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Judgment
R.N. Misra, J.—Plaintiff has appealed against the reversing judgment and decree of the learned Additional Subordinate Judge of Berhampur in a suit for recovery of money.
Plaintiff was a licensed dealer under the Orissa Rice Procurement (Levy) Order, 1964 (hereinafter referred to as the Levy Order). Under the Levy Order, Plaintiff was obliged to sell to the Union of India a part of his stock of rice. The Union Government had posted officers at various places to work out the scheme and supplies were being received at different rail-heads.
Plaintiff''s supplies were (effected to officers working under the control of an Assistant Director (Food), posted at Khurda Road and the material supplies were effected on 4-2-1965, 25-2-1965, 9-3-1965 and 27-4-1965, the total value being about Rs. 41,500/ -. Payments for these supplies were effected between 16-2-1965 and 16-8-1965. Plaintiff, who happened to be a registered dealer under the Central Sales-tax Act, demanded Central sales-tax on the transaction. Thereupon, the Assistant Director (Food) instead of paying the sales-tax passed on to the Plaintiff two written under takings under Exts. 3 and 3/a to the effect that if the party was made liable to pay purchase or Sales-tax in accordance with the provisions of law in force at any future date, the President of India undertakes to reimburses the amount of tax to the party. Plaintiff refuted liability of sales-tax on these transactions before his assessing officer, but he overruled the objections and raised demands in 1967. Plaintiff was thus obliged to pay the amount and asked for recovery from the Union Government in terms of the two undertakings. When Plaintiff''s demand was not accepted, after giving due notice u/s 80 of the Code of Civil Procedure, Plaintiff filed the suit on 15th of March, 1969.
In the suit, apart from the Union of India, one H.L. Khosla, who had given the undertakings under Ext. 3 series, was also impleaded as a Defendant. The Union of India took the stand that supplies effected under the Levy Order were not sales and, therefore, no sales-tax was exigible. It was the obligation of the Plaintiff to dispute his liability to be assessed and he should not have acquiesced to the demand. It was next contended that the undertakings did not bind the Government of India, inasmuch as the second Defendant had no authority to act on behalf of the President and, therefore, there was no compliance of Article 299(1) of the Constitution. The suit claim was said to be barred by limitation.
The second Defendant in a separate written statement claimed that he had no authority as such to give the undertakings, but when the Plaintiff demanded such undertakings if sales-tax was not to be paid, he contacted the Joint Director and Deputy Director then posted at Cuttack and furnished such undertakings.
The trial Court accepted the extent of supply of rice as pleaded by the Plaintiff; found Defendant No. 2 to be duly authorised to act on behalf of the Union Government and, therefore, the undertakings were binding on the Government of India; he exonerated the second Defendant from personal liability; found a part of the claim to have become barred by limitation and decreed the suit for Rs. 840.76.
The Defendants appealed against the decree and the only point they canvassed in appeal was that the second Defendant qua Assistant Director (Food) had no authority to give the undertakings and, therefore, Government were not bound to reimburse to the Plaintiff sales-tax recovered from his on the transactions in question. The lower appellate Court came to hold that the second Defendant had no authority to act on behalf of the President of India and, therefore, the undertakings were not binding and provisions of Section 70 of the Contract Act were not applicable to the case. Accordingly it reversed the decree and dismissed the suit. This second appeal has been carried against the reversing judgment and decree.
When the second appeal came up for hearing before a learned Single Judge counsel for the Appellant relied on a Single Judge, decision of this Court Messrs. Haji Abdul Rahman Haji Abdula v. The Union of India 40 (1974) C.L.T. 632. while counsel for the Respondents relied on another Single Judge decision of this Court delivered on 16th October, 1974, in Union of India v. Messrs. Pravat Rice Mills F.A.No 100 of 1971 -D/16-10-1974. As the learned Single Judge was of the view that the judgments expressed conflicting views, he referred the second appeal for disposal by a Division Bench. That is how the second appeal has now come before us for final disposal.
That supplies under the Levy Order amount to sale is no more disputed in view of a Division Bench decision of this Court in the case of Union of India (UOI) Vs. Shri Jagannathpur Rice Mill, . Undoubtedly, the seller is liable to pay the tax on the sale transaction. In the case of The Tata Iron and Steel Co., Ltd. Vs. The State of Bihar, , the Supreme Court held:
.... The circumstances that the 1947 Act, after the amendment, permitted the seller who was a registered dealer to collect the sales tax as a tax from the purchaser does not do away with the primary liability of the seller to pay the sales tax. This is further made clear by the fact that the registered dealer need not, if he so pleases or chooses. collect the tax from the purchaser and sometimes by reason of competition with other registered dealers he may find it profitable to sell his goods and to retain his old customers even at the sacrifice of the sales tax. This also makes it clear that the sales tax need not be passed on to the purchasers and this fact does not alter the real nature of the tax which, by the express provisions of the law, is cast upon the seller. The buyer is under no liability to pay sales tax in addition to the agreed sale price unless the contract specifically provides otherwise...
