Jeevan Reddy, J.
1. The Hyderabad Denatured Spirit Rules, 1955 and the Andhra Pradesh Denatured Spirit Rules, 1971, which repealed the Hyderabad Rules, levied gallonage fee at the rate of Re. 1/- per gallon on the denatured spirit purchased by licensees from the Government Distilleries. Denatured spirit is used as a raw material in the manufacture of several products. A person, M/s. Syntho-Pharm, represented by its partner Sri. A. P. Waghray, challenged the said levy on the ground, inter alia, that the State was not rendering any services whatsoever in lieu of the said fee and, therefore, the levy was bad. The writ petition filed by him was allowed by a Benc of this Court, which declared the levy to be bad inasmuch as the state failed to produce any material whatsoever to show that it was rendering some or other service in lieu of the said fee. The declaration granted by the Court is to the following effect :
" We are, therefore, constrained to hold that the imposition of the Gallonage Fee of the nature and dimension of that fixed by the Denatured Spirit Rules of Hyderabad and Andhra Pradesh is invalid. A writ will, therefore, issue to the respondents to restrain them from collecting Gallonage Fees on denatured spirit at the rate of one rupee per galloon. The petitioner had also prayed for refund of the Gallonage Fee collected from him from March 1966 onwards. We see no justification for granting a refund of the Gallonage Fee paid by him prior to 1969 as he had done so without any protest. The petitioner is, however, entitled to a refund of the Gallonage Fee paid from 1969 onwards. A direction to that effect will issue. The writ petition is accordingly allowed......".
2. The said writ petition was filed in 1969, and the decision was rendered on 6-3-1972; it is reported in M/s. Syntho Pharm v. Commissioner of Excise (1972) 2 Andh WR 260. The plaintiffs/ appellants herein were not parties to the said writ petition, nor had they filed any similar writ petition. After the judgment of the Bench aforesaid, however, they instituted the present suits for recovery of the gallonage fee paid by them. Since the facts in all the three appeals are identical, it would be sufficient if we state the facts in A. S. No. 510/1977, arising from O. S. No. 83 of 1975 on the file of the Additional Subordinate Judge, Vijayawada.
3. O. S. 83/1975 was filed on 4-3-1975, i.e., practically on the last day of the three-year period commencing from the date of the Bench judgment reported in (1972) 2 Andh WR 260, aforesaid. The plaintiff asked for refund in a sum of Rs. 2,12,679.22 Ps., made up of two items, viz., Rs. 1,80,234.22 Ps., being the gallonage fee paid by him during the period 1961-62 to 1972-73, and another sum of Rs. 32,445/- being interest on the said amount from 6-3-1972 to 4-3-1975. The plaintiff also asked for interest from the date of suit till the date of realisation. The plaintiff's case is based on the following averments :-
The plaintiff is a manufacturer French polish; he also deals in methylated spirit; he was granted a licence under the relevant Rules enabling him to purchase denatured spirit; he has been purchasing various quantities of denatured spirit from the Government from the year 1961-62 onwards and has been paying the gallonage fee at the appropriate rate; after the aforesaid Bench judgment, the plaintiff made a representation on 7-10-1973 requesting the Excise Commissioner, Andhra Pradesh Hyderabad to refund the gallonage fee collected from him, in view of the said judgment; though the plaintiff sent several reminders to the Commissioner, as well as to other Excise authorities, they took no action in pursuance thereof; the judgment of the High Court ; makes it clear that the levy and collection of the said fee is illegal; the plaintiff paid the same under a bona fide mistake and is, therefore, entitled to its refund along with interest at the rate of 6% per annum; the cause of action for claiming the refund arose on the several dates upon which the fee was illegally collected from the plaintiff during the years 1961-62 to 1972-73, and on 6-3-1972 when the aforesaid Bench judgment was delivered. It was further stated that the cause of action also arose on 7-10-1973 when the plaintiff requested for refund of the amount, and also on various subsequent dates when he sent reminders.
4. The State of Andhra Pradesh resisted the suit. It was pleaded in the written statement that, inasmuch as the plaintiff paid the said fee without any objection or protest, and voluntarily, he is not entitled to recover the same; the plaintiff is estopped from asking for refund; he is not a party to the aforesaid judgment. Further, "the plaintiff having obtained the stock and dealt in intoxicants is now not entitled to claim the refund of the amount after having the benefit of supply and possession of, and business in denatured spirit on which the gallonage fee is paid. Further, the petitioner has passed on this amount to the third-parties who have taken the denatured spirit form him or the French polish in which the same is used. The petitioner cannot have undue enrichment of getting a refund of the amount when he is not refunding the among to third parties to whom it is passed on"; the suit is barred by limitation; S. 72 of the Contract Act has no application; the plaintiff is not entitled to refund under any equitable principle.
5. On the above pleadings, the trial Court framed the following nine issues :-
"1) Whether the plaintiff is entitled to claim interest?
2) Whether the suit firm is not a partnership firm; if not, whether the suit filed by N. V. Ramanayya in his personal capacity is maintainable under Section 69 of the Partnership Act?
3) Whether the plaintiff is entitled to claim the refund of the suit principal amount?
4) Whether the suit is barred by time?
5) Whether the plaintiff is entitled to claim the benefit of the judgment in W. P. 4290/69 on the file on High Court of A. P. ?
6) Whether the plaintiff is estopped from claiming the refund of the suit amount?
7) Whether the plaintiff is entitled to claim the suit l amount under Section 72 of the Contract Act?
8) Whether the notice under S. 80 C. P. C., is proper and valid?
9) To what relief?"
We are concerned herein only with issues 3 to 7, and not with the other issues and, therefore, we shall refer to the findings of the trial Court only on these issues. On issue No. 3, the trial Court found that the plaintiff is entitled to claim refund of the suit principal amount only to the extent of Rs. 9,661.16 Ps., i.e., the amount paid during the three-year period prior to 6-3-1972 (the date of the Bench judgment) (reported in (1972) 2 Andh WR 260); on issue No. 4, it held that, while the suit is not barred in respect of the claim for the three-year period prior to 6-3-1972, it is barred for the anterior period; on issue No. 5 it held that the plaintiff is entitled to claim the benefit of the Bench judgment. Issue No. 6 was held in favour of the plaintiff, and it was held that the plaintiff is not estolled from claiming the refund; on issue No. 7 it was found that the plaintiff is entitled to claim the refund under S. 72 of the Contract Act. Accordingly, the suit was decreed for refund of the amount paid by the plaintiff during the three-year period prior to 6-3-1972 with interest @ 6% per annum from the date of suit alone. The suit was dismissed in other respects.
6. No appeal has been preferred by the State; only the plaintiffs have filed appeals in so far as their suits have been dismissed. In other words, the claim in these appeals is for refund of the amount paid by them on account of gallonage fee prior to 6-3-1969.
7. Mr. N. Rajeswara Rao, the learned counsel for the plaintiffs/appellants, urged the following contentions : (i) the trial Court having rightly held that the plaintiffs are entitled to refund under S. 72 of the Contract Act, erred in holding that the suits were barred in so far as they related to the amount paid prior to 6-3-1969; the cause of action for filing the suits arose only on 6-3-1972; i.e., the date on which a Bench of this Court delivered the judgment in Syntho Pharm's case (1972-2 Andh WR 260) (supra); the suits have been filed within three years therefrom ; they are, therefore, not barred; there is no other Article or provision in the Limitation Act which bars the plaintiffs' claim; accordingly, the entire claim ought to have been allowed; and (ii) and State is estopped from refusing to refund the amount illegally collected by it, inasmuch as it has not chosen to file appeals questioning the trial Court's decree granting refund for a period of three years; the levy and collection being illegal, the State is bound to refund the same, and it is unjust for the State to refuse to do so and thereby deprive a citizen of the amount which he paid under a bona fide mistake of law.
8. On the other hand, the learned Advocate-General, appearing for the State, submitted that the plaintiffs' suit ought to have been dismissed inasmuch as allowing their claim amounts to unjust enrichment of the plaintiffs; the plaintiffs have passed on the burden of the said gallonage fee to the consumer; the plaintiffs did not suffer any prejudice or loss; there is no allegation by them to that effect, much less any proof; the plaintiffs' claim ought to have been dismissed in toto on the said principle. The learned Advocate-General also supported the trial Court's finding on the question of limitation; indeed he went to the extent of saying that, even the claim for the period 6-3-1969 to 4-3-1972 is barred.
9. Mr. N. Rajeswara Rao, however, demurred to the learned Advocate-General's raising or arguing the question of unjust enrichment. He submitted that no issue was framed on this aspect in the Court below, nor did the State adduce any evidence to show that the plaintiffs had passed on the said gallonage fee to the consumer. He submitted that, having not insisted upon an issue on the above aspect, and having not adduced any evidence in that behalf, it is not open to the State to raise the said plea in these appeals to non-suit the plaintiffs. Counsel also submitted that, indeed, the plaintiffs/appellants themselves are consumers; they purchased the denatured spirit and used it themselves in the manufacture of either French-polish, or otherwise; the theory of passing on the burden to consumer is, therefore, inapplicable in the very circumstances. Counsel emphasized that the plea of 'unjust enrichment' is a mixed question of fact and law, and not having clearly averred the same in the written statement, and since there was no issue in that behalf, nor any evidence on record on that aspect, this Court should not allow the State to raise the said plea. Of course, the learned Advocate-General disputes this reasoning.
10. The plaintiffs claim for refund is not based upon any provision in the Hyderabad Abkari Act/Andhra Pradesh Excise Act, or the Rules mad thereunder. The claim l is made under, and with reference to S. 72 of the Contract Act, which reads as follows :-
"72. A person to whom money has been paid, or naything delivered by mistake, or under coercion, must repay or return it".
