Poornima vs The Sales Tax Officer and Others

P.A. Mohammed, J.—The writ Petitioner is a small scale industrial unit registered with the Industries Department. It is a registered dealer under the provisions of the Kerala General Sales Tax Act 1963 (for short ''the Act''). The Petitioner seeks to quash the assessment orders passed under the Act for the years 1980-81, 1981-82, 1982-83 and 1983-84 and to direct the Respondents to refund a sum of Rs. 52,782-04 collected towards sales tax for the aforesaid assessment years.

The Government of Kerala issued notification dated 11th April 1979 (hereinafter referred to as ''first notification'') exempting from payment of sales tax new small scale industrial units set up after 11th April 1979 for a period of five years from the date of production. However, in exercise of the powers conferred by Section 10 of the Act the Government issued another notification on 29th September 1980 which was published in the Gazette on 21st October 1980 (hereinafter referred to as ''second notification''). By the said notification the cumulative sales tax exemption concession granted to a unit at any point of time shall not exceed 90 per cent of the cumulative gross fixed capital investment of the unit. It is also provided that the said notification shall be deemed to have come into force with effect from 1st April 1979.

The present small scale industrial unit was set up after 11th April 1979 and it started production from 9th June 1980. The first sale was effected on 7th July 1980. Though the Petitioner was entitled to full exemption from payment of sales tax in view of the first notification, the first Respondent assessed the Petitioner for the years 1980-81 to 1983-84. The total liability as per the above assessments would come to Rs. 73,484-80. As against those assessment orders the Petitioner filed appeals before the Appellate Assistant Commissioner. The appellate authority after hearing the appeals remanded the matter to the assessing authority to reassess the Petitioner with a direction to give the Petitioner benefit of exemption available to small scale industrial units for a period of five years. The second Respondent further directed the assessing authority to examine the claim of the Petitioner for exemption in respect of the years 1982-83 and 1983-84. Exts. P-1 to P-4 are copies of the appellate orders. By Ext. P-5 certificate issued by the General Manager, District Industries Centre, Quilon dated 5th February 1985 exemption was granted to the Petitioner from payment of sales tax with effect from 7th July 1980 for a period of five years. However, the above certificate was issued in terms of S.R.O. 968/80 (second notification) limiting the exemption to 90 per cent of the capital investment.

While so, the first Respondent initiated action for revenue recovery proceedings in realisation of Rs. 28,200-45 for the assessment years 1980-81 and 1981-82 and Rs. 38,267-64 for the years 1982-83 and 1983-84. After the receipt of the above-mentioned appellate orders the first Respondent assessing authority granted partial relief to the Petitioner and then advised recovery of Rs. 52,782-04. The Petitioner was compelled to pay this amount in view of the coercive proceedings initiated against it. Later, in view of the notification, S.R.O. 968/80 the first Respondent revised the assessment orders in question. Exts. P-7 to P-10 are the copies of the revised assessment orders passed by the assessing authority, pursuant to Exts. P-1 to P-4 appellate orders.

By Ext. P-13 the Petitioner requested the first Respondent to refund the amount of Rs. 52,782-40 collected from the Petitioner pursuant to revenue recovery proceedings. Again a written request was made to third Respondent to refund the tax as per Ext. P-14. That request was rejected by the third Respondent as per Ext. P-15 observing that the Petitioner is not eligible to get sales tax exemption. Thereafter the Petitioner by Ext. P-16 submitted a further representation before the Board of Revenue for a direction to refund the amount illegally collected invoking the powers u/s 35 of the Act. The counsel submits that the Petitioner''s unit is entitled to full exemption from payment of sales tax for a period of five years in view of the first notification and hence the assessment proceedings initiated against it are unauthorised and illegal. What is argued is that Government is bound by the promise given in the first notification and when the Petitioner acted pursuant to the said promise the Government cannot resile. In other words the contention is that the principles of promissory estoppel would apply.