One of us in the case of Union of India v. Jagannathpur Rice Mill ILR 1971 Cutt 1339, examining the same position, observed:
.... The legal position in regard to sales tax can be restated thus. It is a burden on a registered dealer which can be passed on to his purchaser. It is open to the registered dealer not to realise the tax from the buyer. In the present case the Plaintiff dealer never wanted the sales tax to be borne by it, nor was it stipulated that the transaction would be free of sales tax and the buyer would not be saddled with the incidence of sales tax. On the other hand, the Defendant had undertaken to bear it provided it was a burden created under law. When the demand was raised under the provisions of the Central Sales Tax Act the undertaking of the Defendant became operative and the Plaintiff became entitled to reimbursement. Public duty in the present case required the Plaintiff to make the sale and did not cast the liability of making the sale free of sales-tax, nor did it relieve the purchaser of the liability to pay sales-tax. Thus in regard to payment of sales tax no provision was made in the Order keeping the dealer or the purchaser in view. The general law was allowed to hold the field....
The Defendants had been taking the stand that the transactions with the Union of India were not exigible to sales-tax. Plaintiff''s evidence clearly shows that he had demanded sales-tax while raising bills for payment, but sales-tax was not paid and in lieu thereof, the undertakings had been given.
Mr. Das for the Respondents does not dispute the position that it was open to the Plaintiff to claim sales-tax over and above the statutory price prescribed under the Levy Order. He has advanced the contention that if the undertakings are non est for not satisfying the requirements of Article 299(1) of the Constitution, Plaintiff''s suit having been filed beyond three years from the transactions, the same must be dismissed as barred by limitation. The undertakings are in similar terms and for convenience, we may extract Ext. 3;
This is to certify that M/s. Sri Gobinda Panigrahi, Berhampur, have booked rice of the following consignment, on behalf of the President of India, in pursuance of THE ORISSA RICE PROCUREMENT (LEVY) ORDER, 1964 - Order No. G.S.R. 1738 Dated 1-12-1965 of the Ministry of Food and Agriculture (Deptt. of Food). If the party is made liable to pay any purchase or sales-tax in accordance with the provision of law in force at future date, the President of India hereby undertake to reimburse the amount of tax to the party.
Particulars of Consignment:
xx xx xx xx
Ext. 3 is dated 28-8-1965 while Ext. 3/a is dated 29-7-1965. Asked as to what would be the appropriate Article of the Limitation Act to govern the suit. Mr. Das for the Respondents did not point out any, while the Appellant claimed that Article 23 would be applicable. That Article provides:
For money payable to Three years When the money the Plaintiff for is paid. money paid to the Defendant.
If the 3-year rule of limitation is applied and the period of limitation is found to run from the dates of the transactions or even the dates of the undertakings, the suit having been filed on 15th of March, 1969, and the period of limitation being three years, the suit would certainly be barred by limitation. But if the undertakings are accepted, the liability to reimburse would start when Plaintiff is assessed to sales-tax. As we have already indicated, it was open to the Plaintiff as a registered dealer to demand sales-tax on the transactions and Plaintiff''s demand had been avoided by passing on to him the two undertakings. In terms of the undertakings, the cause of action would arise from the date when Plaintiff is made liable to pay sales-tax on the transactions. Therefore, it becomes very much necessary now to decide whether the two undertakings would bind the Union Government.
A notification marked Ext. A has been produced by the Defendants to show that the Assistant Director (Food) was not authorised in terms of Article 299(1) of the Constitution. The notification reads thus:
MINISTRY OF LAW
New Delhi, the 1st December, 1958.
G.S.R. 1161: In exercise of the powers conferred by Clause (1) of Article 299 of the Constitution, and in supersession of the Notification of the Government of India in the Ministry of Law No. S.R. Order 3442, dated the 2nd November. 1955, the President hereby directs that the under-mentioned contracts and assurances of property made in the exercise of the executive power of the Union may be executed on his behalf as follows:
xx xx xx
In the case of the Ministry of Food and Agriculture:
VII. B - In the case of the Department of Food:
1(a) All contracts and instruments relating to purchase, supply and conveyance or carriage of materials, stores, machinery and Food grains:
(b) ...
