STATE OF BIHAR versus ORIENTAL COAL CO. LTD.

Citation: [1972] 1 S.C.R. 982 · Decided: 06-10-1971 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Appeal(s) allowed

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Judgment (excerpt)

'982 
STATE OF BIHAR 
v. 
ORIENTAL COAL CO. LTD. 
October 6, 1971 
[K. S. HEGDE AN)) A. N. GROVER, JJ.J 
Civil Court-Jurisdiction-Assessment of sales tax-Assessee's place of 
:business outside State-Payment of sales tax outside State-Assessmenl 
set aside by appellate authority-Sui~ for refund-Filed outside State-If 
cause of action or part of cause of action arose outside State. 
The registered office of the respondent company was at Calcutta. The 
respondent company was a registered dealer under the Bihar Sales Tax 
Act, 1947. 
It issuad cheques to the appellant-State for the amounts due 
towards sales tax for the years 1950-51, 1951-52 and 1952-53 on a Cal-
cutta Bank and the cheques were encashed there. 
After paying the tax 
it appealed and the appellate authority heard the appeals at Calcutta and 
set aside the orders of assessment. 
Thereafter, the respondent filed an 
application before the Superintendent of Sales Tax, Dhanbad, in Bihar, 
for refund of the lax paid by it. Since the request was not complied with. 
a suit was filed on the original side of the High Court of Calcutta. The 
respondent urged that a part of the cause of action arose at Calcutta. 
because, (I) the payments were macle at Calcutta under a 
bona fide 
mistake of law that it was liable to pay sales tax; (2) its appeals were 
heard in Calcutta and the orders of the appellate authonty were also 
.received at Calcutta; and (3) its registered office was situate in Calcutta 
.and it was the duty of the debtor to find the creditor. 
The trial Judge held that the High Court at Calcutta had jurisdiction 
but on merits came to the conclusion that the respondent was not oo-
~illed to any relief. The Division Bench, on appeal, held that the respon-
dent was entitled to the refund. 
Allowing the appeal to this Court. 
A 
B 
c 
D 
E 
HELD: (I) In view of Sales-tax Continuance Order, 1950 made by 
the President in exercise of his powers under the proviso to Art. 286(2) 
F 
of the Constitution as the article then stood and s. 2 of the Sales Tax 
Laws Validation Act, 1956, the assessments for the periods from April 1. 
1950 to March 31, 1951 and from April I, 1951 to March 31, 1953 res-
pectively were valid. 
Therefore, the paym1=nts were not made under a 
ho11a fide mistake of law. (987 C-H: 988 A-DJ 
Sundaramier v. State of A.P. [1958] I S.C.R. 422, followed. 
G 
(2) But the appellate authority had held that the asoessments were 
not valid. 
This order of the appellate authority is not affected by s. 2 
of the Sales Tax Laws Validation Act, because that ~ection only validate~ 
assessments a1ready made, 'notwithstanding any judgment, decree or order 
.nj a court', but not, 'notwithstanding an order made by an authdrity under 
the Sales Tax Act'. 
The validity of the order made by the appellate 
authority could not also be questioned by the appellant in a civil court in 
·H 
view of s. 23 of the Bihar Sales Tax Act. 
Therefore, as the assessment< 
made were set" aside by the appellate authority, the respondent was entitled 
cto the refund. [988 D--H] 
A 
B 
STAIE OF BIHAR v. ORIENTAL COAL co. LID. (Hegde, I.) 983 
(3) But the High Court at Calcutta had no jurisdiction. The fact 
that the plaintiff based his claim on ,three alternative grounds, for one of 
which alone (which however was not a tenable plea) a part of ihe cause 
of action can at best be said to have arisen in Calcutta, but not for others 
cannot confer jurisdiction on the Calcutta lligh Court to try the suit on 
basis of grol!nds in respect of which no part of the cause of action arose 
in Calcutta. The cause of action. within the contemplation of law is that 
which relates to a tenable plea. [990 D] 
(a) Since it could not be said that the payments were made under any 
mistaken impression of the law, the fact that the cheques issued by the 
respondent were encashed at Calcutta did not afford any cause of action 
for filing the suit in Calcutta. [989 CJ 
(b) (i) Assuming that the encashment of the cheques in Calcutta gave 
rise to a cause of action at Calcutta for a claim based on the ground that 
C 
the payments were made on mistaken impression of law, that circumstance 
could not be said to give rise to a cause of action for the suit on the 
ground that the respondent was entitled to the refund of the amounts paid 
because of the order of the appellate authority. [989 DJ 
D 
(ii) In view of the Bihar Sales Tax Rules, 1949, an application for 
refund could have been made only to the Commi

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