State Trading Corporastion Of ... vs Dalmia Cement (Bharat) Ltd.
1992 Latest Caselaw 294 Del

JUDGMENT

Usha Mehra, J.

(1) State Trading Corporation of India Ltd. has claimed Rs. 14,62,465.73p against M/s. Dalmia Cement (Bharat) Ltd. en account of refund of the deposit made by the plaintiff with interest at the rate of 12. per cent per annum. In. short, the case set un by the plaintiff is that Government of India vide Cement Control Order 1958 (hereinafter called the Order 19581 entrusted the plaintiff With the duty of distribution of cement in India. The defendant at the relevant time was manufacturing and selling cement in the State of Tamil Nadu. Defendant in pursuance to Order 1958 started supplying cement to plaintiff or ii.s agents and other persons as per the directions cf the plaintiff. The Sales Tax authoritier; under Madras Central Sales' Tax Act. claimed Sales Tax horn the defendant for the supplies /;salcs of cement made for and on behalf of the plaintiff of under its direction and also demanded sales tax in respect of'the element of packing charges involved in the sales/supplies made. On this demand being made, the defendant sought reimburse merit of the same from the plaintiff denied its. liability to pay such lax. however agreed to deposit with the defendant Rs. , and 1. 69,196.26 p totalling Rs. 5,66.734.95p. The amount was paid on the condition that thc defendant would contest the liability of payment of tax on the said packing element. The High Court of Madras accepted the objections of the defendant and allowed the writ petition in favor of the defendant and against the Sales Tax Authority. Madras High Court quashed She demand of levying of Sales Tax on the element of packing charges, State Authority was directed to refund the amount to defendant. Since no tax was leviable, the defendant became liable to refund back Rs. 5,66,734.95P to the plaintiff. When amount was demanded by the plaintiff, the defendant put up the excuse that Sales Tax Authority had filed appeal in Supreme Court. it was also put up by the defendant that they were entitled to a sum of Rs. 3,38,523.92P on account of interest as the defendant Was made to pay the tax to the Sales Tax Authority and thus incurred loss by way of interest which according to defendant. plaintiff was liable to pay. Beside interest defendant also claimed Rs. 9,493.68P as cost of litigation, Defendant offered to refund plaintiffs amount minus Rs.3,48.057.40p. The Supreme Court upheld the contention of the defendant. After the appeal filed by the Sales Tax Authority was dismissed. by Supreme Court, the plaintiff demanded the refund of the amount deposited with defendant. The defendant put up the excuse that the question of levy of sales tax on the element of packing charges was still pending with the Tribunal, hence unless and until, matter finally adjudicated, money could not be refunded. Ultimately vide letter dated 14-11-75 defendant informed that all pending matters regarding said levy had been finally decided in their favor and that there was no tax liability on any account. However. the defendant instead of refunding the full amount deposited by the plaintiff offered to refund only Rs. 2,08,985.47p. less the defendant's claim on account of interest account of.interest and cost plaintiff at no stage admitted its liability to pay sales tax on any account hence denied the right of the defendant to deduct any amount from. plaintiff's money. Since the defendant has failed to refund the amount. hence this suit.

(2) Defendant beside contesting the suit on. merits also took legal plead .hat suit was haired by time. According to defendant as per the regulations governing the sale and supply of cement at the relevant time, as soon as the cement was manufactured by the defendant, it stood acquired by inc plaintiff and thereafter sale. and distribution of the cement was by and on behalf of the plaintiff. State of Tamil Nadu charged sales tax on the transaction of supply of gunny bags Along with the cement by the defendant to plaintiff or; the plea that the packing element amounted to sale. Defendant had represented to the plaintiff that since plaintiff had acquired the cement vide Order 1958, if any sales tax was charges tax was charged responsibility was. that of the plaintiff, as the supply was affected by or on behalf of the plaintiff. Hence Plaintiff was liable to reimburse the same. It was also made clear that all expenses to be borne by defendant on litigation would be recovered from the plaintiff. The amount paid by the pontiff was. towards its liability and nut trust as alleged. Since substantial amount was deposited by the defendant with Sales Ta.x Authority which liability was that of the plaintiff, hence the defendant was entitled to de-duct the amount of interest for blocking their amount with the Sales Tax Authority and also spent money for pursuing litigation on behalf of the plaintiff. Hence are entitled to deduct the amount on both counts i.e. interest and costs. Defendant never admitted or acknowledged its liability to pay sales tax.