What is promissory estoppel? The origin of doctrine of promissory estoppel may well be found in Thomas Hughes v. Metropolitan Railway Co. (1877) 2 A.C. 439 and Birmingham and District Land Co. v. London and North Western Rly. Co. (1888) 40 Ch. D. 268 which were decided by the House of Lords about a century ago. The said doctrine was rediscovered by Lord Denning in the year 1947 in a famous case called ''High Trees case'' (1947) 1 K.B. 130. That was a historical necessity in the march of law and justice. Sir Henry Maine said:

Social necessities and social opinion are always more or less in advance of law. We may come indefinitely near to the closing of the gap between them, but it has a perpetual tendency to re-open.... The greater or less happiness of a people depends on the degree of promptitude with which the gap is narrowed.

Lord Denning in Central London Property Trust Ltd. v. HighTrees House Ltd. (1947) 1 K.B. 130 analysed the earlier decisions in Jorden v. Money (1854) 5 H.L.C. 185, Fenner v. Plake (1900) 1 Q.B.426, In re Wickham (1917) 34 T.L.R. 158, Re William Porter and Co. Ltd. (1937)2 All E.R. 361 and Buttery v. Pickard (1946) W.N. 25 and held:

In each case the court held the promise to be binding on the party making it, even though under the old common law it might be difficult to find any consideration for it. The courts have not gone so far as to give a cause of action in damages for the breach of such a promise, but they have refused to allow the party making it to act inconsistently with it. It is in that sense and that sense only, that such a promise gives rise to an estoppel. The decisions are a natural result of the fusion of law and equity: for the cases of Huges v. Metropolitan Ry. Co. (1917) 34 T.L.R. 158; Birmingham and District Land Co. v. London and North Western Ry. Co. (1937) 2 All E.R. 361 and Salisbury (Marquess) v. Gilmore (1946) W.N. 25 afford a sufficient basis for saying that a party would not be allowed in equity to go back on Such a promise. In my opinion, the time has now come for the validity of such a promise to be recognized.

(emphasis supplied)

Spencer Bower and Turner in "Estoppel by Representation" observe:

It was possible for the first edition of this work (1923) to assert with apparent finality that no estoppel could be founded upon a representation other than one as to an existing fact. This statement of principle was, of course, based upon the decision of the House of Lords in Jorden v. Money. That leading case, decided in 1854, appeared in 1923 still to enjoy undiminished and secure authority, but in 1946 there came before Denning, J. sitting in the Court of King''s Bench as a Judge of first instance, an ordinary looking piece of litigation which was to shake the foundations of this part of the law. This was Central London Property Trust Ltd. v. High Trees House Ltd.

They further say:

It must be noticed at once that the whole of the important parts of the judgment in the High Trees case consist of obiter dicta. But this did not prevent this decision from becoming one of the leading cases of our generation, and it is now clear that High Trees must be taken as an established authority for the principle laid down in the passage which has been cited above,....

Lord Denning in ''The Discipline of law'' said:

The importance of the High Trees case, as I see it, is this: During the 19th century the courts of Common Law had laid down strict rules of law expressed in archaic terms such as ''consideration'' and ''estoppel''. These strict rules had survived the Judicature Act, 1873 and were capable of causing injustice in many cases. There was a gap between those strict rules and the social necessities of the 20th century. The High Trees case helped to narrow that gap.

That a representation of existing fact is necessary for the foundation of a true estoppel but the words or conduct necessary to support a promissory estoppel are essentially different in quality. They consist of a promise or assurance as to the future conduct of a promisory on which the promises relies to act to his detriment. They are really promises intended to be binding, intended to be acted upon and in fact acted upon''. The substance is this. ''When a man, by his words or conduct, has led another to believe that he may safely act on the faith of them and the other does act on them he will not be allowed to go back on what he has said or done when it would be unjust or inequitable for him to do so.'' This is the embodiment of the principles of promissory estoppel distinctly different from the cases of estoppel in the strict sense. It is paramountly a principle of justice and of equity.