This Section along with S. 70 and a few other Sections, occurs in Chapter V of the Contract Act, which deals with certain relation resembling those created by contracts. Shorn of authority, it would appear that a claim for refund of tax or fee, paid in pursuance of a statutory provision, does not fall under Section 72, since the concept of either a contract or a quasi-contract is inappropriate to such a situation. However, in view of the decision of the Supreme Court in Sales Tax Officer v. Kanhaiya Lal, , it must be held that even a tax paid under a mistake can be claimed back under the said provision. This decision, upon which substantial reliance is placed by the learned counsel for the appellants, establishes the following propositions, relevant in this behalf. They are :
(i) The expression "mistake" occurring in S. 72 is not confined to mistake of fact, but extends to mistake of law as well. This is the decision of the Privy Council in Shiba Prasad Singh v. Srishchandra Naudi, AIR 1949 PC 297, which resolved the conflict of opinion among the Indian High Courts on the question.
(ii) Unlike, English American and Australian law, money paid under a mistake of law can be recovered in India.
(iii) Tax paid under a mistake of law can also be recovered under S.
(iv) However, proposition (iii) above does not imply that "every sum paid under mistake is recoverable, no matter what the circumstances may be. There may in a particular case be circumstances which disentitle a plaintiff by estoppel or otherwise".
11. In view of the binding nature of this decision, we think it idle to discuss the English or American law on the subject. We shall, therefore, proceed on the footing that such a claim for refund is maintainable under S. 72. At the same time, it is necessary to point out that, in this case, the plea of unjust enrichment was neither raised nor considered. Yet, the Court recognized that there may be circumstances in a given case which may disentitle the plaintiff from the relief; it may be on the ground of estoppel or otherwise".
12. Section 72 incorporates a rule of equity. It is said to be legislative expression of the principle of equitable restitution. This Section and S. 70 can be said to be cognate Sections, both incorporating the same rule of equity in its varying facets. Section 70 says that, where a person lawfully does anything for another, or delivers anything to him, without intending to do so gratuitously, the other person who enjoys the benefit thereof is bound to compensate the former in respect of, or to restore the thing so done or delivered. A person who claims an equitable relief from the Court, has to satisfy the Court that in equity he is entitled to such relief; a mere bald claim would to do; he must make it apparel to the Court that equity demands the grant of relief to him. What does this precisely mean? It can better be set out in the words of the Supreme Court itself in a case arising under S. 70, viz., Mulamchand v. State of M. P., . The Court said :
"The important point to notice is that in a case falling under S. 70 the person doing something for another or delivering something to another cannot sue for the specific performance of the contract, nor ask for damages for the breach of the contract, for the simple reason that there is no contract between him and the other person for whom he does something or to whom he delivers something. So where a claim for compensation is made by one person against another under S. 70 it is not on the basis of any subsisting contract between the parties but on a different kind of obligation. The juristic basis of the obligation in such a case is not founded upon any contract or tort but upon a third category of law, namely, quasi-contract or restitution. In Bibrosa v. Fairbairn 1943 AC 32, Lord Wright has stated the legal position as follows :-
"........... any civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is, to prevent a man from retaining the money of, or some benefit derived from, another which it is against conscience that he should keep. Such remedies in English Law are generically different from remedies in contract or in tort, and are now recognized to fall within a third category of the common law which has been called quasi-contract or restitution".
In Nelson v. Larholt (1948) 1 KB 339 Lord Denning has observed as follows :-
"It is no longer appropriate to draw a distincition between law and equity. Principles have not to be stated in the light of heir combined effect. Nor is it necessary to canvass the niceties of the old forms of action. Remedies now depend on the substance of the right, not on whether they can be fitted into a particular framework. The right here is not peculiar to equity or contract or tort, but falls naturally within the important category of cases where the Court orders restitution if the justice of the case of requires".
Applying the principles to the present case, it is manifest that the appellant would have been entitled to compensation under S. 70 of the Indian Contract Act if he had adduced evidence in support ofhis claim, but the trial Court has examined the evidence on this point and reached the conclusion that the appellant did collect lac in the jungles in the year 1951 but later on abandoned the working of hs own accord. It is well established that a person who seeks restitution has a duty to account to the defendant for what he has recieved in the transaction from which his right to restitution arises. In other words an accounting by the plaintiff is a condition of restitution from the defendant (See 'Restatement of the Law of Restitution', Americna law Insitute 1937 Edn.p. 634). The appellant did not produce sufficient evidence to show to what extent he worked the contract and what was the profit made by him in the year 1951 and the succeeding years. In the absence of reliable evidence on this point the appellant was not entitled to restitution or refund of the deposit he had made. The case of the appellant with regard to this part of his claim was therefore rightly disallowed both the trail court and the High Court and the respondent is therefore not liable to refund the amount of deposit".
The above extract yields the following principles : (i) Section 70 - which would also mena S. 72, incorporate as they both do the equitable rule of restitution - is designed to prevent unjust enrichment; (ii) it is not appropriate to draw a distinction between tlaw and equity, and the relief of restitution would be ordered by the Court only if the justice of the case so requires; and (iii) the plaintiff who seks this equitable remedy, has to adduce evidence insupport of his claim. He has a duty to account to the defendant for what he has received in the transaction from which the right to restitution arises. In short, accounting by the plaintiff is a condition precedent fro granting restitution. The burden is upon the plaintiff, who seeks such equitable remedy, to plead and prove all the facts which lead the Court to the conclusion that the equity and justice demand the grant of relief to him.
13. The above principles are equally implicit in S. 72.
14. It is therefore idle to cntend that, in the absence of any evidence being adduced y it in support of its pea of unjust enrichment, the State should not be allowed to raise the said contention in these appels. On the other hand, it is for the plaintiff to plead and satisfy the Court that, by grant of relief to him, he would not be iunjustly enriched. Evidently, a provision of law designed to prevent unjsut enrichment cannot be made use of precisely to gain unjust enrichment. In the present case, the State expressly pleaded in the written statement that the grant of relief to the plaintiff would amount to undue enrichment of the plaintiff, inasmuch as he has passed on this amount to third-parties. Indeed, apart from the plea of limitation, this was the only other defence put forward by the State. True it is that there is no issue on this aspect; but, there were issues which clearly totok in this aspect as well. Issues 3, 6 and 7, which related to the plaintiff's right to claim refund under S. 72 of the Contract Act, and also to the question whetehr the plaintiff was estopped from claiming the refund of the amount, did take in this plea. Moreover, it was for the plaintiff to establish that, by grant of this relief, he would not be unjsutly enriched. It was not for the Stae to establish the said fact. The plaintiff, who seeks an equitable remedy, must make out all the ffact and grounds which entitle him to such remedy. In this connection we must mentioned that, denatured spirit ws purchased by the plainitff for manufacture of French-polish, or for being sold to third parties. In the ordinary course, the Court is entitled to presume that, while fixing the price of his product, or while reselling the product, the plaintiff must have passed on the galoonage fee component also along with the price of spirit, to the consumer; in fixing the price of his product or in re-selling the denatured spirti, it would be reasonable to presume that he had included this component also. It is not the plaintiff's case that he did not do so, nor did he adduce any evidence to show that he did not take the said component (gallonage fee component) into account while fixing the price of his product, or while re-selling the spirit to third-parties. We find that a Bench of the Gujarat high Court has arrived at an identical opinion in a case, the facts of which are almost identical with the facts of the case before us. In Union of India v. Ahmedabad Manufacturing and Calico Printing Co., Ltd., (1984) 17 ELT 246 : (1984 Tax LR 2570) (Guj), the Bench, after considering the decision of the Supreme Court in Mulamchand's case , observed thus :-
"In our opinion, the above ;rinciples will apply wiht equal force to a case arising under S. 72 of the Contract Act. A held by the Supreme Court, a person who seeks restitutio has a duty to account to the defendant what he received in the transaction in which his right to restitution arises. In other words, acounting by the plaitiff is a condition of restitution. It is, therefore, that we have taken the view that in order to successfully claim restitution under S. 72, it is necessary for the person claiming restitution to prove loss or injury to him. If a person who has paid money or delivered thing by mistake to another has received some benefit on account of o r in consequence of such payment or delivery, he is liable to accouint for it before climing restitutio from the person to whom money has been paid or thing has been delivered".
The Bench further observed to the following effect :
"It is not in dispute that excise duty paid by the Mills wnet intot the cost structure of blended yarn manufactured by them..... the excise duty paid on blended yarn was thus ultimately passed on to the buyer of the fabric....... It is in the background of these undisputed facts that we are alled upon to decide the question whether the Mills are entitled to claim refund of the excise duty paid on blended yarn from the Revenue. Having regard to the above facts, can it be said that they have suffered any los or injury as a result of the transaction in question? The answer has to be in the negative. If that be so, how can the Mills be said to be the real owners of the money in the form of excise duty which is alleged to have been retained by the Revenue?.......... Therefore, if anybody is entitled to restitution, it is the buyer of fabric and not the Mills. If the claims made by the Mills were to be allowed or granted, that would undoubtedly result in unjust enrichment of the Mills for though they have not suffered any loss or injury they would get the refund of excise duty paid by them to the Revenue. That is not the object with which S. 72 of the Contract Act is enacted............"