(3) On the pleadings of the parties following issues were framed:-- "1. Whether the plaint is signed and verified by a duly authorised person on behalf of plaintiff (OPP) 2. Whether the sums of Rs 4.97,538.69p and Rs. 69,196.26P (total Rs. 5.66.734.95P) were placed by the plaintiff with the defendant by way of deposit and in trust, as alleged? (0?P) 3. Whether the said sum of Rs. 5,66,734.95P was paid by the plaintiff to the defendant for the specific purpose of Madras Sales Tax and Central Sales Tax. claimed by the State of Tamil Nadu, under the Madras General Sales Tax Act and Central SalesTax Act in respect of element of packing charges involved in the sales/supplies of cement by the defendant to or on behalf of the plaintiff, on the express understanding and assurance, that the same would be refunded to the plaintiff without demur if the Madras High Court held, in the pending writ proceedings, that no such tax was leviable? (OPP) 4. Whether the Supreme Court, having finally affirmed the judgment of the Madras High Court, holding that no such tax was leviable, the defendant could retain the said sum of Rs. 5,66,734.95P, paid an aforesaid ? (OPD) 5. Whether the plaintiff became entitled to refund of the said sum of Rs. 5.b6,734.95P on the Hon'ble Supreme Court's upholding the- judgment of the Madras High Court vide its judgment dated 22nd November, 1972 and finally on the culmination of all proceedings in relation thereto and after it was finally decided that no such tax was due, as intimated by the defendant to the plaintiff, vide its letter Hated 14th November, 1975 (Ex. PI) ? (OPP) 6. Whether the defendant is entitled to interest, as claimed or otherwise, from the plaintiff in respect of Madras General Sales Tax and Central Sales Tax paid by the defendant to the State of Tamil Nadu in respect of element of packing charges and/or expenses incurred in contesting the said liability? (OPD) 7. If issue No. 6 is held in favor of the defendant, whether the defendant's claim in regard to interest and expenses is within time? (OPD) 8. If issues No. 6 & 7 are held in favor of the defendant, what was the amount so paid, when was amount so paid, when was the amount so refunded, what would be the rate of interest payable and for what period and what was the expense incurred by the defendant to contest the said liability? (OPD) 9. Whether the defendant company is entitled the interest claimed or found to be expense claimed or found to be payable, from the said sum of Rs. 5.66,734.95P paid by the plaintiff to the defendant, as afoewsaid, in these proceedings? (OPD) 10. Whether the plaintiff is entitled to interest on the suit amount and if so, from which date and at what rate? (OPP) 11. Whether the plaintiff is entitled to costs of the suit? (OPP) 12. Whether the suit is within time ? (OPD) 13. Whether in view of the stand of the defendant that since the judgment of the Madras High Court was the subject- matter of an appeal before the Hon'ble Supreme Court, at the instance of. the State of Tamil Nadu. it was not liable to refund the suit amount to the plainliff, unless the plaintiff gave an undertaking to reimburse the defendant in respect of the various amount paid by it or that may be found due from it towards the .Madras General Sales-Tax or Central Sales-Tax, On the said element of packing charges, or on account of the pendency of the said appeal. in the Hon'ble Supreme Court, the cause of action for refund of the suit amount, arose to the plaintiff firstly on 22nd November, 1977 when the Supreme Court upheld the judgment to the Madras High Court? 14. Whether in view of the defendant's stand, after the judgment of the Hon'ble Supreme Court dated 22nd November, 1972, that since proceeding in respect of the subject assessment years, pertaining to the said liability of sale.-tax, on the said element of packing crhages, were still pending before the Sales Tax Appellate Tribunal (Additional Bench), Madurai. under the Madras General Sales Tax Act, 1956. and until the said cases were decided, it could not be said that the question of levy of sales tax in respect of the said clement, of packing charges had been completely and finally disposed of (vide defendant's l letter dt. 31st January 1st Febrnray, 1973, annexure, E' to the plaint) and intimation of the defendant to the plaintiff by its letter dated 14th November, 1973 (annexure 'F' of the plaint.) that the same had been finally disposed of in favor of the defendant, the causs of action for refund of the suit amount finally arose to the plaintiff only on receipt of the said letter dated 14th November, 1975? (OPP) 15. Whether the defendant's letter dated 21st of May, 1969 read with annexure 'V' thereto (annexure 'C' to the plaint), letter dated 31 si January 1st February, 1973 (annexure 'E' to the plaint) and letter dated 13th November, 1975 (annexure 'F' to the plaint), addressed to the plaintiff, constitute acknowledgement of liability on the part of the defendant in favor of the plaintiff in respect of the suit amount of Rs. 5,66,734.95P or any part thereof, as alleged and extend the period of limitation ? 16. To what relief, if any, is the plaintiff entitled to? (OPP.)"