The evolution of the doctrine of promissory estoppel has its genesis in the law of equity but its origin and development in India can be traced to the various decisions of the Supreme Court. The following decisions deserve to be noted in the development of different facets of this branch of law in Indian jurisprudence. Union of India v. Anglo Afghan Agencies AIR 1968 S.C. 718, Century Spinning and Manufacturing Company Ltd. and Another Vs. The Ulhasnagar Municipal Council and Another, , Excise Commissioner, Uttar Pradesh, Allahabad and Others Vs. Ram Kumar and Others, , Motilal Padampat Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh and Others, , Jit Ram Shiv Kumar and Others Vs. State of Haryana and Others, , Union of India (UOI) and Others Vs. Godfrey Philips India Ltd., ; State of Bihar and Another Vs. Usha Martin Industries Ltd., , Pournami Oil Mills and Others Vs. State of Kerala and Another, , Delhi Cloth and General Mills Ltd. Vs. Union of India (UOI), , Assistant Commissioner of Commercial Taxes (Asst.) Dharwar and Others Vs. Dharmendra Trading Company and Others, , Pine Chemicals Ltd. and Others Vs. Assessing Authority and Others, , Amrit Banaspati Co. Ltd. and another Vs. State of Punjab and another, and D.C.M. Ltd. and Another Vs. Union of India (UOI) and Another, -

The High Trees'' case (1947) 1 K.B. 130 supra was relied on by the Supreme Court in the decision in Motilal Padampat Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh and Others, . There the court held:

The true principle of promissory estoppel, therefore, seems to be that were one party has by his words or conduct made to the other a clear and unequivocal promise which is intended to create legal relations or affect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is in fact so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so having regard to the dealings which have taken place between the parties, and this would be so irrespective whether there is any pre-existing relationship between the parties or not.

Eulogizing the decision in Anglo Afghan Agencies'' case AIR 1968 S.C. 718 as its ''eternal glory'' the Supreme Court observed:

There was a time when the doctrine of executive necessity was regarded as sufficient justification for the Government to repudiate even its contractual obligations, but, let it be said to the eternal glory of this Court, this doctrine was emphatically negatived in the Indo-Afghan Agencies case (A.I.R. 1968 S.C. 718) and the supremacy of the rule of law was established. It was laid down by this Court that the Government cannot claim to be immune from the applicability of the rule of promissory estoppel and repudiate a promise made by it on the ground that such promise may fetter its future executive action. If the Government does not want its freedom of executive action to be hampered or restricted, the Government need not make a promise knowing or intending that it would be acted on by the promises and the promises would alter his position relying upon it. But if the Government makes such a promises and the promises acts in reliance upon it and alters his position, there is no reason why the Government should not be compelled to make good such promise like any other private individual.

In Anglo Afghan Agencies'' case AIR 1968 S.C. 718 supra, the Supreme Court after placing reliance on the decision of the Privy Council in Municipal Corporation of the City of Bombay v. Secretary of State ILR (1904) 29 Bom 580 observed in paragraph 20 thus:

This case, is in our judgment, a clear authority that even though the case does not fall within the terms of Section 115 of the Evidence Act, it is still open to a party who has acted on a representation made by the Government to claim that the Government shall be bound to carry out the promise made by it, even though the promise is not recorded in the form of a formal contract as required by the Constitution.

However, in Jit Ram Shiv Kumar and Others Vs. State of Haryana and Others, the Supreme Court took a different view and held:

It may, therefore, be stated that the view of this Court has been that the principle of estoppel is not available against the Government in exercise of legislative, sovereign or executive power.

This decision also expressed its disagreement with the observations made in Motilal Padampat Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh and Others, that the doctrine of promissory estoppel cannot be defeated by invoking the defence of executive necessity suggesting by necessary implication that the doctrine of executive necessity is available to the Government to escape its obligation under the doctrine of promissory estoppel. This dissenting view point was taken note of by a larger bench of the Supreme Court in Union of India (UOI) and Others Vs. Godfrey Philips India Ltd., . After analysing the decision in Jit Ram Shiv Kumar and Others Vs. State of Haryana and Others, and Motilal Padampat Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh and Others, the Supreme Court held in paragraph 13 thus:

We have carefully considered both the decisions in Motilal Sugar Mills'' case and Jeet Ram''s case and we are clearly of the view that what has been laid down in Motilal Sugar Mills case represents the correct law in regard to the doctrine of promissory estoppel and we express our disagreement with the observations in Jeet Ram''s case to the extent that they conflict with the statement of the law in Motilal Sugar Mills case and introduce reservations cutting down the full width and amplitude of the prepositions of law laid down in that case.

