1976 (10) TMI 102 - SC - VAT and Sales Tax

Supreme Court grants refund of sales tax for inter-State trade, prevents double taxation

Manickam and Co. Versus The State of Tamil Nadu

Manickam and Co. Versus The State of Tamil Nadu - [1977] 39 STC 12 (SC), 1977 AIR 518, 1977 (1) SCR 950, 1977 (1) SCC 199 Issues Involved:1. Entitlement to refund of sales tax under the State Act for inter-State sales.2. Interpretation of Section 15(b) of the Central Sales Tax Act and Section 4 of the Tamil Nadu General Sales Tax Act.3. Applicability of the decision in M.A. Khader & Co. v. Deputy Commercial Tax Officer.4. Impact of the amendment to Section 15(b) of the Central Sales Tax Act in 1972.Detailed Analysis:1. Entitlement to Refund of Sales Tax Under the State Act for Inter-State Sales:The appellant, a dealer in cotton yarn, claimed a refund of sales tax paid under the Tamil Nadu General Sales Tax Act (State Act) for yarn sold in inter-State trade. The Additional Commercial Taxation Officer partially admitted the claim, allowing a refund of Rs. 5,562.59 but rejecting the balance. Upon appeal, the Additional Appellate Assistant Commissioner allowed an additional refund of Rs. 3,204.73. The Appellate Tribunal, relying on M.A. Khader & Co., rejected the remaining claim and also reversed the refunds previously granted. The Madras High Court upheld the Tribunal's decision.2. Interpretation of Section 15(b) of the Central Sales Tax Act and Section 4 of the Tamil Nadu General Sales Tax Act:Section 15(b) of the Central Sales Tax Act mandates that sales tax levied on declared goods, like cotton yarn, sold in inter-State trade must be refunded. Section 4 of the State Act and Rule 23 of the Tamil Nadu General Sales Tax Rules align with this, stipulating that such refunds should be made to the dealer making the inter-State sale. The Supreme Court held that the appellant, having paid Central Sales Tax on inter-State sales, is entitled to a refund of the State sales tax.3. Applicability of the Decision in M.A. Khader & Co. v. Deputy Commercial Tax Officer:The High Court's reliance on M.A. Khader & Co. was misplaced. That case dealt with quashing assessments under the Central Act, not directly with refund claims under the State Act. The Supreme Court clarified that the term 'refunded' in Section 15(b) of the Central Act and the proviso to Section 4 of the State Act emphasizes repayment and does not necessarily mean to the original payer of the tax. The legislative intent and context suggest that the refund should be made to the dealer who conducted the inter-State sale and paid the Central sales tax.4. Impact of the Amendment to Section 15(b) of the Central Sales Tax Act in 1972:The 1972 amendment to Section 15(b) clarified that the tax levied under the State Act should be reimbursed to the person making the inter-State sale. The Supreme Court interpreted this amendment as a clarification of the original legislative intent, reinforcing that the appellant is entitled to the refund. The amendment, although not retrospective, elucidates the legislature's intent to reimburse the dealer who paid the Central sales tax on inter-State sales.Conclusion:The Supreme Court allowed the appeal, setting aside the High Court's judgment. It ordered that the appellant-firm be refunded the sales tax levied under the State Act for goods sold in inter-State trade, provided the appellant paid the Central sales tax on those sales. The appellant is entitled to recover costs from the respondent for both the Supreme Court and High Court proceedings. The decision underscores the legislative intent to ensure that dealers conducting inter-State sales are not burdened with double taxation.