Voluntary tax settlement schemes may bar refund claims where the refund restriction has a rational nexus to the scheme's object.

Section 14 of the West Bengal Sales Tax (Settlement of Dispute) Act, 1999 was examined as a refund bar within an optional tax settlement scheme. Applying the test of reasonable classification under article 14, the majority view accepted that dealers who voluntarily entered the scheme with knowledge of its terms formed a distinct class and that the refund restriction had a rational nexus with the scheme's objective of expeditious dispute resolution. On that basis, the constitutional challenge failed and the excess deposit was held not refundable. The dissent considered the denial of refund arbitrary, but the operative view sustained the statutory prohibition and left no enforceable claim for return of the excess amount.

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Issues: (i) Whether section 14 of the West Bengal Sales Tax (Settlement of Dispute) Act, 1999, which bars refund of amounts paid under the settlement scheme, is unconstitutional as offending article 14 of the Constitution of India; (ii) whether the petitioner was entitled to refund of the excess amount deposited after settlement of the tax dispute.

Issue (i): Whether section 14 of the West Bengal Sales Tax (Settlement of Dispute) Act, 1999, which bars refund of amounts paid under the settlement scheme, is unconstitutional as offending article 14 of the Constitution of India.

Analysis: The scheme was treated as an optional method for expeditious settlement of arrear tax disputes. Applying the settled test of reasonable classification under article 14, the reasoning accepted that the Legislature may classify persons if the classification is founded on intelligible differentia and has a rational nexus with the object of the statute. The dissenting view held that the bar on refund created an arbitrary distinction between dealers who had not made prior deposits and those who had deposited more than the payable amount, and that there was no reasonable basis for denying refund of the excess amount. The majority view held that the assessee voluntarily opted into the scheme with full knowledge of its terms, that the provision reflected the policy of the settlement mechanism, and that the constitutional challenge was not made out.

Conclusion: The majority upheld section 14 and rejected the constitutional challenge.

Issue (ii): Whether the petitioner was entitled to refund of the excess amount deposited after settlement of the tax dispute.

Analysis: The settlement authority determined the tax payable at an amount lower than the sum already deposited, leaving an excess balance. The majority held that, because the petitioner had opted for the scheme knowing that section 14 barred refund of amounts paid under section 6, the excess could not be reclaimed. The dissenting view treated the excess as refundable because the denial of refund was considered discriminatory and without reasonable justification.

Conclusion: The petitioner was not entitled to refund of the excess amount.

Final Conclusion: The settlement scheme was treated as binding on the applicant, and the statutory prohibition against refund was sustained, leaving no enforceable claim for return of the excess deposit.

Ratio Decidendi: A person who voluntarily opts into an optional statutory tax settlement scheme with full knowledge of its terms cannot later challenge the scheme's refund bar where the classification created by the scheme bears a rational relation to its object and is not shown to be arbitrary.

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