2011 (12) TMI 485 - HC - VAT and Sales Tax

Court upholds non-refund stipulation in notifications, dismisses petition for refund. Purposive interpretation

The court dismissed the writ petition, upholding the non-refund stipulation in the notifications and finding that the petitioner's claim for refund was ... Denial of the claim for refund, in respect of exemption from the liability to pay purchase tax with retrospective effect - Held that:- The purchase tax paid by the petitioner has already been passed on to the customers, not as purchase tax, collection of which is prohibited under section 22(2)(b), but by including the same in the cost price and then fixing the appropriate 'sale price'. This is not a case where the liability to pay purchase tax is disputed by the petitioner. The purpose of granting retrospective exemption is stated as in tune with public interest. However, on comparison with the other limb of the 'public interest', i.e., the State exchequer who had already obtained the tax paid and had provided necessary budget allocation shall not be let to be dried up, this court has necessarily to adopt a purposive interpretation. In the above circumstances, this court finds that the claim for refund put forth by the petitioner, challenging the correctness and sustainability of exhibit P1 assessment order, is quite wrong and misconceived. The writ petition is devoid of any merit and the same is dismissed accordingly. Issues Involved:1. Denial of the claim for refund of purchase tax.2. Retrospective exemption from the liability to pay purchase tax.3. Interpretation of notifications stipulating non-refund of tax already paid.4. Applicability of the principle of unjust enrichment.5. Comparison with precedents and relevant case law.Detailed Analysis:1. Denial of the claim for refund of purchase tax:The petitioner, a dealer in rubber, sought a refund of purchase tax paid for the assessment year 2001-02, following retrospective exemption notifications (Exhibits P2 and P3). The petitioner argued that since the tax was not collected from customers, the stipulation that 'tax, if any, already paid shall not be refunded' should not apply. The court, however, found that the petitioner's claim for refund was not sustainable, as the notifications explicitly stated that already paid tax would not be refunded.2. Retrospective exemption from the liability to pay purchase tax:The Government issued Exhibit P2 notification under section 10 of the KGST Act, exempting manufacturers of centrifuged latex and crumb rubber from purchase tax retrospectively from April 1, 1988, to October 9, 2001. This exemption was later extended to March 31, 2004, by Exhibit P3. The petitioner argued that the State had no right to retain the tax paid during the exempted period, citing Article 265 of the Constitution, which mandates that no tax shall be collected without the authority of law.3. Interpretation of notifications stipulating non-refund of tax already paid:The petitioner contended that the clause 'tax, if any, already paid shall not be refunded' should be interpreted as 'tax, if collected and paid, will not be refunded', emphasizing that no tax was collected from customers. The court referred to the Division Bench decision in Kokkala Arecanut Commission Agent Association v. Commissioner of Commercial Taxes, which upheld the non-refund stipulation, stating that the liability to pay tax exists irrespective of whether it was collected from customers or not.4. Applicability of the principle of unjust enrichment:The petitioner argued against the principle of unjust enrichment, asserting that the tax was not collected from customers, and therefore, there was no unlawful enrichment. The court, however, found that the purchase tax paid by the petitioner had been factored into the sale price, thus indirectly passing the burden to customers. The court emphasized that the intention behind the notifications was to prevent outflow from the Government exchequer, aligning with the decision in Kokkala's case.5. Comparison with precedents and relevant case law:The petitioner relied on the Supreme Court decision in Corporation Bank v. Saraswati Abharansala and the Division Bench decision in Apar Ltd. v. Asst. Commissioner. The court distinguished these cases, noting that Saraswati Abharansala dealt with sales tax and the principle of unjust enrichment, while Apar Ltd. involved turnover tax and a different factual matrix. The court found that the present case was more aligned with the Kokkala decision, which dealt with a similar non-refund clause in a notification.Conclusion:In conclusion, the court dismissed the writ petition, upholding the non-refund stipulation in the notifications and finding that the petitioner's claim for refund was misconceived. The court emphasized the need for a purposive interpretation to balance public interest and the State exchequer's integrity.