We respectfully agree with every word inthe said boservations. Indeed, they correctly echo our thoughts, and give expression to our view. In the case before the Gujarat High Court also the argument was that the burden lay upon the State to prove tha, by granting the relief, the plaintiff will be unjustly enrichd. The said argument was rejected and it was held that the burden is upo the plaintiff. The Bench also rejected the argument that the Mills thyemselves were the consumers since the blended yarn purchased by them was used up by them for manufacturing another product - an argument repeated before us. We agree that the plaintiffss cannot be said to be consumers; they passed on the burden to consumers. It was also urged before the Bench that sometimes the plaintiffs (manufacturers) have to sell their goods at a price which will be less thatn the cost and that,in such cases the burden of excise duty may not passed on to the buyers, or customers of the goods. While not ruling out such a contingency, the Bench observed - and we agree with it- to the following effect :-
"We are not concerned with hypothetical cases........ We are not suggesting that in no case manufacturer can receive the refund of excise duty. It would depend upon the facts of each case whether or not the manufacturer would be entitled to refund of excise duty. It is, therefore, that we have emphasized that iin order to claim restitution, the persom claiming restitution has to prove loss or injury to him. If he proves loss or injury he would be entitled to restitution to the extent of loss or injury suffered by him. However, it is absolutely essentital to plead and prove loss or injury to successfully claim restitution under S. 72 of the Contract Act......"
We are, therefore, of the opinion that, the plaintiff having failed to plead and prove that he has suffered any loss or injury and that, to offset that loss or injury he must be granted the equitable relief of restitution, he would not be entitled to the equitable relief under S. 72 of the Contract Act. Added to the failure to plead and prove on the part of the plaintiff, is the presumption which the Court is entitled to draw, having regard to the ordinary course of business, that every manufacturer passes on the burden of what he has paid for the raw material, to the consumer of his product. Similary, every dealer who resells such product to another, equally recovers the same from his purchaser.
15. We shall now proceed to consider the decisions cited by the parties before us. At the outset, we may say that the decisions on this question have not been uniform. It is only in very recent times that the Courts have come to emphasize the equitable nature of the remedy contained in S. 72, and the implications flowing therefrom. In earlier cases this aspect was niether raised, nor considered and, therfore, the relief of restitution granted; but, when the equitable nature of the relief was raised with reference to the theory of unjust enrichment, the Courts refused to grant relief unless the plaintiff pleaded and proved all the facts which go to establish that he has suffered some loss or injury which must be made good by granting the equitable relief of restitution under S. 72.
16. The first case cited by Mr. N. Rajeswara Rao, the learned counsel for the plaintiffs/appellants, is in Sales Tax Officer v. Kanhaiya Lal, . The petitioner in this case was a dealer under the U. P. Sales Tax Act. He paid sales tax on the forward transaction in silver-bullion entered into by him; the levy of sales tax on forward transaction was held to be ultra vires by the Allahabad High Court by its judgment in Budhprakash Jai Prakash v. Sales Tax Officer, Kanpur, ; the petitioner asked for refund of the amount paid by him, which was refused, whereupon he approached the High Court by way of a writ petition. In the writ petition he challenged the order of assessment, and also prayed for refund; both the reliefs were granted by a learned single Judege, and confirmed by a Division Bench in appeal; the State then carried the matter, by way of an appeal, to the Supreme Court; the contention urged was that S. 72 of the Contract Act under Which the refund was ordered, has no application and that, the writ petition was not a proper remedy. Both these contentions were overruled. It was held that Section 72 covers mistakes of law; that, tax paid under mistake can be recovered under the said Section and that, such relief can also be granted in a writ petition. The question of unjust enrichment was not at all raised, or consiered, in this decision. The rule of estoppel was, however, considered, but from a different angle. It was observed that, where both the parties were labouring under a mistake of law when the tax was demanded and paid, no question of estoppel rises which precludes the petitioner/ dealer from claiming back the amount. It was also observed that, the argument that the State had spent the amount so collected illegally, for purlbic purposes or for adminstration, is no answer to the plea of restitution. Evidently, the two questions with which wer are concerned in the appeals before us, viz., the applicability of the doctrine of unjuust enrichment, and what should the petitioner/plaintiff prove to claim the equitable relief of restitution under the said Section, were not considered in the said decision.
17. The next decision cited is of a learned single Judge of this Court in Andhra Fertilisers Ltd., Tadepalli v. Asst. Collector of Central Excise, 1980 ELT 16. The learned Judge held that, duty paid under a mistake of law is recoverable under S. 72 of the Contract Act, and granted the relief of refund of tax recovered over a period of eight years. In this case again, the question of unjust enrichment, or the nature and implications of the equitable rule contained in S. 72, was not raised or considered.
18. The next decision cited is in Maharashtra Vebetable Products private ltd. V. Union of India, 1981 ELT 468, a decision of a Bench of the Bombay High Court. In this case, it was held that, an amount of duty illegally collected is refundable, even though it was recovered from the consumers by the manufacturer and may result in his unjsut enrichment,. With respect to thelearned Judges, wer are unable to agree with the said view, for the reasons discussed hereinbefore. Moreover, this decisionis clearly contrary to the later decision of the Supreme Court in State of M. P., v. Vyankatlal, AIR 1981 SC 901, as we shall presetnly show.
19. Mr. N. Rajeshwara Rao then relied upon the decision in Union of India v. I. T. C. Ltd., (1985) 21 ELT 655 (Kant) is support of his contention that the plea of unjust enrichment cannot be allowed to be raised by the State for the first time in appeal. It is true that the said decision does say so; but, we are unable to agree with it, in view of the decision of the Supreme Court in Mulamchand v. State of Madhya Pradesh, , the principle of which, we have held, is equally applicable in a case arising under S. 72 of the Contract Act. It is not necessary to repeat the reasons over again here. This is a decision of the Karnataka High Court.
20. We think it unnecessary to refer to the several other decisions of the Supreme Court and High Courts granting refund of tax in similar situations, where the nature of the right under S. 72, and the theory of unjust enrichment have not been considered, and turn to the decisions cited by the learned Advocate-General, where the said aspect has been considered.
21. We have already referred to the Bench decision of the Gujarat high Court in Uniion of India v. Ahmedabad Manufacturing and Calico Printing Co., Ltd., (1984) 17 ELT 246 : (1984 Tax LR 2570), the facts of which are almost identical with the facts of the case before us. The next decision is of a Bench of this Court in G. S. G. A & Company v. State of Andhra Pradesh (1972) 30 STC 120 : (1972 Tax LR 2027). The Bench consisting of Chinnappa Reddy and mdhava Reddy, JJ., expressed the opinion that, even if the Court is satisfied, having regard to all the circumstance, that the petitioner is entitled to the refund of tax paid under a mistake of law, the petitioenr may still not be granted this discretionary relief if it result in retention of the sales tax collected by the petitioenr from the public and imposes and burden on the State of refunding the tax which it had collected under a valid assessment order. That was a case of a writ petition, and the assessment orders, so far as the petitioners therein were concerned, were not quashed as such, though the levy became illegal by virtue of a decision of the Sales Tax Appellate Tribunal, in appeals preferred by some other assessees. It was therefore, that the matter was examined from the standpoint of Art. 226 of the Consitution, the pwoer whereunder has been held to be discretionary. The Court observed that, the discretionary jurisdiction of the High Court should be exercised for public good, andnot to facilitate individuals to make an unlawful gain at th expense of the public on the one hand, and th State on theother. It was observed that, the extraordinary jurisdiction of the High Court under Art. 226 must advance the cause of justice and not subserve the ends of the individual for retaining the sales tax illegally collected by him. We respectfully agree with the said views. We must add that we find no distinction between a writ petition and a suit for refund of a tax. Since the relief even in a suit has to be claimed, and can be granted only with reference to, and upno the equitabel principle of restitution, underlying S. 72 of the Contract Act, the Court's discretion to grant or refuse the relief is intact, and has to be exercised only to further the ends of justice and to prevent unjust enrichmen, andnot for th opposite purpose.
22. The next decision is of another Bench of this Court in Godavari Plywoods Ltd., v. Unino of India (1984) 18 ELT 732. This was a case where refund of excise duty paid under a mistake of law was sought, by way of a writ petition. It was held tha, inasmuch as the burden of excise udyt has been passed on to the consumer, grant of refund to the manufacturer is nt permissible, since that would amount to unjust enrichment of the manufacturer. The directive principles contained in Art. 46 and 36 of the Consitution, as also the underlying the spirit of our Consitution, were relied upon to come to that conclusion. We agree with their view.
23. At this State, we way refer to another Bench decision of this Court in Kesoram Cements, Basantnagar v. Union of India, 1982 ELT 214, where it was held that, the refund of an illegally collected ducyt cannot be denied by the department on the ground that the assessee has passed on the same to the consumer. It ws so held on the ground that no such condition is incorporated in S. 11-B of the Central Excise Act. It was also observed that the refund cannot be refused on the ground that it would amount to unjust enrichment of the assessee. We are of the opinion that this view cannot be considered to be good law any more, in view of the decision of the Supreme Court in State of M. P., v. Vyankatlal, , which we now proceed to consider.
