section 72 does not even apply to mistake of fact."

For these reasons I hold that the order of the Sales Tax Officer dated the 10th of September, 1950, should be set aside and that the matter should go back to the Sales Tax Officer who should make re-assessment for the period in question according to law. I think there should also be a direction upon the respondents calling upon them to refund to the petitioner so much of the sales tax as has been paid by the petitioner in excess of the amount of re-assessment which will now be made by the Sales Tax Officer. I would accordingly allow this application with costs. Hearing fee Rs. 250.

RAJ KISHORE PRASAD, J. - I agree.

Application allowed.