(4) Issue No. 1: Plaintiff vide testimony of Shri Narinder K. Bhatnagar, PW-1. proved that he was competent to sign, verify and institute the suit. In this regard he relied on the Memorandum Article of Association, Ex. P-3 and the Resolution of the Board, Ex. P-4. Mr. Vohra's contention that Mr. Bhatnagar was not authorised to institute the suit is belied from the bare reading of Ex. P-4 i.e. (he Resolution of the Board. Clause (a) of Ex. P-4, empowers the Finance Manager to sign. verify and institute the suit. Mr. Bhatnagar was the Finance Manager at the relevant lime. On this there is no cross examination nor any rebuttal. Therefore, in view of the testimony of Mr. Bhatnagar coupled with the Resolution of the Board Ex. P-4, empowering Mr. Bhatnagar to sign. verify and institute the suit, I hold that the suit has been properly instituted. This issue is accordingly decided in favor of the plaintiff.

(5) Issues No. 2 to 5: Issues 2 to 5 are interlinked and are disposed of by one order. Few of the admitted facts: which have come on record are, that plaintiff gave a sum of Rs. -'4.97,,538.69P towards the Madras Sales Tax and Rs. 69.196.25P towards the Central Sales Tax to the defendants, totalling a sum of Rs. 5,66,734.95p. It is also an admitted fact on record that this amount was paid by the plaintiff to the defendants vide letter Ex. D-3 with the conditions stipulated therein as mentioned in paras 4, 5 & 6 of the said letter which are reproduced as under:- "4.Taking into consideration all file view points raised by you in your various communications from time to time and as a special case, we agree to the reimbursement of the above mentioned sales tax amount as well as the amount of penalty imposed subject to the following conditions:- (i) You would contest the appeals etc. with one diligence and in the manner required by us and. would keen us posted with the developments from time to time. (ii) If ultimately the imposition of tax and/or penalty is quashed, you would refund such amounts of tax and/or penalty to us without demur. (ili) In the event of default on your part in refunding the amount to us, we would be entitled to recover such amounts from any moneys that may be due to you from us or that may become due to you."

(6) We are advising our. Finance & Accounts division by forwarding a copy or this letter to arrange payment to you of the amounts mentioned above. In the meantime, we would request you to kindly let us have your confirmation To the conditions mentioned above.

(7) It is also a fact that condition No. 4 mentioned above was acknowledged by the defendant vide their letter Ex. D-32, dated 23rd July, 1965, wherein the defendant stated as under:-    "ASdesired, we hereby convey our confirmation of the conditions mentioned in para 4 of your letter under reply."  