Ultimately the Supreme Court said in Union of India (UOI) and Others Vs. Godfrey Philips India Ltd., , while expressing its full agreement with Motilal Padampat Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh and Others, in paragraph 14 of the judgment thus:

Of course we must make it clear, and that is also laid down in Motilal Sugar Mills case AIR 1978 S.C. 621 (supra), that there can be no promissory estoppel against the legislature in the exercise of its legislative functions nor can the Government or public authority be debarred by promissory estoppel from enforcing a statutory prohibition. It is equally true that promissory estoppel cannot be used to compel the Government or a public authority to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make. We may also point out that the doctrine of promissory estoppel being an equitable doctrine, it must yield when the equity so requires, if it can be shown by the Government or public authority that having regard to the facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or representation made by it, the Court would not raise an equity in favour of the person to whom the promise or representation is made and enforce the promise or representation against the Government or public authority. The doctrine of promissory estoppel would be displaced in such a case, because on the facts, equity would not require that the Government or public authority should be held bound by the promise or representation made by it. This aspect has been dealt with fully in Motilal Sugar Mills case (supra) and we find ourselves wholly in agreement with what has been said in that decision on this point.

The small scale industrial unit in the present case was set up in pursuance of the first notification issued by the Government on 11th April 1979. Ext. P-5 proceedings of the General Manager, District Industries Centre, Quilon would reveal that the unit had started production on 9th June 1980 and the first sale was effected on 7th July 1980. The second notification restricting the exemption was issued on 29th September 1980. The first notification gave more of tax exemption than the second one. The second notification withdrew the exemption relating to purchase tax and confined the exemption from sales tax to limit of 90 per cent of the capital investment. However, the present unit would come within the purview of the first notification and thus entitled to total exemption from payment of sales tax for a period of five years.

The ambit and scope of the two notifications involved in this case came up for consideration before the Supreme Court in Pournami Oil Mills and Others Vs. State of Kerala and Another, . In view of the principle that where the authority making an order has power conferred upon it by statute to make an order made by it and an order is made without indicating the provision under which it is made the order would be deemed to have been made under the provision enabling the making of it, the Supreme Court found that the first notification was issued u/s 10 of the Act which confers power on the Government to grant exemption and deduction in rate of tax. The second notification was specifically issued u/s 10 of the Act. The Supreme Court observed that in response to the notification dated 11th April 1979 and in consideration of the concession made applicable many small scale industrial units had been set up within the State of Kerala and they were entitled to plead the rule of estoppel in their favour when the state purported to act differently. After applying the ratio of the decision in Motilal Padampat Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh and Others, the Supreme Court held thus:

All parties before us who in response to the order of April 11, 1979, set up their industries prior to October 21, 1980, within the State of Kerala would thus be entitled to the exemption extended and/or promised under that order. Such exemption would continue for the full period of five years from the date they started production. New industries set up after October 21, 1980, obviously would not be entitled to that benefit as they had notice of the curtailment in the exemption before they came to set up their industries.

(emphasis supplied)

However, it was pointed out that the doctrine of promissory estoppel could not be regarded now as a good law. A similar contention was rejected by the Supreme Court in Assistant Commissioner of Commercial Taxes (Asst.) Dharwar and Others Vs. Dharmendra Trading Company and Others, . The court further observed that the doctrine must be regarded as good law in view of its decision in State of Bihar and Anr. v. Usha Martin Industries Ltd. (1987) 65 S.T.C. 430 This was a case where a Division Bench comprising three learned judges of the Supreme Court upheld and applied the decision in Pournami Oil Mills and Others Vs. State of Kerala and Another, .

