The Cotton Corporation of India Ltd. vs State of Punjab and Others

N.K. Sodhi, J.—This order will dispose of a bunch of twenty one writ petitions in which common questions of law and fact arise. Cotton Corporation of India Ltd. (for short the Corporation) a Government company registered under the provisions of the Companies Act is the petitioner in all these cases. For the sake of convenience facts are being taken from Civil Writ Petition 1600 of 1999.

By a notification dated 30.11.1990 the State of Punjab directed all the Municipal Committees in the State to Impose Urban Development Cess on the sale/purchase of Kapas (Raw Cotton), Narma and oil seeds made within the respective Municipal areas at the rate of 0.25% ad valorem. Thereafter, the Joint Secretary, Local Government, Punjab addressed a communication dated 5.12.1990 to all the Commissioners of Municipal Corporations, all the Executive officers of Municipal Committees and all the Executive Officers of Notificated Area Committees in the State issuing instructions and guidelines for effecting recovery of the Cess by the officials of the Municipal Corporations/Municipal Committees/Notified Area Committees. The legality and validity of the Cess as imposed was challenged by number of dealers by filing different writ petitions in this Court which were heard by a Division Bench which allowed the writ petitions on 19.8.1991 and the aforesaid notification was quashed, The respondents therein which were Municipal Councils/Municipal Corporations/Notified Areas Committees were directed to refund the amount of tax collected by them alongwith 12% interest thereon within one month from the date of the judgment. It is pertinent to mention that the corporation was not a petitioner in the writ petitions before the Division Bench. The State of Punjab and the Municipal Committees challenged the aforesaid judgment of this court in the Supreme Court by filing Special leave Petitions. When those petitions came up for hearing on 12.11.1991 the Hon''ble judges of the Supreme Court stayed the operation of the impugned judgment and passed the following order:

" Counsel heard. Leave granted, hearing expedited. The impugned order is stayed subject to the conditions that in the event of its being held that the respondents are entitled to refund amounts collected from them will be refunded with interest at the rate, of 12 per cent per annum. Printing of appeal paper books dispensed with provided proper paper books are prepared within six weeks."

The order was modified on 4.5.1992 in the following terms:

"Regarding the past our order dated 12.11.1991 will continue in force. As far as future is concerned the petitioners, if they collect any amount or amounts on account of the cess in question, undertake to keep a separate account in respect of the same and to deposit in this court after every three months. The amount deposited in court to be invested by the Registrar in a fixed deposit for a suitable time and to be renewed from time to time until further orders. It is clarified that after the date of High Court''s judgment, no amount can be collected by the concerned authorities on account of the cess in question subject, of course, to any orders passed by the court."

It is alleged by the. petitioner before us that in spite of the stay order granted by the Apex Court the Municipal Committees/Municipal Corporations/Notified Area Committees continued recovering the Cess which they were not otherwise competent to do. The appeals filed in the Supreme Court were finally dismissed on 25.11.1997 and the concluding part of the judgment of the Supreme Court reads as under:-

"The appeals must, therefore, fail and are dismissed.

The appellant shall refund to the respondents the amounts collected from them as and by way of the cess with interest at the rate of 12 per cent per annum from the dates of collection till the dates of payment.

No order as to costs."

The corporation like other dealers is dealing in the sale/purchase of Kapas (Raw Cotton), Narma and oil seeds and respondent-Municipal Council of Gidderbaha had recovered the Urban Development Cess from the former. After the dismissal of the appeals by the Supreme Court the corporation represented to the Municipal Council-respondent for the refund of Cess illegally recovered by it on the basis of the notification dated 30.11.1990 which had been struck down. The details of the amount paid by it as urban Development Cess were furnished to enable the Municipal Council to refund the same. Since the corporation did not receive any reply from the Municipal Council it served a registered legal notice through counsel claiming refund of the Cess recovered by the Municipal Council. The Municipal Council sent its reply dated 25.10.1998 through its counsel to the legal notice served by the corporation stating that the latter was not entitled to the refund of the amount as it had not filed any writ petition in the High Court and nor was it a party in the proceedings before the Supreme Court. It was also stated that those who filed the writ petitions were alone entitled to the refund. It was further stated in the reply that the judgment of the Supreme Court affirming that of this court was a judgment in personam and not in rent and, therefore, the corporation could not enforce the same. It was then that the corporation filed the present writ petition for a direction to the respondent-Municipal Council to refund the amount of Cess illegally collected by it on the basis of the notification dated 30.11.1990.

In response to the notice issued by this Court the Municipal Council has filed its reply. The facts as stated in the writ petitions have not been disputed. It is, however, pleaded that the amount collected from the corporation by way of Cess had been utilized in the Development work of the Municipal Council and, therefore, the petitioner is not entitled to the refund of the same. The stand taken in the reply to the legal notice has been reiterated.

We have heard counsel for the parties.

It was strenuously urged by the learned counsel for the Municipal Council that the writ petition was not maintainable as it had been filed for the recovery of money. This question need not detain us because the same stands concluded by a judgment of the Apex Court in M/s. Shree Baidyanath Ayurved Bhawan Pvt. Ltd. Vs. State of Bihar and others, wherein it was held that a writ petition for the refund of tax which has been declared unconstitutional is maintainable and even if such a petition were to be treated as only for the recovery of money, it fell outside the ordinary stream of the writ petitions. In the instant case when the notification dated 30.11.1990 was quashed, this court while allowing the writ petitions had directed the Municipal Committees/Councils to refund the amount so collected. Again when the judgment was affirmed by the Supreme Court their Lordships also directed that the Cess collected be refunded alongwith interest at the rate of 12% per annum from the date of collection till the date of payment. It is true that the corporation was not a petitioner in those petitions. But once the notification dated 30.11.1990 levying the Cess had been quashed any recovery made by the Municipal Council under such notification became illegal and, therefore, the Municipal Council was bound to refund the same as was ordered by the court in the case of other petitioners.

It was then urged that the corporation sold the goods to subsequent purchaser and had passed the burden of Cess to the next buyer of cotton, oil seeds etc. and, therefore, any amount of refund made to the corporation would amount to it being unduly enriched which is not permissible. He has referred to the judgment of the Supreme Court in Amar Nath Om Prakash and Others Vs. State of Punjab and Others, in support of his contention. We have carefully gone through this judgment and find that the same does not support the contention of the petitioner as it is clearly distinguishable. On the other hand, learned counsel for the petitioner placed reliance on State of Orissa and others and Orient Paper and Industries Ltd. and another Vs. Mahanadi Coalfields Ltd. and others, to contend that where levy of tax has been declared illegal and the court directed refund of the same, the principle of unjust enrichment cannot be invoked to deny the refund. This judgment is in all fours with the case in hand and supports the contention of the writ petitioner.

In the result, the writ petitions are allowed. The Municipal Councils/Corporations/Notified Area Committees are directed to refund within six months to the corporations the cess collected from it alongwith interest at the rate of 12% per annum from the date of collection till the date of payment. There is no order as to costs.