1994 (9) TMI 309 - SC - VAT and Sales Tax

Supreme Court directs STC on sales tax reimbursement, limits claim to 3 years

Lipton India Ltd. Versus Union of India and Others

The Supreme Court allowed the writ petition filed by the vanaspati manufacturer, directing the State Trading Corporation (STC) to determine the ... Relief of refund - Held that:- Appeal allowed. The petitioner cannot claim a greater relief than he could have claimed in the suit. Accordingly, we direct that the petitioner's claim will be limited to the period of three years prior to the date of filing of this writ petition. The period for which the relief of refund is claimed is the period commencing from December, 1984 to May, 1988. The writ petition was filed in June, 1988. Thus in so far as the period subsequent to the filing of the writ petition, i.e., up to November, 1988, is concerned, the petitioner shall be entitled to it on the same basis as the claim for the period anterior to the filing of writ petition. The respondent-State Trading Corporation shall examine the petitioner's claim in the light of this judgment, with notice to the petitioner and determine the amount, if any, payable to it. The petitioner shall be entitled to interest on the amount found due at the rate of 6 per cent per annum from the date of this judgment up to the date of realisation. Issues Involved:1. Uniform pricing of vanaspati and supply of imported oil at uniform price.2. Sales tax variation across states and its impact on vanaspati manufacturers.3. Interpretation and implementation of the Parmeshwaran Committee formula.4. Entitlement to reimbursement of sales tax paid by the petitioner.5. Laches and the time frame for claiming refunds.Detailed Analysis:1. Uniform Pricing of Vanaspati and Supply of Imported Oil at Uniform Price:The petitioner, a manufacturer of vanaspati, was part of a scheme called the 'All-India voluntary price control system' initiated by the Government of India to ensure uniform pricing of vanaspati across the country. The scheme required manufacturers to sell vanaspati at a uniform price, and the government proposed to supply imported oil, the main raw material, at a uniform price to all manufacturers regardless of their location.2. Sales Tax Variation Across States and Its Impact on Vanaspati Manufacturers:The issue arose due to varying rates of sales tax on oil across different states. Some states did not levy any tax, while others levied tax at rates ranging from 1% to 4%. This disparity led to complaints of discrimination by vanaspati manufacturers, prompting several writ petitions in the High Courts, which were later transferred to the Supreme Court.3. Interpretation and Implementation of the Parmeshwaran Committee Formula:Following the Supreme Court's order dated February 8, 1982, the Government of India constituted the Parmeshwaran Committee to address the issues raised by vanaspati manufacturers. The committee recommended two alternative formulas for equalizing the incidence of sales tax, with the Government of India accepting the second alternative. This alternative involved the State Trading Corporation (STC) charging sales tax on the release price and reimbursing the sales tax paid by the manufacturers upon submission of necessary declaration forms.4. Entitlement to Reimbursement of Sales Tax Paid by the Petitioner:The petitioner claimed entitlement to reimbursement of sales tax paid to the STC for oil purchases where it did not furnish the necessary declarations under the Uttar Pradesh Sales Tax Act. The STC denied this claim, insisting on the submission of declaration forms as a condition for reimbursement. The court recognized the difficulty in complying with this requirement under the Uttar Pradesh Act, where furnishing declarations was not feasible for oil intended for manufacture and sale outside the state. The court held that the petitioner could not be required to furnish declarations for reimbursement and outlined conditions under which the petitioner could claim reimbursement:- The oil purchased was used exclusively for manufacturing vanaspati.- The manufactured vanaspati was sold at the prescribed rate and subjected to tax.- The non-furnishing of declarations was due to legal impossibility.5. Laches and the Time Frame for Claiming Refunds:The court addressed the issue of laches, noting that the petitioner filed the writ petition in 1988, five years after the formula's implementation. While the delay was acknowledged, it was not deemed sufficient to dismiss the petition. The court limited the petitioner's claim for refund to three years prior to the filing date of the writ petition and directed the STC to examine the claim in light of the judgment, with interest on the amount found due at 6% per annum from the date of the judgment until realization.Conclusion:The writ petition was allowed with directions for the STC to determine the amount payable to the petitioner based on the outlined conditions, with interest on the amount due. The interlocutory application related to other writ petitions was dismissed as misconceived, with no costs awarded.