(8) It is also an admitted fact on record that the defendant filed the writ petition challenging the assessment order made by the State of Tamil Nadu and also vide appeal against the assessment orders to the Tribunal, on the advise and instructions of the plaintiff. It is also a fact on record that the Madras High Court upheld the contention of the defendant that the supply of gunny bags did not amount to sale. This decision of the Madras High Court was upheld by the Supreme Court in the case of State of Tamil Nadu V. Cement Distributors Pvt. Ltd., wherein Supreme Court held:    "SINCE the price of gunny hairs in which cement was supplied to the Stc under the Cement Control Order 3958 was controlled and fixed by the Central Government during the relevant periods from time to time. Under Clause 6(14) of the Order, the supply of gunny bags by the producers did not amount to sale and the producers were not liable to pay sales tax on the turnover relating to gunny bags."  

This decision of the Supreme Court was rendered on 22nd November. 1972. By virtue of High Court's decision the sales tax authorities refunded the amount of the tax deposited by the defendant.   

(9) Now the Question for consideration is whether this amount which the defendant was forced to pay pursuance to order of Sales Tax Authority was an illegal exaction, and therefore, the plaintiff was not liable- to pay for the same. To answer this question one has to look towards the documents as well as the evidence led by both the parties. So far as the statement of Mr. Narinder Bhatnagar. Public Witness -1. is concerned this is of no help to establish as to whose responsibility it was- to pay the sales tax. Mr. Vohra contended that it does not behave for the plaintiff to contend that it was illegal exaction. it became illegal exaction only after the legal pronouncement. If the Courts had not set aside the orders of the Sales Tax Authorities it could not be called illegal exaction. When demand was made it was. legal, so far Madras Sales Tax Authority was concerned and defendants were bound to pay the same. Since it was contested by the defendant hence it became illegal exaction. The question, therefore, for consideration is that the amount of sales tax deposited with the Deptt., whose responsibility it was? In this regard reference can be made to the evidence adduced. To a Court question Mr. Bhatnagar stated that in case the High Court and the Supreme Court had decided against the defendant, the plaintiff would have recovered this amount from the defendant. On the other hand Mr. N. Ramachandran, DW-1 and Mr. S. N. Mittal Law Officer of the defendant, DW-2, have testified that it was the duty of the plaintiff to pay the sales tax because the plaintiff had been allocating the cement to various dealers under the Cement Control Order. The sale voucher? used to be prepared by the Sales Manager of the plaintiff It was plaintiff's representative who used to prepare the sales vouchers in favor of the dealers Paying the price in accordance with the said Control Order. The Sales Manager of the plaintiff used to collect the sales tax of both kinds from the dealers separately. The element of sales tax went into the account ofthe dealers. Defendant had no role to collect the price of the cement or the element of packing material. So far as the manufacturing of the cement was concerned, it was not taxable admitted fact on record, nor the defendant had been paying tax on the manufacturing of the Cement. Since the plaintiff requisitioned the cement by Control Order 1958, the defendant under law was compelled to supply the cement with the gunny bags to the nominees or to the dealers appointed by the plaintiff. This requisition has been held by the Supreme Court to be not a sale. Since it was not a sale and the supply was made at the directions of the plaintiff, the defendant was acting as an agent of the plaintiff. Therefore, the amount of sales tax deposited with authority by the defendant was agent of the plaintiff. Plaintiff being principal is liable to reimburse the defendant for the loss suffered by it on account of having deposited the tax winch ultimately was held not liable to be paid.

(10) Mr. Mittal, DW-2, has gone to the extent of saying that there was no element of bargaining in the fixation of the price Of the gunny bags, Defendant could only charge that price which was fixed by the Government. Both the parties had accepted this position that the price payable in respect of the element of packing charges was not subject to levy of tax. When the sales tax authority reopened the assessment for the year 1962-63, 1963-64, 1964-65,the fact was. brought to the notice of the plaintiff, who in turn advised the defendant to challenge the same. Plaintiff further instructed the defendant from time to time as to what pleas were to be taken for opposing the said order. It. was at the advise or the Joint Divisional Manager (Law) and of Deputy Divisional Manager (Sales) that the defendant filed aippeals, against the assessment orders. According to Mr. Mittal, since the defendants were contesting the assessment orders at the instance and under the directions of the plaintiff, it amounted to acceptance of liability by the plaintiff. This he has tried to fortify by various letters exchanged between the parties and drew the reference to letter Ex. DW-2/1 dated 28-7-77. He also testified that the supply of cement was not being made by the defendant to the actual ceaiers. it was being made through the selling agents of the S.T.C. .i.e.. plaintiff.