24. The facts in Vyankalal's case must be noted first. The plaintiffs/respondents therein were the owners of Sugar Mill in the former Stae of Madhya Bharat. An Act, called "Madhya Bharat Essential Supplies (Temporary Powers) Act, 1948" was in force at the relevant time. By a notification issued under the Act the ex-factory prices were fixed for different sugar factorires. According to this notification, the sugarr factories in Madhya Bharat were to supply and despatchh sugar at a particular rate which was little high thatn the ex-factory price; the difference between the supply price and the ex-factory price ws to be credited to Madhya Bharat Government Sugar Fud. In pursuance of the noti9fication, the plaintiffs deposited sum of Rs. 50,000/- under protest towards the said Fund, and then insituted a suit for recovery of the said amount. The ground urged by the plainitffs was that, the inclusion of sugar within the definition of 'essential commodities' under the said Act was bad an that, the notifications issued there under were incomptetnet and invalid. It was submitted that the levy and collection of tax/impost, styled as 'Sugar Fund" was illegal and invalid and, therefore, violative of Art. 265 of the Consitution. Thematter ultimately went up to the High Court, which delcared that the levy and collection 'Sugar Fund' was incomptent and that, the State must restore the same to persons from whom it was collected. It was held that, the State cannot keep the said amount on the ground that plaintiffs too have been wrongly allowed to collect the said amount from the correxponding purchasers. The High Court, however, did not go into the questin whether the corresponding purchasers were tntitled to recover form the plaintiffs the amount they had paid to the plaintiffs in excess of the ex-factory prince. The plaintiffs' main relieance was upon the decision of the Supreme Court in Orient Paper Mills Ltd., v. Stae of Orissa, , where it was held
that, a tax paid under an invalid law has to be refunded to the dealer. The Supreme Court, however, noticed its later decisions in Shiv Shaker Dal Mlls v. State of Haryana, ; Newabganj Sugar Mills v. Union of India, ; and Amarnath Omprakash v. State of Punjab, , and in particular to the following
passage occurring in Amarnath Omprakash's case:
"We do not see how a mere declaration that the levy and collection of fee in excess of Rs. 2/- per hundred would automaticlally vestin thedealer the right to get at the excess amount when in fact he did not bear the burden of it and when the moral and equitable owner of it was the consumer-public to whom the burden had been passed on.
The primary purpose of S. 23A is seen on the face of it; it prevents the rrefund of licence fee by the market comittee to dealers, who have already passed on the burden of such fee to the next purchaser of the agricultural produce and who want to unjustly enrich themselges by obtaining the refund from the market commmittee. Section 23A in truth, recognises the consumer-public who have borne the ultimate burden as the persons who have really paid the amount and so entitled to refund of any excess fee collected and therefore directs the market committee repressetning their interests to retain the amount. It has to be in this form because it would, in practice, be a difficult and futile exercise to attempt to trace the individual purchasers and cnosumer who ultimately bore the burden. It is really a law returning to the public what it has taken from the public, by enabling the committee to utilise the amount for the performance of services required of it under the Act. Instead of allowing middlemen to profiteer by illgotten gains, the legislature has devised a proceudre to undo the wrong that has been done by the excessive levy by alloiwng to comittees to retain the amount to be utilized hereafter for the benefit of the very persons for whose benefit the marketing legislation was enacted".
The Court then proceeded to hold :
"The principles laid down in the aforesaid cases were based on the specific provision in those Acts but the same principles can safely be applied to the facts of the present case inasmuch as in the present case also the respondents had not to pay the amount fro their coffers. The burden of paying the amount in question was transferred by the rspondents to the purchasers, and, therefore, they were not entilted to get a refund. Only the persons on whom lay the ultimate burden to ay the amount would be entitled to get a refund of the same. The amount deposited towards the Fund was to be utilized for the development of sugarcane. If it is not possible to identity the persons on whom had the burden been placed for payment towards the Fund, the amount of the Fund can be utilized by the Governent for the purpose for which the Fund was creted, namely, devleopment of sugarcane. There is no question of refunding the amount to the respondetns who had not eventually paid the amount towards the Fund. Doing so would virtually amount to allow the respondents unjust enrichment".
This passage clearly goes to show that, even where there is no specific provisin providing the manner in which the illegally collected tax should be utilized (as in the cases Shiv Shanker Dal Mills v. State of haryana; ; Newabganj Sugar Mills v. Union of India
; and Amarnath OM Prakash v. State of Punjab,
, referred t above), the Court would not grant the
relief of refund where the plaintiff has not really suffered any loss or prejudice, he having passed it on to others, doing so would be the negation of the very equitable principle underlying S. 72. In othters words, instead of preventing unjust enrichment, such grant of refund would amount to unjustly enriching a person, certianly the Court would not lend its hand to such a course in the name of giving effect to an aequitable principle. It is equally relevant to mention that, in this decision, the Supreme Court ahs also noticed its earlier decision in Sales Tax Officer v. Kanhaiya Lal, , besides the
decision in Orient Paper Mills Ltd., v. State of Orissa, . This decision is an important mile-stone in the
devleopment of law under S. 72, and we respectfully follow it, as indeed we are bound to. We are also of the opinion that eh said decision lay s down a very salutary rule of equity. Today we find that dealers and businessmen collect sales tax, market fee, and other similar impost from public on the repesentation that it has to be made over to the State; sometimes they show the said tax/fee separately, and at other times they include it in the price and show a consolidated figure. Then they litigae in the department and before the Courts, disputing the exigence of tax; very often they ask for stay of collectino of tax from them, which they have already collected from the public and very often the courts grant them stay either wholly, or partially; they plough back that money into their business to make more profit. If they succeed ultimately, all that money is a windfall; it is an additional income to them : Even if they fail, they have nothing to lose, becasue they would pass on to the State the amount already recovered by them from public and which they have beneficially made use of for th purpose of their business. It is well known that litigation of this type takes years and years to pass through the hierarchy of Tribunals and Courts. The position under the Central Excise Act is no different. Whereever in doubt, a dealer or manufacturer collects duty or tax, as the ase may be, from the public, and then fights the incidence in Tribunals and Courts; it makes little difference whether the excise duty levied is on a finished product, or upon the raw material purchased by a manufacturer; in either case it is passed on to the consumer. It is a matter for the Courts to pause and consider whether in such situations they should grant stays, and finally refunds. The latest decision of the Supreme Court in State of M. P., v. Vyankatlal, must guide us in this matter. It should also be noticed that the appeal before the Supreme Court in this case arose in a suit, and not in a writ petition.
25. Mr. N. Rajeswara Rao then argued that it is immoral for the State, besides being illegal, to seek to retian a tax/impost illegally collected by it from citizens. He likelned it to theft. We are not impressed. The money really belongs to the people, i.e., the consuming public; it cannot be retunred to them because they are such unidentifiable large body of persons that it is not practicable to do so. In such asituation, the question is whether the money should be allowed to lie with the Staet, where it will be used for public purposes, or whether it should be given to dealers and manufacturers, where it wil be utilized for their private profit? There cannot be two answers to htis question. Indeed, the answer is already provided by the Supreme Court in Vyankatlal's case (supra). We are of the opinion that the dealers and manufacturers cannot equate themselves with the State. The funds of the State belong to the people, while the funds of the dealers and manufacturers belong to themselves. Public policy demands that the Court should not exercise its powers to unjustly enrich any one at the cost of the State, or at the cost of the consuming public.
26. For the above reasons, we hold that the plaintiffs' suits for refund must fail; but, inasmuch as they have already been decreed partly, against which the State has not filed any appeal, we cannot disturb the decrees of the trial Court; we cannot grant any further relief in these appeals.
27. There is yet another ground why we should deny relief to the plaintiffs. They did not file any writ petition questioning the levy of gallonage fee; another person, Syntho-Pharm, questioned the same and succeeded. He had expressly asked for refund in that writ petition; he was granted refund only from 1969 to 1972, i.e., the fee which he paid under protest; the fee which he had paid prior to 1969 without any protest was refused to be refunded. Do the plaintiffs herein stand on a different footing? If they had joined in filing the said writ petitin, or had they filed similar writ petitions, they would also have been given the same relief, and no more. Can they say that, since they were not parties to the said judgment, they are not bound by the said direction and that, they should get refund of all the amount which they had paid over a period of nine years without any protest? Once the power of the Court to grant relief under Section 72 of the Contract Act is held to be equitable,, it would be ineuitable to confer upon the plaintiffs a greater advantage than that was obtained by the writ-petitioner, Syntho-Pharm, who had taken the rouble of questioning the levy and successfully challenged the validity of the impost. Inded, if we strictly apply the reasoning of the said judgment, the appellants would not be entitled to any refund, since it is not their case that they have paid any fees under protest. All the fees paid by the appellants were paid without any protest.
28. We shal now consider the question of limitation. According to the plaintiffs, their suits are overned by Art. 113 of the Limitation Act, which reads as follows :-
"113. Any suit for Three When the right which no pe- years to sue accrues".
Period of limita-tion is provi-ded elsewhere in this Sche-dule.
This article corresponds to the old Art. 120, but with a shorter peirod limitation. The plaintiffs say that the right to sue accrued to them when the High Court delcared the said levy to be illegal and invalid. They say, that is the point of time at which they discovered the mistake of law under which they had been paying the said fee all along. According to them, therefore, the suit filed within three years thereform, is within limitaino, and once the suit is within limitation, there is no restrictino as to the period of claim; it can be threee years; it can be six years; it can even by thirty years, or more. Support for htis proposition is sought from the decision of the Supreme Court in D. Cawasji & Company v. State of Mysore, , and several decisions of this Court and other High Courts granting refund of the amount paid over a period of more than threee years, so long as the suit or writ petition is filed within three years of the discovery of the mistake, i.e., the pronouncement of the Court regarding the invalidity of levy.
29. On the other hand, the lerned Advocate-Genrral contended that every person is supposed to know the law, the plaintiffs must be deemed to have knwon about the illegality of the levy on each occasion they made the payment and, therefore, it is each payment which gives rise to the right to sue, and not the pronouncement of the Court. Support is sought from certain decisions for this proposition, which we shall presently refer to.
30. Before, however, we refer to the decisions, it is well to notice a basic fact. If every one is suppposed to know the law, then the very concept of mistake of law becomes inappropriate and meaningless. An absolute and total adherence to the rule (every one is supposed to know thelaw) is likely to lead to unjust consequences in many cases. The said rule has to be counter-balanced with the fact that the law itself recognizes the concept of mistake of law. The decisions show that all these years the Supreme Court and otehr Courts have recognized a decision of a High Court or the Supreme Court, declaring a law or a rule to be invalid, as consituting the starting point of limitation for filing suits or petitions for refund.
