2012 (4) TMI 542 - HC - VAT and Sales Tax

Court orders tax refund on field latex purchase despite State objections. Remand for further assessment & CST exemption.

State of Kerala Versus Kurian Abraham (P) Ltd.

The Court ordered a refund of tax on the purchase of field latex, despite the State's objections based on notification S.R.O. No. 695/2003. The Court ... Refund claim - tax remitted by mistake - Held that:- If tax paid forms part of price and is passed on to the purchaser, then the respondent is not entitled to unjustly enrich themself by getting refund of tax remitted voluntarily that is passed on along with product price to the purchaser. In order to consider these matters, we remand these assessments to the assessing officer. Assessing authority shall specifically examine the scope of other Notifications S.R.O. Nos. 316/2005, 946/2007 and 123/2010 while deciding the matter. We allow the revisions by setting aside the orders of Tribunal and the first appellate authority and remand the matter to the assessing authority to re-consider the claim of the respondent for refund after giving an opportunity to the respondent to establish that tax paid on raw material is not passed on to the purchasers by including in the product price. Issues:Refund of tax on purchase of field latex, application of notification S.R.O. No. 695/2003, tax remitted voluntarily, unjust enrichment, examination of various Supreme Court decisions, remand to assessing officer, consideration of CST exemption.Refund of Tax on Purchase of Field Latex:The respondent, engaged in the purchase of field latex and sale of centrifuged latex, voluntarily filed returns and paid tax on the purchase value of field latex. However, the respondent later claimed exemption based on notification S.R.O. No. 695/2003, seeking a refund of the tax remitted. The Tribunal, following principles from a Supreme Court case, ordered the refund, which was contested by the State in revisions for multiple years. The Court noted that the tax paid on raw material, i.e., field latex, is collected as part of the product price, and the State argued against refund based on the notification prohibiting such refunds.Application of Notification S.R.O. No. 695/2003:The State relied on the notification to support its stance against refunding the tax on field latex, considering it as part of the product price and passed on to the customer. The respondent argued against a separate collection of tax on the purchase of field latex, claiming it was not included in the product price. The Court emphasized the need to analyze the purchase price, manufacturing cost, and product price to determine if the tax on raw material is included in the final product cost.Tax Remitted Voluntarily and Unjust Enrichment:The Court referred to various Supreme Court decisions, including Mafatlal Industries Ltd. v. Union of India and State of Maharashtra v. Swanstone Multiplex Cinema (P) Ltd., highlighting the principle that refunding tax should not result in unjust enrichment if the tax is part of the product price and passed on to the purchaser. The Court emphasized the need to prevent unjust enrichment by granting refunds of voluntarily remitted taxes that are included in the product price.Examination of Various Supreme Court Decisions and Remand to Assessing Officer:The Court set aside the Tribunal and first appellate authority's orders and remanded the matter to the assessing officer for reconsideration. The assessing authority was directed to examine the scope of other notifications while deciding the refund claim, and the respondent was given an opportunity to establish that the tax on raw material was not passed on to purchasers through the product price.Consideration of CST Exemption:The Court allowed the respondent to apply for CST exemption based on the judgment, with the assessing officer instructed to grant CST exemption if the claim is made. However, any refund, whether under KGST or CST, should adhere to the principles outlined in the judgment to prevent unjust enrichment. The respondent was directed to present a copy of the judgment before the assessing authority for further proceedings.