Again, Pournami Oil Mills and Others Vs. State of Kerala and Another, was relied on by three learned Judges of the Supreme Court in Pine Chemicals Ltd. v. Assessing Authority (1992) 85 S.T.C. 432. That was a case coming under Jammu and Kashmir General Sales Tax Act, 1982, where similar question of exemption was in issue. After explaining its decision in Shri Bakul Oil Industries and Another Vs. State of Gujarat and Another, the Supreme Court said:

In Pournami Oil Mills and Others Vs. State of Kerala and Another, also the learned Judges appear to have given the benefit of exemption for the full period even after the withdrawal on the basis that the industry was set up in pursuance of some representation made by the Government amounting to estoppel. In the present appeals also there are lot of materials to show that the Government made representations to industry that they would give tax exemptions and other incentives and invited entrepreneurs to establish their industries in Jammu and Kashmir.

In view of the decision in Pournami Oil Mills and Others Vs. State of Kerala and Another, the Petitioner is entitled to total exemption from payment of sales tax for a period of five years inasmuch as the first notification would apply in this case as observed hereinbefore. The original assessment orders as well as the revised assessment orders (Exts. P-7 to P-10) for the years 1980-81 to 1983-84 were passed by the assessing authority pursuant to the second notification. The second notification has no retrospective effect and it is only prospective in operation. It can only be so because if a Government notification about exemption from payment of tax stipulates or does not stipulate as to how long the exemption would remain in operation it would be open to the Government to withdraw the same or to reduce the extent of exemption by a subsequent notification in which case the subsequent notification does not take effect from an anterior date. In this case the total exemption as per first notification was available in respect of the small scale industrial units set up prior to 21st October 1980. That being so, the assessments/revised assessments as against the Petitioner for the aforesaid years are without any authority of law. Those proceedings are therefore liable to be set aside.

The next question which calls for determination is whether the sales tax collected from the Petitioner is liable to be refunded. In this context it was pointed out at the outset that in view of the decision in Amrit Banaspati Co. Ltd. and another Vs. State of Punjab and another, no direction can be issued for refund of tax. That was a case where the Supreme Court was considering a representation or assurance given by officials to the Appellant that the sales tax paid shall be refunded. The case for refund was negatived by the court holding that a provision or agreement to refund tax due or realised in accordance with law cannot be comprehended since no law can be made to refund tax to a manufacturer realised under the statute. The court also observed:

Exemption from tax to encourage industrialisation should not be confused with refund of tax. They are two different legal and distinct concepts. An exemption is a concession allowed to a class or individual from general burden for valid and justifiable reason. For instance tax holiday or concession to new or expanding industries is well known to be one of the methods to grant incentive to encourage industrialisation. Avowed objective is to enable the industry to stand up and compete in the market. Sales tax is an indirect tax which is ultimately passed on to the consumer. If an industry is exempt from tax the ultimate beneficiary is the consumer. The industry is allowed to overcome its teething period by selling its products at comparatively cheaper rate as compared to others. Therefore, both the manufacturer and consumer gain, one by concession of non-levy and other by non-payment. Such provision in an Act or Notification or orders issued by Government are neither illegal nor against public policy.

What is involved in the present case is exemption from tax to encourage the small scale industry. There is no question of representation leading to refund of tax. The question of refund arises in this case because the assessments/revised assessments passed against the Petitioner were found to be unauthorised. When the levy of tax is set aside it naturally results in raising a demand for refund. Thus the situation for claiming refund in the present case is totally dissimilar to the situation involved in Amrit Banaspati Co. Ltd. and another Vs. State of Punjab and another, . It is distinctly clear in this case. What is sought for by the Petitioner is the refund of sales tax consequent on the invalidation of assessment orders/revised assessment orders.