31. In D. Cawasji & Company v. State of Mysore, it is held:
"In a case where payment is made under a mistake of law as contrasted with a mistaek of fact, generally the mistake becomes known to the party only when a Court makes a declaration as to the invalidity of the law. Though a party could, with reasonable diligence, discover a mistake of fact even before a Court makes a pronouncement, it is seldom that a person can, even with a reasonable diligence, discover a mistake of law before a judgment adjudging the validity of the law.
Therefore, where a suit will lie to recover moneys paid under a mistake of law, a writ petition for refund of tax within the period of limitation prescribed i.e., within 3 years of the knowledge of the mistake, would also lie. For filing a writ petition to recover the money paid undre a mistake of law, this Court has said that the starting point of limitation is from the date on which the udgment declaring as void the particular law under which the tax was aid was rendered, as that would normally be the date on which the mistake becomes known to the party.....".
The Bench recognized the fact that such a rule would enable the persons to claim refund of the amount paid over a long period, which is likely to cause grave inconvenience to the State; but, that aspect, they said, is a matter for Parliament to rectify. It must also be noticed that these observations were made with reference to S. 17(1)(C) o the Limitation Act which, in so far as is relevant, reads as follows :-
"17. Effect of fraud or mistake :
(1) Where, in the case of any suit or application for which a period of limiation is prescribed by this Act-
(a) & (b) xx xx xx
(c) the suit or application is for relief from the consequences of a mistake; or
(d) xx xx xx
the period of limitation shall not begin to run until the plaintiff or applicant has discovered the fraud or the mistake or could, with reasonable diligence, have discovered it.....".
It is true that, according to the said provision, the period of limitation shall not begin to run until the plaintiff has discovered the mistake, or could, with reasonable diligence, have discovered it; yet, the Supreme Court has explained in the above decision that, in the case of mistake of law, it is seldom that a person can, even with reasonable diligence, discover a mistake of law before a judgment adjudging the validity of the law. It is not possible for us to treat the said observations of the Supreme Court as obiter, and ignore them. In facts, these observations have been followed by the High Courts all over the country uniformly. Secondly, even the obiter dicta of the Supreme Court are held to the binding on the High Courts. It cannot also be said that the said observations are more in the nature of loud thinking an do not consitute a considered opinin. There is no decision of the Supreme Court which takes a contrary view; hence we must follow the same and hold that the suits were filed within limitation.
32. We may now consider the decisions cited by the learned Advocate-General. Relieance is placed upon the foloiwng observations in the opinion of Hidayatullah, C. J., in Tiloichand Motichand v. H. B. Munshi, :-
"To that I answer that law will presume that he knew the exact ground of unconsitutionality. Everybody is presumed to know the law. It was his dity to have brought the matter before this Court for consideration. In any event, having set the machinery of law in motion he cannot abandon it to resume it after a number of years, becaue another person more adventurous than him in his turn got the statute declared unconsitutional, and got a favourable decision..........".
However, a perusal of the facts of that case shows that it was not a case of tax being paid under mistake of law. The petitioner therein was very much aware of the illegality of the levy and had in fact challenged the relevant provisions of the Act by way of a writ petition in the High Court on ceratin grounds, but had failed. Meanwhile, some other assessee had challenged the same provisions on certain other grounds, and succeeded. It is then that the petitioner made the claim for refund. It is in that context that the above observations were made and, therefore, they cannot be read as holding that, in very case of refund of tax, the suit must be filed within three years of the payement.
33. The learned Advocate-General next relied upon certain observations in Shri Vallabh Blass Works Ltd., v. Union of India, made with reference to S. 17(1)(C) of the Limitation Act, 1963. Venkataramiah, J., speaking for the Bench, observed thus :-
"......It is not disputed that if the appellants had filed a suit within the period of limitatin the excess amount would have become refundable by virtue of S. 72 of the Contract Act. S. 17(1)(C) of the Limitation Act, 1963 provides that where in the case of any suit or application for which a period of limitatino is prescribed under that Act, the suit or applicatin is for relief from the consequences of a mistake, the perod of limtation shall not begin to run until the plaintiff or applicant had discovered it or could have with reasonable diligence discovered it. In the instant cae, the date on which the mistake was discovered by the appellants or the date on which the appellants could with reasonable diligence have discovered it is not clear from the record before us. No effort also was made in the course of the arguments urged on behalf of the appellants to establish it. We have, therefore, to assume that on the date of each payment of excise duty made by the appellants in excess of the proper duty payable by them, the appellants could have discovered with due diligence that the duty claimed from them was excessive. Under Art. 113 of the Limitation Act, 1963 which is applicable to this case, a suit for recovery of such excess duty had to be filed within three years from the date of payment to the Department......"
In our opinion, these observatios do not run counter to the principle enunciated by the Supreme Court in Cawasji's case . They must be understood in the particular facts of that case. In this Case, the plaintiff failed to allege and establish the date on which he discovered the mistake of law, or the dte on which he could, with reasonable diligence, have discovered it. Moreover, the plaintiff-appellant had earlier filed a writ petition challenging the levy, but withdrew it in view of cl. (3) of Art. 226 of the Consitution, as it then stood. (The said clause introuduced by Consitution Forty-SEcond Amendment, barred the remedy under Art. 226 where an alternative remedy was availabel). After withdrawing the writ petition, he pursued the remiedies provided by the Act, and the again came to the High Court by way of a writ petition. In other wors, in this cae, the appellant was aware of the illlegality of the levy and had even challenged it in Court. In such a cae, he could not contend that he 'discovered' the mistake at a later point of time. It is for this reason the Court observed that the appellatn must be deemed to be aware of the ilegality as and when he made each payment. Thus, this decision doesnot lay down a principle different from the one flowing from Cawasji's case (supra). This appeal did not arise from a suit but from a writ petitin, and the discussin is entirely coloured by that aspect. S. 72 of the Contract Act too did not fall for considerationin this case. The Court, therefore, did not examine the ingredients of the said section, or the rule incorporated in it, or its application.
34. We are, therefore, of the opinion that the suits cannot be said to be barre by limitation.
35. Howeve, inasmuch as we are of the opinion, for the reasons stated hereinbefore, that the suits should fail on account ofthe failure of the plaintiffs to allege and prove the loss or prejudice suffered by them, i.e., on the plea of unjust enrichment, the appeals are dismissed. In the circumstances, we direct the parties to bear their own costs in these appeals.
P. Kodandaramayya, J.
36. I have had the advantage of reading the judgments prepared by my learned brother Jeevan Reddy, J. I agree with his conclusion that the plaintiffs-appellants in this batch of appeals are not entitled to the refund of the amounts of gallonage fee collected by the Stae of Andhra Pradesh from them on the basis of the doctrine of unjust enrichment. However I prefer to rest my conclusion on the ground of limitation and record my reasons separately.
37. The facts of the cases are fully set out in the judgment of my brother and I need not re-state them.
38. Sri. N. Rajeswararao appearing for the plaintiffs-appellants urged that the Court below grossly erred in totally ignoring the judgment of the Supreme Court in D. Cawasji & Co., v. State of Mysore holding clearly that once the Court delared the Act is void being unconstitutional the Stae is bound to refund the tax paid under such mistake of law "Be it hundred years after the date of payment."
39. I may state at the outset that all the judgments cited before us are cases where observations occurred in cases dealing with the claim for refund in writ petitions. No case arising out of a suit where the question of limitation was considered was brought to our notice. Further most of the cases are cases declaring the law as void under which the tax is assessed and collected. Hence we have anxiously considered the rule of limitation when a suit is filed for the refund of the tax illegally collected.
40. It is well known, the first mile-stone in this branch of law is sales Tax Officer v. Kanhaiya Lal. . They levy of the sales tax on forward transactions was held to be ultra vires and not within the powers of the U. P. Legislature and the assessees asked for quashing the asessment orders and for a writ of Mandamus requiring the State to refund the amounts collected. The High Court granted relief as prayed for. On appeal by the State the Supreme Court affirmed the said judgment and sustained the claim under S. 72 of the Contract Act 9 of 1872. Threee pcinciples emerge from the said judment. (i) The term 'mistake' used in S. 72 of the Contract Act embraces mistakes of fact and mistake of law. (ii) Tax paid under mistake of law can be recovered under S. 72 of the Contract Act. (iii) However, such recovery will be subject to the questions of estoppel, waiver, limitation or the like.
41. The Court havingnoticed the legal position in England, America and Australia that money paid under mistake of law cannot be recovered held that the contrary intendemnt of S. 72 of the Indian Contract Act must be given effect to in this country, in view of the pronouncement of the Privy Council in Shiba Prasad Singh v. Srish Chandra, (AIR 1949 PC 297). In this Case the question of limitation did not arise. Thus it is settled that the mistake of alw is a ground for refund of tax but it is necessary to find out the true meaning of the term 'mistake of law', and when the limitation starts for such claim for refund. For this purpose we must look to S. 72 of the Contract Act 9 of 1872 and S. 17 and Art. 113 of the Limiatin Act 36 of 1963.
"S. 72 of Contract Act.
A persom to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it."
"S. 17 of Limitation Act.
Effect of fraud or mistake :
(1) Where, in the case of nay suit or applicationfor which a period of limitatinis presecribed by this Act-
(a) &(b) xx xx xx
(c) the suit or application is for relief from the consequences of a mistake; or
(d) xx xx xx
the period of limitation shallnot begin to run until the plaintiff or applicant has discovered the fraud or the mistake or could, with reasonable diligence, have discovered..........".
Art. 113 of the Limitation Act :
"Any suit for which Three When the right no peirod of limita- years to sue accrues."
