Unjust enrichment limits statutory tax refunds where the claimant cannot prove the tax burden was not passed on.

A statutory refund of excess sales tax was treated as subject to limitation and to the equitable bar of unjust enrichment. The claim was held within time because it arose from a continuing failure to comply with the refund procedure after assessment, rather than a one-time challenge governed by discovery-of-mistake principles. The refund nevertheless failed because the claimant did not prove that the tax burden had not been passed on to buyers; credit notes alone were insufficient. The notice initiating the matter was found defective in form and not warranted in law, and was quashed, while the refund claim itself was rejected.

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Issues: (i) Whether the application for refund was barred by limitation under section 8(2) of the West Bengal Taxation Tribunal Act, 1987. (ii) Whether the claim for refund of excess sales tax was defeated by the doctrine of unjust enrichment and the applicability of rule 55(1A) of the Bengal Sales Tax Rules, 1941.

Issue (i): Whether the application for refund was barred by limitation under section 8(2) of the West Bengal Taxation Tribunal Act, 1987.

Analysis: The claim was founded on the continuing omission to comply with rule 55(1A) after the assessment order, not on a one-time challenge to the assessment itself. On that footing, the cause of action was treated as continuing from day to day until the statutory refund procedure was complied with. The limitation principle referred to in relation to discovery of mistake was held not to govern the present facts.

Conclusion: The application was held to be within time and not barred by limitation.

Issue (ii): Whether the claim for refund of excess sales tax was defeated by the doctrine of unjust enrichment and the applicability of rule 55(1A) of the Bengal Sales Tax Rules, 1941.

Analysis: Rule 55(1A) was read as requiring a refund payment order where excess tax remained after adjustment, but the entitlement was held not to be absolute. The doctrine of unjust enrichment was applied as an equitable limitation on refund, and the claimant was required to establish that the tax burden had not been passed on to buyers. Since the petitioner had issued credit notes and had not proved that the burden was not shifted, the refund could not be granted at that stage. The impugned notice was, however, found not to be in proper form and not warranted in law.

Conclusion: The refund claim was rejected for want of proof that the tax burden was borne by the petitioner, while the impugned notice was set aside.

Final Conclusion: The proceeding ended with rejection of the refund claim on the ground of unjust enrichment, but the impugned notice was quashed and the matter was left to proceed according to law.

Ratio Decidendi: A statutory refund of excess indirect tax is not automatic or unconditional; even where the refund mechanism is mandatory in form, relief may be denied unless the claimant proves that the tax burden was not passed on to third parties.

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