(11) From the documentary documentary placed on record, it is clear that it was the plaintiff who had been directing the defendant to contest the case and what pleas should be taken. In this regard reference can be had to Exs. D-l to D-5, D-6, D-7, D-10 and D-14. Vide Ex. D-14, directions were given by the plaintiff to the defendant to file the Revisions before the Deputy Commissioner of Commercial Taxes against provisional assessments and was also intimated that after the decision of the said application, the question of reimbursement would be considered. The said letter is dated 1-3-66, followed by letters E.x. D-15, D-18, D-23 & D-25. From the perusal of these letters it is apparent that the plaintiff had been intimating to the defendant as to what pleas are to be taken and whether the appeal was to be filed or writ was to be filed or revision was to be filed. Therefore, it is apparent that the defendant had been contesting the case, up to the Apex Court, for and on behalf of the plaintiff and' under the instructions and guidance of the plaintiff. Mr. Vohra, Sr. Counsel for the defendant.. contended that there was no need for the defendant to contest these litigations and to deposit the money with the sales tax authorities. H the liability was not that of the plaintiff the defendant would have right away stopped the supply of the cement and had filed a suit for recovery of the amount paid by it to the said department. This has also been so testified by Mr. Mittal DW-2. Law Officer of the defendant. According to DW-2. the defendant was paid only the price of the cement so supplied as fixed and specified in she schedule attached to the said Cement Control Orders. The defendant had no choice in demanding the price or selecting the customers The price payable by the plaintiff to the defendant. in respect of these gunny bags was fixed by the Government of India. There was no element of bargaining in the fixation of the price of the gunny bags. These gunny bags were not manufactured by the defendant. According to him if was the plaintiff who was liable to pay the amount of sales tax and if the assessments were set aside, the beneficiaries' were also the plaintiff. It was understood by both the parties that just like the supply of the cement by the defendant to the plaintiff did not attract the levy of the sales tax. Similarly the element of packing charges did not attract the sales-tax. If it had not been so, there was no problem for the defendant to charge the sales tax and collect it from the plaintiff and pay to the revenue. It was not going out of the pocket the defendant, therefore, this answer of Mr. Mittal,DW-2. clearly indicate that if the defendant had the authority to collect the price of the cement Along with the tax, the defendant would have done it, and after collecting the same from the plaintiff would have paid to the revenue authorities. Therefore, in either case the defendant was not a looser. Because if the defendant was selling the cement and was liable to pay the tax on the gunny bags he would have recovered the same from the plaintiff's customer and would have paid to the revenue authorities, the customer in this case is the plaintiff. But that is not what the Supreme Court has held. Since it was not a sale and the defendant was not the seller, but infact the Stc, plaintiff which was the seller, therefore, it was not for the defendant to collect the same and pay to the department. Therefore, Mr. Vohra rightly contended that, had this responsibility been entrusted to the defendant, the defendant would have recovered the same from the customers or stopped supply of the cement in gunny bags till it was decided as to who was liable to pay the tax. I find force in this submission of Mr. Vohra. the correspondence exchanged between the parses and the advise rendered by the plaintiff to the defendants' as io how to draft the appeals and writs and what pleas were to be taken, clearly establishes that the plaintiff through the defendant was challenging its liability to pay the sales tax.