Tion is provided
elsewhere in this
It is necessary to notice that S. 17 of th present Limitation Act correspondes to S. 18 of the previsous Limitatin Act 9 of 1908. The previous S. 18 of the Act was amended and the section was re-caset to include actions based on fruad and also for relief found on mistake. This ection corresponds to S. 26 of the Limitation Act 1939 in England. It is also necessary to notice the previous article of the Lmitation Act, 1908 which is Art. 96 governing this question.
"Art. 96 of the Limitation Act 1908
For relief on the Three When the misground or mistake years take becomes
known to the
It is necessary for us to note in this connnection that S. 72 speaks of liability of the person to refund the money paid to him either by mistake or under coercion. The present article under the Limitaion Act for refund of tax collected under coercion is Art. 24 and the period of limiation begins when the money is paid. The said article correspondes to Art. 62 of th previous Limitation Act and this legal position is settled by the judgment of the Supreme Court in Venkata Subbarao v. State of A. P., . The language used in Art. 24 and
Art. 62 does not speak of payment or collection of levy by State either under coercion or otherwise but the Court on a construction of the article held that such collections are within the contemplation of this article. The said case arose out of a suit filed by the dealers when the State collected excess amount from them while they were acting as procuring agents of paddy. The Court treating such compulsory collection as a tax coercion held that the proper article applicable is Art. 62. Accordingly it was held, the money received as a tax by the defendant-State from the plaintiffs which the plaintiffs were not bound in law to pay but which they were compelled or forced to pay because of the threats or apprehension of legal process, Art. 62 is atracted. Henc unlikein the case of payment under mistake of law the tax paid under coercion th cause of action arises from the date of the payment of the tax. So in every case it is necessary to examine whether the tax was paid under coercion or under mistake of law. It is difficult sometimes to domarcate the line and such situation is clearly visible when we look to the judgment in Tilokchand Motichand v. H. B. Munshi, 9 . It is necessary to notice the facts of that case. The Sales Tax Officer forfieted a sum fro the petitioner under S. 21(4) of the Bombay Sales Tax Act 3 of 1953 on 17-3-1958. When he challenged the said order his wirt petition was dismissed by the High Court both by single Judge on 28-11-58 and by a Division Bench finally on 7-7-59 respectively. Thereafter he paid the said amount under various insalments includig penalty under threat of attachment and sale of his property. Subsequent there to the Gujarat High Court struck down a similar provisin in S. 12-A(4) of the Bombay Sales Tax Act on 2-12-1963 and the Supreme Court affirmed the said judgment on 29-9-67. Thereafter the writ petitions were filed in the Supreme Court under Art. 32 of the Consitution of India on 9-2-68 praying for quashing of the order dt. 17-3-1958 for the refund of the amounts paid by him. On these facts the question raised before the Supreme Court is, though the law under which the tax was recovered wa unconsitutional whether the petitioner can invoke Art. 32 of the Consitution of India after such distance of time. In that context the learned Judes had to examine whether the claim of the petitioenrs would be barred if a suit is filed. Bachawat, J., in his judgment formulated the points like this- (i) Would the claim be barred by limitation if it were the subject matter of a suit in February, 1968. (ii) If so whether the petitioner is entitled to any relief in this petition under Art. 32 of th Consitution. All the five Judges delivered separate judgments and hidaytullah, C. J., Bachawat, J. And Mitter, J., took the view that the payment is made not under mistake of law and the plaintiffs' claim in a suit will be barred, and even though there is no period of limitation as such for invoking the Art. 32 for the protection of fundamental rights of the petitioner, they declined to exercise th discretion in favour of the petitinoer in view of the delay. Justice Sikri and Hedge, J., held that the payment clearly consitutes a payment undre mistake of law and the State is bound to refund the amount as the cause of action arose when tthe Supreme Court delivered the judgment. Hidayatullah, C. J. observed :
"The question is : can be petitioenr in this case take advantage, after a lapse of a number of years, of the decision of htis Court? He moved the high Court but did not come up in appeal to this Court. His contention is that the ground on which his petition was dismissed was different and the ground on which the statute was struck down was not within his knolwedlge and therefore he did not know of it and pursue it in this Court. To that I answer that law will presume that he knew the exact ground of unconsitutionality. Everybody is presumed to known the law. It ws his dity to have brought the matter before hit Soucrt for consideration. In any event, having set the machinery of law in motion he cannot abandon it to resume it after a number of years, because another person more adventurous than him in his turn got the statute declared unconsitutional, and got a favourable decision. If I were to hold otherwise, then the decision of the High Court in any case once adjudicated upon and acquiesced in may be questioned in a fresh litigation revived only with the argument tht the correct position as not known to the petitioner at the time when he abandoned his own litigation. I agree with the opinion of my brethren Bachawat and Mitter, Jj., that there is no questinohere of a mistake of law entitling thie petitioner to invoke analogy of the article in the Limitation Act."
Bachawat, J., held that suit for recovery of money instituted in February, 1958(1968) challenging the order dt. 17-3-58 is barred under Art. 24 of the Limitation Act and hence the discretion under Art. 32 cannot e involed, Mitter, J., also agreed with this view holding that the facts negative any claim of payment under a mistake of law, and are only consistent with a claim for money paid under coercion. He also observed that the Limitation Act does not in terms apply to claims against States in respect of violation of fundamental rights. Sikri, J., in his dissenting judgment held, the petitioner has attempted to raise question of vires of the Act but failed and his failrue to aproach the Court earlier should not be a ground to hold that he did not pay the amount under mistake of law and observed :-
"The contention seems to be that when a petitioenr approahces a High Court and fails, he can no longer suffer from any mistake of law even if the point on which this Court ultimately strikes down the provisions, never struck him or his lawyer or the Court. I cannont uphold this contention.
In my opinion the petitioner was under a mistake of law, when he paid up, the mistake being that he though that S. 12A(4) was a valid provisinin spite of its imposing unreasonable restrictions. This mistake he discovered like all assessees when this Court struck down S. 12-A(4) of the Bombay Sales Tax Act. He has come to this Court within six months of that day and there is no delay."
and he took th eview that the petition must be allowed. Similarly Hedge, J., observed:
"A mere impression of a party that a provision of law may be ultra vires the Consitution Cannot be equated to knowledge that the provision is invalid. Hope and desire are not the same things as knowledge. A law passed bya competent legislature is bound to be presumed to be valid it is struck down by a comptetent Court. The fact after a futile attempt to get the provision in question declared invalid the petitioenrs gave up their fight and submitted to the law which was aparently valid is no proof of the fact that they knew that the provision in question is invalid."
and held that the petitioenr committed a mistake of law andhis petition is fit to be accepted. We quoted these passages in extenso to show how difficult it is to come to the conclusion that a particular set of facts consititutes a mistake or a coercion and which limb of S. 72 of the Contract Act shall apply when in particular separate articles apply to different situations in respect of the paymet of the tax.
42. Now we shall look to D. Cawasji & Co., v. State of Mysore, on which gret reliance and emphasis is placed by the learned counsel for the appellants. That case also arose out of a writ petition where in the first batch of writ petitions the High Court of Mysore struck down the provisions of the Elementary Education Act holding that the provisions of the Act providing levy and collection of educational cess is unconsitutinoal. The said view as also confirmed by the Supreme Court subsequently. The judgment of the Court was delivered on 2-5-1968 and iwthin three months from that date they filed second batch of writ petitions for refund of the cess collected from othem on the ground that they paid the cess under mistake of law without knowing the law was unconsitutional. The High Courtl dismised the writ petitions mainly on the ground that there is delay in approaching the Court. ON appeal to the Supreme Court a Benc consisting of Mathew and Alagiriswami, JJ., disagreed with the conclusion on the question of limitation. Referring to Tilokchand Motichand v. H. B. Munishi, it was held that the Judges who formed a majority in that case did not consider the payments made by the petitioners there in as payments made by the petitioners therein as payments made under mistake of law and therefore that case has no relevancy. However, they dismissed the appeals on the ground that the appellants before them who filed the second batch of writ petitions who are also petitioners in the first batch of writ petitios challenging the consitutional validity of the Act should have asked the refund of the cess in the first batch of writ petitions itself. The ground of rejection was piecemeal litigation by the petitioners i.e., the petitioner had not made the prayer for refund in the original petitions made by them. Thus it is seen that though the petitions were filed within less than three months, the discertion under Art. 226 of the Consitution was not exercised though the observatinos are to the effect that there cannot be limitaiton. The result of this judgment woul dbe, if persons other than the writ petitioners file a petition for refund and on the strength of the judgment they are bound to succeed (sic) but the petitioners who took all the trouble to agitate the matter were denied the relief on the basis of the plea normally availagle in private law. Further the petitioners could have succeeded by filing a suit. The observation of the learned Judge which is relief upon may be noticed in full.
"Therefore, where a suit will lie to recover moneys paid under a mistake of law, a writ petition for efund of tax within the period of limitation prescribed i.e., within 3 years of the knowledge of the mistake, would also lie. For filing a writ petition to recover the money paid under a mistake of law, this Court has said that the starting point of limitation is from the date on which the judgment declaring as void the particular law under which the tax was paid was rendered, as that would normally be the date on which the mistake becomes known to th party. If any writ petition is filed beyond three eyars after that date, it will almost always be proper for the Court to consider that it is unreasonable to entertin that petition, though even in cases where it is filed within thee years the Court has a discretion, having regard to the facts and circumstances of each case not to entertin the application."