u/s 72 of the Indian Contract Act, 1872 a person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it. In this case, the tax has been paid under coercion though the levy is unauthorised. Where the payment of tax is not made voluntarily, but is made for the purpose of avoiding a threatened distrait under the provision of certain statute, it cannot be said that such payment is made with the intention of giving up the right but under immediate necessity. This is different from the payment of money by a person with the knowledge of facts that he is not in law bound to pay the tax but he is voluntarily paying it to close the transaction. In the former case he can recover the tax, though money is not paid under coercion in the strict sense of the term, but in the latter case he cannot recover the tax since the transaction cannot be reopened. The payment in such cases would establish that it is not made voluntarily to close the transaction but for the purpose of averting a threatened evil. ''Coercion'' within the meaning of Section 72 of the Contract Act is a wrongful act, producing liability to restitution which that section statutorily enjoins. The liability to make that restitution is absolute, and there is nothing in that section which can persuade the view that liability can come to an end if the person compelling the payment parts with the amount received by him. In this context it may be recalled that the Privy Council in Seth Kanhaya Lal v. National Bank of India ILR (1913) 40 Cal. 598 held that the word ''coercion'' occurring in Section 72 is used in its general and ordinary sense and its meaning cannot be controlled by the definition of ''coercion'' contained in Section 15 of the Act. Lord Moulton said in the said decision:

It is impossible to contend that the coercion referred to in this section or in the above illustration is with the intention of causing any person to enter into an agreement. The word ''coercion'' must therefore be there used in its general and ordinary sense as an English word, and its meaning is not controlled by the definition in Section 15.

In AIR 1949 215 (Nagpur) it was held that in a case where taxes are illegally recovered, the same is recoverable, as payment made under coercion, within the meaning of Section 72 of the Contract Act.

It is essential in this context to examine whether party entitled to relief by way of refund u/s 72 can enforce it by invoking the provisions contained in Article 226 of the Constitution. While dealing with the question Vaidialingam, J. in Forbes, Ewart and Figgis (Pte.) Ltd. v. Board of Revenue (Taxes) 1963 KLT 356 took the view that a party is entitled to claim by way of refund u/s 72 of the Contract Act in a suit, the proceedings by way of Article 226 are not in any way eliminated or will not stand against the Petitioner for granting adequate relief. When the collection of tax comes within the inhibition of Article, 265 of the Constitution or the tax has been paid under mistake of law or coercion the Assessee can claim refund of tax either by way of civil suit or by filing petition under Article 226 for a writ of mandamus. There are cases where the tax has been paid pursuant to the assessment orders passed by the assessing authority. In such cases the refund can be ordered only after setting aside such assessment orders or proceedings otherwise even after the refund of tax the assessment orders passed by a competent authority, if any, will continue to operate.

The Supreme Court in Salonah Tea Co. Ltd. and Others Vs. Superintendent of Taxes, Nowgong and Others, while dealing with writ petition praying for direction to refund the tax collected under Assam Taxation (on Goods carried by Road or Inland Waterways) Act observed that where the refund was prayed for as a consequential relief the same was normally entertained if there was no obstruction or if there was no triable issue like that of limitation. It further said:

We agree that normally in a case where tax or money has been realised without the authority of law, the same should be refunded and in an application under Article 226 of the Constitution, the court has power to direct the refund unless there has been avoidable laches on the part of the Petitioner which indicate either the abandonment of his claims or which is of such nature for which there is no probable explanation or which will cause any injury either to Respondent or any third party.

The Constitution Bench of the Supreme Court in The State of Madhya Pradesh and Anr. v. Bhailal Bhai and Ors. (1964) 15 S.T.C. 450 declared that the High Courts have power for the purpose of enforcement of fundamental rights and statutory rights to give consequential relief by ordering repayment of money realised by the Government without the authority of law. The special remedy provided in Article 226 is however not intended to supersede completely the modes of obtaining relief by an action in a civil court or to deny defenses legitimately open in such actions. The power to give relief under Article 226 is a discretionary power and this is specially true in the case of power to issue writs in the nature of mandamus. However, it further said that whether repayment should be ordered in the exercise of this discretion will depend in each case on its own facts and circumstances. It is not easy nor is it desirable to lay down any rule for universal application. As a general rule it may be stated that if there has been unreasonable delay the court ought not ordinarily to lend its aid to a party by this extraordinary remedy of mandamus.

Three learned Judges of the Supreme Court in M/s. Orissa Cement Ltd. and Others Vs. State of Orissa and others, had occasion to deal with the question of limitation applicable while ordering refund of tax consequent on making the levy invalid. What is unequivocally laid down in the said decision is that a finding regarding the invalidity of a levy need not automatically result in a direction for refund of all collections thereof made earlier. It is a well-settled proposition that it is open to the court to grant, mould or restrict the relief in a manner as to advance the interest of justice.