(12) From the evidence discussed above, it is apparent that, bad Courts not set aside the order, the supply of cement by defendant to plaintiff would have amounted to sale. In that case purchaser would be liable to nay the tax. Plaintiff being the purchaser would have to pay the tax. But after the Supreme Court judgment when it was held that this- transaction was not sale, the liability of paying tax on element of packing did not arise. Since defendant was forced to deposit the sales tax, ft can be stated that the defendant by doing so was acting as an agent of the plaintiff. Therefore, if the sales tax authority's order had not been quashed, to my mind, the responsibility would have been that of the plaintiff, to pay the sales tax on the sale of cement as well as on the element of packing charges. The defendant had infact no role to play in the supply of the cement. Neither the defendant could fix the price nor could sell the same in the open market. All the transactions which took place fur the supply of the cement were for and on behalf of the plaintiff, therefore, the sales tax on the element of packing charges, if at all it was to be levied had to be paid by the plaiatiff. Now, since the Supreme Court has declared the said demand of the sales tax authority as illegal and quashed the order, the plaintiff cannot say that it was an illegal exaction, and therefore, not liable to pay the damages suffered by the defendant on account of such illegal exaction. Admittedly Supreme Court has held that both the parties were not liable to pay the sales tax, but the question is not for the payment of sales tax. The question is who should bear the loss on account of this illegal exaction.? Defendant has suffered the loss on account of depositing huge amount from time to time under intimation to plaintiff with the sales tax authorities on the element of packing charges which was not due, and if it all payable, ought to have been paid by the plaintiff. Therefore, the only irresistable conclusion which can be arrived at is that since it was the duty of the plaintiff to have paid the sales tax, if it had not been quashed, consequently the amount deposited by the defendant with the sales tax authority was for and on behalf of the plaintiff. Hence any loss suffered by the defendant was on behalf ofthe plaintiff.

(13) Mr. Watal's contention that the sales tax was not paid for and on behalf of the plaintiff, to my mind, has no force, in the facts and circumstances of this case. Plaintiff had previously also admitted its liability of paying the sales tax as is apparent from letter Ex. D-8. Plaintiff for the present demand though initially denied its liability but ultimately by its conduct accepted the same when it agreed to reimburse the defendant vide Ex. D-3. Hence, it cannot be said that the amount of Rs. 5,66,734.95P was a trust amount nor the plaintiff can deny its liability by saying that it was an illegal exaction. Nor can it be said that in letter Ex. D-3, the word demure would mean that the defendant had no right to claim adjustment of the damaged suffered by it on account of the order passed by the sales tax authority for the deposit of the amount. There is no doubt that the defendant was to refund ibis amount to the plaintiff and the defendant has expressed its desire to refund the same, but subject to adjustment of the expenses incurred by it by way of litigation expenses and on account of the interest lost by depositing the amount, with the sales tax authorities. Admittedly the defendant is not justified to keep the full amount of Rs. 5,66,734.95P. But has a right to adjust the same which right has not been challenged before me, rather this adjustment was accepted by the plaintiff vide its letter Ex. DW-2/l dated 28-7-77, whereby plaintiff intimated to the defendant that the plaintiff was prepared for the settlement with the defendants. Plaintiff was also prepared to pay interest on the amounts deposited by the defendants with the sales tax authorities from the date of deposit till the date of refund by the said authority and the rate of interest payable was as per prevalent and fixed by the Reserve Bank of India, during the relevant time.

(14) Mr, Watal, on the other hand contended that since the plaintiff had never acknowledged its liability, the defendant ought not to have paid the amount, nor the plaintiff can be made liable for the same. I am afraid this argument has no force, as already observed above the defendant had no role to play in this case. He was only acting as an agent of the plaintiff under the Cement Control Order of 1958. Defendant had no axe to grind. It was a legal compulsion under which he was supplying the cement to various dealers as well as to the nominees of the plaintiff. The defendant was only receiving the price of the cement and the gunny bags, and that too as fixed by the Government of India therefore, the plaintiff by merely saving that it did not acknowledge the liability cannot escape from its liability. It was not the responsibility of the defendant to pay the sales tax and since it was not the responsibility of the defendant, therefore, the liability vested with the plaintiff. Mere denial will not absolve it from such a liability. The liability to reimburse was claimed by the defendant in the facts and. circumstances of this case. The title in the goods, on account of the Cement Control Order, had passed from the defendant to the plaintiff. The plaintiff having become seller of the goods was bound to reimburse the defendant the loss suffered by the defendant for having deposited the amount with the sales tax authorities which was ultimately quashed, by the Supreme Court. Tnfaci Mr. Vohra rightly posed the question, why should the defendant act on behalf of the plaintiff and incur expenses for contesting the case? Why should the defendant arrange funds through other sources and deposit with the sales tax authorities particularly when supply of cement was made by the defendant at the behest of the plaintiff? No prudent person would waste his money for some one else unless he is assured or any undertaking given that he would be reimbursed. The reimbursement in this case was done as is clear from Ex. D-3, with the conditions as pointed out above that the defendant shall contest the case to the best of its ability and refund the amount after succeeding in the case. The defendant pursuance to the wishes of the plaintiff contested the case up to the highest Court and won the same. Now, the question is for the refund, which the defendant is prepared to do so after adjusting the amount spent by is by way of litigation expenses and by way of interest. Therefore, from the above discussion it is apparent that since the tide in the cement manufactured by the defendant passed on to the plaintiff without there being any sale because- of compulsory acquisition in favor of the plaintiff, I find force in the submission of the defendant that the entire contest was made by the defendant at the instance of and for the benefit of the plaintiff. Hence these issues are decided against the plaintiff.