The above dictum also arises out of a writ petition. The learned Judge no doubt made observations which are fully in favour of the appellant. But one thing is clear, this is a case where the Act was struck down as unconsitutional and the tax paid under unconsitutional law is sought to be recovered treating tthe proceedings as void. Whetehr the appellants herein can invoke such principle in their favour on the strength of this judgment which delcared that the collection of gallonage fee is illegal will be examined by us presently.
43. The last case in these series of the Supreme Court is one reported in Shri Vallabh Glass works Ltd., v. Union of India, . It also a case arising out of a writ petition. The writ petitioner in the first instance challenged the duty imposed on him in respect of his goods under Central Excise Act by filing writ petition and the writ petition ws withdrawn as he had already filed an appeal. When the statutory authorities under the Act rejected his claim for refund of the amount paid by him he filed writ petition. The High Court by its judgment held, the contention of the petitioenr that duty was imposed under a wrong item enumerated under the Act is true, but it held, the petitioner is entitled to refund of the excise duty paid by him after 20th Feb., 1976, the date on which he protested and requested for refund. Against the said judgment appeal was filed in the Supreme Court. The Supreme Court agreeed with the view of the High Court tht the levy in respect of the goods of the petitioenr is illegal and it modified the order of the High Court stating that inasmuch as the petitioner filed writ petition in the first instance on 28-9-1976 he would be entitled to refund of the amounts paid three years prior to that date applying S.17(1)(c) read with Art. 113 of the Limitation Act and granted refund accordingly. Venkataramaiha, J., though held that it is discretionary under Art. 226 of the Consitution to grant the relief, examined the claim of the petitioner to see how far his claim is not barred under Limitation Act if a suit was filed. Applying the provisions of the Limitation Act their Lordships held, the claim for three years prior to the filing of the writ petition is not barred and accordingly the decree of the High Court is modified. It is further held that the excess payment made by him cannto be treated as voluntary payments and he can invoke and decision Sales Tax Officer, Banaras v. Kanhaiya Lal Mukundlal Sara, as tax paid under
mistake of law. No doubt the date of discoveryof the mistke is not stated by the petitioner in the proceedigs and it was held :
"We have therefore, to assume that on the date of each payment of excise duty made by the appellants in excess of the proper duty payable by them, the appellants could have discovered with due diligence that the duty claimed from them was excissive. Under Art. 113 of the Limitain Act 1963 which is applicable to this case, a is case, a suit for recovery of such excess duty had to be filed within three eyars from the date of payment to the Department."
This case establishes the requirement of proving the diligence in discovering the mistake in invoking S. 72 of the Act evn though the payment of tax was considered to be one made unde mistake of law.
44. The word 'mistake' as defnied by Story, J., in his well known Treatise on Equity Jurisprudence as contra-distingushed from accident runs thus :
"This is sometimes the resutl of accident, in its large sense; but, as contra-distinguished from it, it is some unitentional act or omission, or error, arising from ignorance, surprise, imposition, or misplaced confidence."
It is necessary to bear in ind that in order to invoke the extended period of limiation either under Art. 96 of the old Limitatino Act or under S. 17 of the present Act, the mistaek must have occurrre on the date of the payment, but not on an even that occurred subsequen to the date. The word "discovered" occurring in S. 17 pre-supposes that the mistake exists actually even before the discovery. The several dicta occurring in the decided cases that the payment of tax paid under unconsitutional law is payment under mistke of law clearly introuduced a fiction to the animus of a citizen treating that such payment must be deemd to have been made under mistake of law. A statute which ocntravenes provisions of the Consitution doesnot ipso facto i.e., without a judicial pronouncement to that effect become void. No doubt the Court declares the pre-existing operation of such offending law, but, onthe declaration by the Court alone the law so delared will become void ab initio leaving out the distinctions between tpre-consitutional laws and post-consitutional laws and the unconsitutionality of a law for want of legislative power or repugnanace to fundamental rights. There is a strong presumption in favour of the consitutionality of a law. Hence till the competent Court declares it void no citizen can ignore it and the State will not permit him to ignore it.
45. No Doubt the Consitutional Court while declaring the law unconsitutional can give suitable directions about the operation of its judgment. The Supreme Court can even say tht the declartion given by it will opearate in future based upon the prospective overruling and High Courts while giving such declartion can restrict the relief to the petitioner stating to what extent the previous transaction can be reopened or even fix some period also if necessary. If any direction was given in the judgment that will be binding on the Civil Court while granting the relief of refund. Even if the most well informed citizen protests against such unconsitutional alw he will be threatened, prosecuted and coerced to pay the tax, and, such law will be enforced against him and the State's action is fully justified. It is true that both the citizen and the State are proceeding on the basis that the law is valid. However on the date of payment so long the law is on the statute book the payment on the day cannot be treated as a payment made illegally under unconsitutional law. S. 17 of the Limitatin Act contemplates the existence of mistake on the date of payment but it never contemplates or enables a citizen to invoke a subsequent event to raise a plea of mistake of law on his part in making the payment. Even in England where the mistake of law is not a ground for obtaining the refund of payment, the Court of Equity can bgrant relief to the plaintiff if it is inequitable to allow the party to retian the money received by him. However when money is paid when the law is in payee's favour it cannot berecovered by reason of a subsequent judicial decision reversing the former understanding of the law. (Vide Halsbury's Laws of England Vol. 32, Fourth Ed., para 72 at page 43). The dictum of Sir Wilfrid Greene, M. R., occurring in Derrick v. Willliams, (1939) 2 All ER 559 at p. 565 is pertinent in this connection. The learned Judge was commenting about the amendment to a pleading permitted by the Court below on the ground tht the party has committed mistake of law in making the payment in view of a judgment of House of Lords delivered subsequent to the payemtn. He said :
"The substantial point, however, apart from the question of procedure, is one upon which, in my opinion, this amendment also fails. In a nutshell, the amedment is as follows : " I am entitedl to withdraw my claim satisfied by the money paid into Court, because, at the time when I so consented, I was under a misapprehensionas to the law." It was suggested by counsel for the respondnet that there was some mistake of fact. Even if that would have helped him - and I express no opinin at all upon that - i can see no suggestion of a mistake of fact in this case. It was a mistake of law, and consisted of the fact tht the plaintiff was under the belief that the law as laid down by this Court in Rose v. Ford was correctly laid down. In that he was wrong, and he is asking the Court to say that, having acted upon the basis of a mistaken view of th law, now that the law has been enunciated by the highest tribunal, he is entitled to make another attempt. That is a thing which, it seems to me, cannot be permitted on principle. It appears to me to be completely indefensible. No shadow of authority was cited to us which would justify the proposition that, where, pursuant to the rules of Court, a claim has been satisfied by money paid into Court by the Defendant, the plaintiff can afer wards come and say : "I was wrongly advised as to the law when I did this, because the law was not as then laid down by the Court of Appeal, but as subsequently litigants if, in circumsances such as these, their opponents were entitled to harass them with further litigation becuase their view of the law had turnedout to be wrong, and, unleess I were constrained by binding authority, I should be quite unable, on priciple, to accept any such proposition. Therefore, it seems to me that, not only on the point as to the correct procedure to be followed, but also no the point of substrance as to the right to get rid of the effect of the acceptance, the appeal succeeds."
Further the rule is well established that any judgemnt or order passed by judicial or quasi-judicial authority annot be reviewed by subsequent change of law. The dictu of Davey in Rajah Kotagiri Venkata Subamma Rao v. Raja Vellanki Venatarama Rao, (1900) 27 Ind App 197 (PC) that "There can be no review of an order which was right when made on the ground of the happending of some subsequent event" is accpeted by the Supreme Court in A. C. Estates v Serajuddin, and Raja
Shatrunjit v. M. D. A. Azim Khan, . Thus it is
necessary to make a distinction betweenlaw declred to be unconsitutional and cases where law was interpreted differently from the previous interpretation. In the former case the law is void and all proceddings taken under that law are treated as void and any assessments made and orders passed become void ab initio and they need not be set aside and a citizen can seek redress without formally requiesting the Court to set aside the orders the have become final but when there is only change of law on an interpretion, the assessments will become illegal and the assessee cannot seek redress without setting aside the orders that have become final. (Vide Madras Rubber Factory Ltd., v. Union of India 1981 ELT 879 : (1982 Tax LR NOC 51) (Delhi). In each case the Court hast o examine whether the mistake of law is one occurred due to unconsitutional alw which was void or due to any change of law by different interpretation placed bythe Court. In the former case there may be justification for a citizen to rely upon a subsequent j udgment as the assessment have become void when the law itself is struck down but in the later case it is clearly a subsequent event and it cannot given him a right to plead the mistake of law to postpone the starting point of limitation.