A suit for refund of tax illegally collected would be a suit for money covered by Article 24 of the Limitation Act, 1963. The period of limitation prescribed for such a suit is three years from the date when money is received. Therefore this period of limitation may ordinarily be taken to be a reasonable standard to count the limitation in a writ petition filed claiming refund of tax illegally collected. In this context it is appropriate to recall what the Constitution Bench said in State of Madhya Pradesh Vs. Bhailal Bhai and Others, .

It appears to us however that the maximum period fixed by the Legislature as the time within which the relief by a suit in a civil court must be brought may ordinarily be taken to be a reasonable standard by which delay in seeking remedy under Article 226 can be measured. The court may consider the delay unreasonable even if it is less than the period of limitation prescribed for a civil action for the remedy but where the delay is more than this period, it will almost always be proper for the court to hold that it is unreasonable.

The above passage came up for consideration later before the Supreme Court in Kamini Kumar Das Choudhury Vs. State of West Bengal and Others, . The court explained the question regarding the period of limitation applicable in challenging the illegal collection of tax as below:

In State of Madhya Pradesh Vs. Bhailal Bhai and Others, , the question before this Court was whether an amount of money illegally realised as tax under a legally void provision could be ordered to be refunded. This Court held that, if the aggrieved person came to the High Court within the period of limitation prescribed for ordinary suits for challenging an illegal exaction under a void order, the writ could issue. It, however, made it clear that this was not an inflexible rule which could be applied to the exercise of discretionary power under Article 226 of the Constitution in every case.

Mathew, J. observed in D. Cawasji and Co. and Others Vs. State of Mysore and Another, :

In State of Kerala v. Aluminium Industries Ltd. (1965) 16 S.T.C. 689 (S.C.) a Bench of seven Judges of this Court followed the view taken in State of Madhya Pradesh Vs. Bhailal Bhai and Others, on the question of the period of limitation within which the petition has to be filed.

While discussing the issue in hand I do aware of the views expressed by Hegde, J. in his dissenting judgment in Tilokchand and Motichand and Others Vs. H.B. Munshi and Another, The learned Judge observed in paragraph 61 thus:

Admittedly the provisions contained in the Limitation Act do not apply to proceedings under Article 226 or Article 32. The Constitution makers wisely, if I may say with respect, excluded the application of those provisions to proceedings under Articles 226, 227 and 32 lest the efficacy of the constitutional remedies should be left to the tender mercies of the legislatures. This Court has laid down in I.C. Golak Nath and Others Vs. State of Punjab and Another, that the Parliament cannot by amending the Constitution abridge the fundamental rights conferred under Part III of the Constitution. If we are to bring in the provisions of Limitation Act by an indirect process to control the remedies conferred by the Constitution it would mean that what the Parliament cannot do directly it can do indirectly by curtailing the period of limitation for suits against the Government. We may console ourselves by saying that the provisions of the Limitation Act will have only persuasive value but they do not limit the power of this Court but the reality is bound to be otherwise. Very soon the line that demarcates the rule of prudence and binding rule is bound to vanish as has happened in the past. The fear that forgotten claims and discarded rights may be sought to be enforced against the Government after lapse of years if the fundamental rights are held to be enforceable without any time limit appears to be an exaggerated one. It is for the party who complains the infringement of any right to establish his right. As years roll on his task is bound to become more and more difficult. He can enforce only an existing right. A right may be lost due to an earlier decision of a competent court or due to various other reasons. If a right is lost for one reason or the other there is no right to be enforced.

In this context it would be appropriate to refer the following decisions. Ramchandra Shankar Deodhar and Others Vs. The State of Maharashtra and Others, , Shri Vallabh Glass Works Ltd. and Another Vs. Union of India (UOI) and Others, , State of M.P. and Others Vs. Nandlal Jaiswal and Others, , D. Cawasji and Co. and Others Vs. State of Mysore and Another, and Salonah Tea Co. Ltd. v. Superintendent of Taxes AIR 1990 S.S. 772.