(15) Issues No. 6 to 9 : These issues are also interlinked and are disposed of by one order. As already observed by me against issues from 2 to 5 that the responsibility to pay the sales tax was that of the plaintiff and the question now for consideration is can the defendant claim interest on the amount deposited by it with the sales tax authorities with respect to element of packing charges or expenses incurred by it in contesting plaintiff's liabifity'? The claim for reimbursement, to my mind, will include the claim for interest as well as for litigation expenses. These are incidental facts and the plea of adjustment is fully covered by the provisions of Sections 69 & 70 of the Contract Act. which are reproduced as follows :- "69.Reimbursement of person paying money due by another, in payment of which he is interested person who is interested in the payment of money which another is 'bound by law to pay. and who therefore pays it is entitled to be reimbursed by the other. 70. Obligation of person enjoying benefit of BOB-- gratuitous act-where a person lawfully.does any- thing for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the letter is bound to make compensation to the former in respect of or to restore, the thing so done or delivered".

(16) Defendant in this case can be called a person interested in making the payment because, otherwise the defendant would have been prosecuted for having not paid the sales tax. The defendant in this case was the person interested in making the payment because untill and unless the demand made by the sales tax authorities was quashed the defendant would have been in the grip of the sales tax authorities arid even might have been prosecuted. Even though the responsibility was that of the plaintiff to pay the tax because it was the plaintiff who was the seller, but still the defendant was forced to pay the money on behalf of the plaintiff, therefore, the provisions of Sections 69 & 70 are attracted in this' case. Since there was no sale by the defendant in favor of the plaintiff, therefore, there was no question of defendant being liable turn the same, and the money which the defendant deposited was to my mind, for and on behalf of the plaintiff. The observation of the Privy Council in the case of Govind Ram Vs. Goundal State 1950 P.C 99, page 104, is fully applicable to the facts of this case. The Privy Council was dealing with a similar matter and held :- "CERTAINLY the common law of England afforded a right of indemnity to one who had paid "under compulsion of law" against the true obligor without limiting the circumstances in which the latter's liability had arisen. Certainly too, there is authority in the Court of India for the proposition that "bound by law" covers obligations of contract or tort. Accepting this interpretation as their Lordships do, they hold that the act of payment by the appellant company gave to it a right of action against the Maharajah to obtain reimbursement of the sums paid."

(17) Therefore, in the present case the supply by the defendant to the plaintiff was under the compulsion of law and the true obligor in this case for the payment was the plaintiff. Therefore, the defendant would be entitled for the reimbursement and adjustment of the sum spent by it by way of litigation expenses as well as of the element of interest which it had lost on account of deposit of amount with the sales tax authorities. These issues are accordingly decided in favor of the defendant and against the plaintiff