46. In this connection it is necessary to note the vital distinction between S. 17 and also Art. 96 of the previous Act. Under the previous Limitation Act it is enough if the plaintiff shows when the mistake became known to him. Under Act. 96 there is no requirement of diligence on his part. This concept is first time introduced under S. 17 based upon the English Act. If the subsequent judgment declaring the law alone consitutes discovery of mistake, the latter limb of S.17(d) "Could with reasonable diligence have discovered"would never apply in respect of tax collected under unconsitutional law. The Legislature while givng the benefit of extension of limitation when the relief is founded on a mistake, has imposed certain restrictions and hence the plaintiff who seeks redress invoking S. 17 must comply with the said provisions strictly. The equity that may operate in favour of a citizen who paid the tax under unconsitutional law cannot be imported while interpreting S. 17. The private law remedy must be interpreted uniformly in all actions between a citizen and State and a citizen and a citizen. The requirement of showing the diligence on the part of the plaintiff to earn the extended period of limitation cannot be dispensed with simply because in the very nature of things he cannot be presumed to know the law is unconsitutional till it is struck down by a comptetent Court of law. These aspects clearly disclose that the framers of the limitation Act are not having in their mind the mistake of law under which the State and a citizen would be labouring when the law in fact is unconsitutional. S. 17 visualises the mistake committed by a citizen on the basis onf an existing law but it is not at all in its contemplation when the law is oblitereated, and a void is created by its being unconsitutional. In fact the Contract Act makes a distinction between the effect of mistake of law and mistake of fact on agreements entered into between parties. S. 20 of the Contract Act declares, where both the parties on an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void; whereas S. 21 States that a contract is not voidable because it was caused by a mistake as to any law in force in India. Mistake as to foreign law is treated as mistake of fact. This difference in two types of mistakes in the formation of the contract was held not germane to invoke S. 72 of the Contract Act in respect of mistake of law by the Privy Council in Shiba prasad Singh v. Srish Chandra, (AIR 1949 PC 297). But the difficulty arose when the Supreme Court extended this doctrine for the recovery of the tax paid under a mistake of law also and that is the law of th land bindding on us. However we are emphasisng these aspects to show, that the private law remedy of a suit is quite inadequate to work out equities between the State and the citizen and the Supreme Court may have to re-state the law in view of the compelling public need whe an occasion arises. Ss. 70 and 72 occurring in Chapter 5 of the Contract Act relating to quasi-contracts cannot be effectively employed in working out the right between the State and the citizen, in particular when tax was collected under unconsitutional law. Those provisions can be resorted to when excess payment is made or when the contract entered into by the State was found to be void, and in all other cases where the relationship between the State and the cirizen in quasi-contractual.
47. The right of a citizen to obtain refund of tax collected under unconsitutional law by filing a suit was upheld in Venkataraman & Co., v. State of Madras, and it is held that Art. 96 of the previous Limitation Act applies to such suits holding that the plaintiff came to know of the mistake when the judgment striking down the law was delivered. This view was further affirmed in State of Bombay (now Gujarat) v. Jagmohandas, . But the
difference in the language of new S. 17 of the Limitation Act which introduced the concept of diligence on the part of the citizen made the position more difficult for the plaintiff to satisfy its requirement. The plaintiff must plead and prove that in spite of his due diligence he could not have discovered the mistake committed by him. We have already noticed the dictum of Mitter, J., that the Limitation Acts do not in terms apply to the claims against State in respect of violation of fundamental rights. We must hold that while interpreting S. 17 of the Limitation Act we cannot import the equity in favour of citizen as there are inherent difficultires for a citizen when he invoked the private law remedy of filing a suit, when the tax collected under law was held to be unconsitutional.
48. Another significant thing to be noticed in our Limitation Act is, total absence of any provision giving power to the Court to refuse relief on the ground of laches or acquiescence or other similar grounds. We have already noticed that S. 17 is recast on the lines of S. 26 of the English Act. In the English Act the power of the Court to refuse a relief on the ground of acquiescence or other similar grounds is specifically preserved even though the action is within time. Hence proceedings against a trustee for breach of trust may be barred in certain circumstances by the laches of the beneficiary, even though under the enactments relating to the limitation of actions against grust property no period of limitation is applicable. (Vide Halsbury's Laws of England, Fourth Ed. Vol. 28, para 607). It is necessary to note S. 29 of the English Act which reads thus :
"Nothing in this Act shall affect any equitable jurisdiciton to refuse relief on the ground of acquiescence or otherwise."
Such provision is necessary in the Indian Limitation Act to meet such a situation like this. The Court can examine the laches on the part of the citizen if he seeks a relief of payment made since hundred years on th basis of a recent judgment declaring the law as unconsitutional and the Court may refuse and restrict the payment to a shorter period of 5 to 10 years. In the absence of any provision analogous to S. 29 of the English Act, in our Limitation Act, the Courts are bound to interpret S. 17 strictly and the non-compliance of the same is fatal to the plaintiff's case.
49. The result of our discussion is that the Civil Court before whom the suit is laid for recovery of tax illegally collected, has to apply the following tests before according relief to the plaintiffs.
(a) The Court should see whether the suit is laid for recovery of tax paid under mistake or under coercion. In the former case Art. 113 of the Limitatoin Act applies and in the latter case Art. 24 applies.
(b) Whether the law was declared unconsitutional or only the proceedings were held to be ilegal under the judgment relied on by the plaintiffs.
(c) If the law is declared unconsitutional all the proceedings taken under that law in respect of every citizen be treated as void and the period of limitation will start as per S. 17 of the Limitaion Act from the date of the judgment.
(d) If the Court merely construed the state and declared that any proceedings are illegal, the plaintiff who is a third party to the judgment cannot get relief of repayment without seeeking to set aside theh individual orders passed aginst him and such judgment cannot be a starting point of limitation under S. 17.
(e) If any direction regarding past transactions was given by the Court declaring the law unconsitutional the same is binding on the Civil Court.
50. We shall apply the above tests to the facts of these cases. In the judgment of this Court dt. 6-3-1972 reported in Syntho Pharm v. Commr., of Excise, (1972) 2 Andh WR 260 the petitioner raised three contentions. (1) The Hyderabad Denatured Spirit Rules ceased to be in force with the repeal of the Hyderabad Abkari Act and the continued levy of gallonage fee under those rules ws illegal. (2) The Hyderabad Denatured Spirit Rules and Andhra Pradesh Denatured Spirit Rules are beyond the rule making power of the Government. (3) The levy of gallonage fee at the rate of one rupee per gallon is far too excessive and not at all commensurate with the service rendered to the licensees by the Excise Department and therefore illegal.
51. The Division Bench rejected the first two contentions and held that the Hyderabad Denatured Spirit Rules continued to be in operation till 1971 by virtue of the first proviso to S. 73 of the Andhra Pradesh Excise Act and the abovesaid two sets of rules are within the powers given to the Government under the respective statutes and so they are valid. However it examined the question whether the supervision, and check of production, possession and transport of denatured spirit is a service rendered to the licensee and held that assuming that such check and supervision consitute a service, one rupee gallonage fee, is far too excessive when compared with the cost of the service rendered by the Excise Department to the licensee by deputing a Sub Inspector and a constable for a few hours every week, and consequently, it issued a writ of mandamus not to collect the gallonage fee.
52. The learned Advocate General contended that the view expressed in the judgement is no longer good law in view of the subsequent pronouncement of the Supreme Court where it was held that the relatin between fee and service need not be direct, a mere casual relation is sufficient. (Vide Delhi Municipality v. Mohd. Yasin, and City Corpn., of Calicut v. T. Sadasivan, . We do not propose to examine the correctness of the view expressed by the Division Bench in view of this subsequent judgment of the Supreme Court. We proceed on the basis that it is correct. However the result of this judgment is, the law is not struck down but the collection of the fee ws held to be illegal. Rule 3 of the Andhra Pradesh Denatured Spirit and Denatured Spirituous Preparations Rules, 1971 empowers the authorities to collect the gallonage fee at one rupee per gallon and the said gallonage fee shall be paid by the licensee before a transport permit is granted. Rule 6(4) further staes the trasnport permit shall not be granted before payment of gallonage fee. The said R. 3 was not struck down but what was held is that the collection of the fee is illegal as the services were not commensurate to the fee charged. The State can show commensurate service at any time and sustin the collection of fee. Hence we cannot proceed on the basis that the law itself is unconsitutional when the levy alone is held to be illegal, and hence the plaintiffs cannot rely upon this judgment under S. 17 of the Limitation Act to extend the period as a starting point of limitation claiming that the amount is paid under a mistake of law and he discovered the mistake when the judgment was delivered. However on the basis of this judgment the mistake must be treated as one that could have been discovered by the plaintiffs by due diligence on each occasion when he made the payments. The payments made under each permit cannot be treated as void nd they must get those orders set aside by seeking the remedies under the Act or in the suit when the jurisdiction is not ousted. However we hold apart from this infirmity that the suit itself is barred under Art. 113 of the Limitatin Act as this is a mistake which oculd have been discovered by the plaintiffs on the day on which they made the payments by exercising due diligence, the suit for recovery of such payments has to be filed within three years from the date of the payment and applying the said test, the present claim of the plaintiffs is clearly barred and the suits are liable to be dismissed on the ground of limitation.
53. However, we shall not disturb the decree granted in part as the State did not prefer the appeal. Once we hold that this is not a case where an Act or a statutory rule was struck down delcaring the law itself unconsitutional the diretionn in thejudgment under reference must be confined to the facts of that case and cannot be treated as a general direction given while declaring the law unconsitutional to be binding on the Civil Court.
54. In the result, the appeals are dismissed. We make no order as to costs.
55. Before parting with this judgment, we may say that the principle that the State should refund the tax collected under unconsitutional law, to the citizen is based upn the principle of equity. In U. S. A., as Willoughby states, it is a special doctrine applicable only in case of taxes paid to the State. So, basically it is desirable to develop an independent doctrine in public law based on equity instead of trying to solve this problem on the basis of doctrines applicable under private law. What was stated by one of us (Kodandaramayya, J.) in a judgment delivered sitting in a Division Bench in Godavari Trading Co., v. A. M. C. Palakol, (1984) 1 Andh LT 221 relating to the applicability of promissory estoppel in public law would equally apply in this case. We said "The principle of equity as stated by the American authority is "to prevent fraud or manifest injustice". Instead of esting the doctrine on the basis of contract, consideraton, detriment, or cause of action, it should be based upon equity governing the jural relationship between the State and the citizen when the citizen acted to his detriment on the declared policies of the State. In the interests of administrative law, an independent concept must be allowed to grow akin to doctrine of natural justice, colourable exercise of power, or an abuse of power based on general requirement of exercising consitutional or statutory power by the authorities without resting on literal meaning of consitutional or statutory provisions".
56. Appeals dismissed.