It is well-settled that the power to give relief under Article 226 is a discretionary power and this is specifically true in the case of power to issue writ in the nature of mandamus. One of the several matters which the court rightly takes into consideration in exercise of that discretion is the delay made by the aggrieved party in seeking this special remedy and what explanation there is for it. Thus in a case where a person claims relief under Article 226 on the ground that the tax has been collected unauthorisedly or without any authority of law or under a mistake and even if the court finds so still it is not bound to exercise the discretion directing repayment. Whether the repayment should be ordered in exercise of this discretion is dependent on the facts and circumstances of each case.

Now it is necessary to examine the facts of the present case in the background of the legal premises discussed herein above. The present writ petition has been filed before this Court on 12th April 1991 praying to quash the orders of assessments and to refund the amount collected. Exts. P-1, P-2, P-3 and P-4 are the orders of the Appellate Assistant Commissioner in respect of the years 1980-81 to 1983-84. The common direction by the appellate authority in the above orders is to the following effect:

The Appellant has produced a certificate issued by the General Manager, District Industries Centre, Quilon to the effect that the Appellant is eligible for tax exemption for a period of five years. In the light of the above certificate the assessing authority will give the Appellant the benefit of the S.S.I, unit.

Subsequently it appears the original assessment orders were revised by the assessing authority pursuant to the appellate orders. However, those revised orders were not communicated to the Petitioner. Therefore, as per letter dated 5th February 1991 a request was made by the Petitioner to the assessing authority for the certified copies of those orders. Accordingly certified copies were communicated to the Assessee and Exts. P-7 to P-10 are the copies thereof From Exts. P-7 to P-10 it is seen that the revised assessment orders were passed on 28th February 1985 and the certified copies were prepared on 13th February 1991 for issuing them to the Assessee. Even though the Assessee was entitled to full exemption for a period of five years as per the first notification the revised assessment orders were passed in accordance with the second notification restricting exemption. That was the background for challenging the assessment orders in the present petition. In the aforesaid circumstances I do not see any scope for forbidding the relief either on the ground of limitation or for any other reason like delay or laches.

The question now remains to be considered is whether an order for refund of tax can be made in the facts of the present case. In this context it has to be reminded here that this Court has already found that the present small scale industrial unit is entitled to full exemption for a period of five years in view of the first notification. That means the tax has been collected from the Petitioner unauthorisedly and without any authority of law. The tax was not paid voluntarily and it was paid pursuant to the coercive proceedings as discussed herein above. By Ext. P-11 dated 15th May 1987 the Petitioner requested the Deputy Commissioner to revise the assessment order u/s 35 and grant total exemption. The Deputy Commissioner however rejected the request as per Ext. P-12 dated 3rd December 1988 on the ground that Section 35 of the Act cannot be invoked since the original assessments were the subject-matter of the appeals. However, the Deputy Commissioner has observed:

The assessment records were called for and examined. It is true that the Appellate Assistant Commissioner has directed the assessing authority to examine the argument of the Petitioners that the Petitioner''s unit is eligible for exemption from payment of tax for five years-

Even after Ext. P-12, the Assessee approached the assessing authority and the Board of Revenue with its claim for refund of tax recovered unauthorisedly. But no action was taken by these authorities so far, that is what the Petitioner complains. These facts are not disputed by the Respondents. No counter affidavit has been filed by the Respondents as against the claim for refund of tax illegally collected. What is abundantly established from the above facts is that the Assessee was all along vigilant in prosecuting its claim for refund of the tax which was collected under invalid assessment orders. In the aforesaid premise, I do not see any justifiable reason for denying discretionary power of this Court in ordering the refund in favour of the Petitioner. In that view of the matter, the claim for refund of tax made by the Petitioner is allowed.

In the result, all the assessment proceedings initiated against the Petitioner in respect of the years 1980-81 to 1983-84 are set aside. Consequently, I direct the assessing authority to refund the tax collected from the Petitioner for the above years without delay. The writ petition is allowed. In the circumstances of the case, no order as to costs.