(18) As regards the question of limitation., the defendant hart been asking for the reimbursement of the sum ever since the show cause notice was received by it and this fact find support from the documentary evidence exchanged between the parties. Vide letter dated 21-5-69, Ex. D-?3, D-34, l.)-35, DW-1/1 dated 14th July, 1965 the defendant claimed interest at the rate of 12 pel cent per annum on the amount deposited by the defendant with the sales tax authorities followed by Ex. DW-1/2 to DW-U3 which are all of the period from February 1965 to November, 1975 vide which the defendant claimed interest at the rate of 12 per cent for the amount deposited by it as well as the litigation expenses vide Ex. D-30 & D-34. The statement of account was also showing the interest due and the litigation expenses incurred by the defendant. A perusal of the document would show that the claim of the plaintiff is within time. Therefore, this issue is also decided in favor of the defendant and against the plaintiff. Defendant will be entitled to interest at the rate of 12 per cent, which according to the defendant was prevalent rate of interest at the relevant time.

(19) Issues NO. 10, 13 & 14: These issues are interlinked and disposed of by one order. Defendant, as i:er DW-2, S. N. Mittal's testimoney, got the refund of the amount deposited by the defendant from the sales tax authorities between October to November, 1968. Having got refund from the said authorities it was incumbent on the defendant to pay back to the plaintiff the amount due. According to defendant's own showing, defendant was entitled only to interest and the litigation expenses incurred uptill them. For the sake of further litigation the defendant could not have withheld the amount of the plaintiff. Defendant could not withheld the refund on the excuse that the plaintiff had not given an undertaking that it would refund the amount if the Supreme Court upset the Madras High Court's judgment. This ground taken now was never put to any witness nor supported by any document. How- ever, after the judgment of the Supreme Court rendered on 26-11-72, there was no justification for the defendant to withhold the amount of the amount. The plaintiff would be entitled to interest at the rate of 12 percent on the amount.'due to the plaintiff after adjustment of the interest and litigation.expensen incurred by the defendant as on 22nd November, 1972, i.e. the date when the Supreme Court delivered the judgment. The defendant could have adjusted the amount of interest then due and should have refunded the balance amount. Notice of demand of interest was served by the plaintiff immediately after Madras High Court judgment. Hence I find no force in the submission of Mr. Vohra that plaintiff is not entitled to interest or that it could not be more than 6 per cent as was permissible under the old Interest Act. Having not refunded the balance amount payable to the plaintiff which is more than Rs.' 2 lacs, the plaintiff would be entitled to interest at the rate of 12 per cent from 22-11-72, though notice for demand of interest was given earlier.

(20) Issue No. 11 : Plaintiff will be entitled to proportionate costs on the amount due from the defendant.

(21) Issue NO. 12: The suit of the plaintiff Is within time. The claim by the plaintiff was lodged immediately after the decision of the Madras High Court. The defendant had been admitting its liability to refund the amount subject to adjustment. Tins admission has been made even up to 19th November. 1975 when the defendant wrote a letter that now no matter with. regard to the levy of tax on the element of packing is pending. In view of the ad cannot be said that the suit is barred by time. This issue is accordingly decided in favor of the plaintiff.

(22) Issue NO. 15 : It is an admitted case on record that the defendant deposited a sum of Rs. 15,23,793.26? towards the levy of sales tax and penalty on the element of packing charges. The amount was paid from time to time under intimation to plaintiff. Defendant also submitted the debit note to the riainfff. It is on this amount, which the defendant deposited with the sales tax authorities, it is claiming interest at the rate of 12 per cent. I see no reason why the plaintiff should not pay the interest on this amount which the defendant was forced to deposit under compulsion of law for and Oh behalf of the plaintiff. It is at the behest and at the instance of the plaintiff that the defendant contested the case up to the Apex Court and thus incurred the expenses to the time of Rs. 19,185.76P. The amount of interest calculated by the defendant and the amount of litigation expenses have not been controverter by the plaintiff. I accordingly hold that the defedant will be entitled to interest (Rs. 3,38,863.72P) and the litigation expenses Rs. 19,185.76P) totalling to Rs. 3,57,749.48P. After adjusting this amount from Rs. 5,66,734.95P, the net amount which is payable refundable to the plaintiff comes to Rs. 2,08,985.43P, Decree for this amount with interest at the rate of 12 per cent w.e.f. 22nd November, 1972, till realisation with proportionate costs is accordingly passed in favor of the plaintiff.