(c) ...
By the Director General of Food, Deputy Director General of Food, Deputy Secretary, Under-Secretary, Regional Directors (Food), Directors, Joint Directors, Deputy Directors, The Chief Director of Purchase, The Director of Purchase, Joint Director of Purchase, Deputy Director of Purchase or Assistant Directors of Purchase...
It is claimed that the Assistant Director (Food) was not included in the authorised category and, therefore, he had no authority to give the two undertakings under Ext. 3 series.
This question was examined by one of us in the case of The Union of India v. Bipra Charan Panigrahi and Anr. 42 (1976) C.L.T. 863, and it was observed at page 868 of the Reporter thus:
That the Assistant Director of Food was designated as the Assistant Director of Purchases is not disputed. That he was the man on the spot dealing with the matter is also not disputed. Mr. Das no more disputes the position that supplies effected for price under the scheme would constitute sales in view of a series of decisions of the Supreme Court and of this Court. At the time when supplies were effected, the Union of India as purchaser was obliged to pay sales-tax. That had been deferred because the position was not very certain then and Plaintiff had in lieu of the tax accepted the undertakings. Taking an overall picture of the matter, I do not think, the Courts below have gone wrong in holding that the Assistant Director concerned was not entitled to give the undertakings. In fact, no additional liability has been created for the Union of India except that what should have been paid contemporaneously with the transactions has been undertaken to be paid if liability of the Plaintiff accrues. I would accordingly negative the contention advanced on behalf of the Appellant and hold that the undertaking bound the Union of India because apart from anything else it derived a benefit of postponing the liability to pay sales-tax to a future date. Defendant No. 1 is estopped from taking the stand that the undertaking did not bind it. In fact, if the undertaking had not been given, Plaintiff would have insisted upon payment of sales-tax contemporaneously and he changed his position relying upon the undertaking given by no other person than the person who was representing the Union of India at the spot for the dealings between the parties. The first contention of Mr. Das must accordingly fail.
The terms of the undertaking have already been extracted. Cause of action for the Plaintiff would arise when Plaintiff pays sales-tax because the undertaking is for reimbursement. A is said to reimburse B when on account of A, B has spent some money and on claim being raised by B, A pays the amount. Cause of action for reimbursement thus arises only when Plaintiff has paid the tax on account of the Defendants. It is conceded that the suit is within limitation from either the date of assessment or the date of payment of the tax...
I In this decision, an unreported decision of this Court in Union of India v. Messrs. Pravat Rice Mill F.A. No. 100 of 1971, was dealt with and distinguished.
We are inclined to agree with the view indicated in The Union of India v. Bipra Charan Panigrahi and Anr. 42 (1976) C.L.T. 863, in regard to the binding character of the undertakings. One additional feature in this case is the written statement of the second Defendant. In paragraph 4(a) of the written statement, he pleaded:
This Defendant was not empowered under Article 299(1) of the Constitution of India, to enter into any contract or give any undertaking on behalf of the Union of India. The Joint Director of Food and the Deputy Director of Food, who were stationed at the time, i.e. in the year 1965 at Cuttack only were empowered in that behalf. The Plaintiff was in immediate contact with this Defendant as the Field Officer who looked after the consignments of the rice by the Plaintiff. The Plaintiff accordingly approached him, to issue the sales-tax declaration under his signature so that he would get it ratified by competent authority. This Defendant, at first, hesitated to do so, but he was persuaded by his office that there was no harm in his signing and giving the declaration prayed for since it had no legal significance unless ratified either by the Joint Director or the Deputy Director. The Plaintiff was fully aware of the real position and it was at his instance the declaration above referred to by this Defendant was signed and issued.
There is absolutely no evidence to support the plea that Plaintiff was aware of the fact that Defendant No. 2 had no authority to execute the undertakings, but the plea is a clear admission of the fact that the Plaintiff was anxious to pass on the incidence of sales-tax and but for the undertakings would have pressed for payment of sales-tax. Once the undertakings bind the Defendant No. 1, the suit must be held to have been filed within the period of limitation and the Defendants'' liability to reimburse the Plaintiff is not open to dispute.
The second appeal is, therefore, bound to succeed. We accordingly allow the appeal, vacate the judgment and decree of the lower appellate Court and restore those of the trial Court. The Plaintiff shall be entitled to costs of the suit thought and the amount decreed shall carry pendente lite and future interest at six per cent as claimed in the suit by the Plaintiff.
N.K. Das, J.
I agree.