Court rules scheme not binding on States; refunds denied under unjust enrichment doctrine. Seek enforcement from tax authorities.

The High Court upheld AAIFR's decision, ruling that the sanctioned scheme was not binding on the State Governments due to lack of consent. The petitioner's claim for refunds was deemed untenable under the doctrine of unjust enrichment as they continued to collect and deposit VAT/Sales Tax during the scheme period. The court emphasized that seeking enforcement of the scheme's provisions from state tax authorities was the appropriate course of action. Consequently, the writ petition was dismissed.

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Issues Involved:
1. Challenge to AAIFR's order dismissing the petitioner's claim for refund of VAT and Electricity Duty.
2. Binding nature of the sanctioned scheme on the State Governments.
3. Jurisdiction of BIFR and AAIFR to order refunds.
4. Applicability of the doctrine of unjust enrichment.
5. Interpretation of exemption from tax versus refund of tax.

Issue-wise Detailed Analysis:

1. Challenge to AAIFR's Order:
The petitioner challenged the AAIFR's order dated 22.01.2016, which dismissed its claim for a refund of VAT and Electricity Duty from the Governments of Maharashtra and Gujarat. The petitioner argued that it was entitled to refunds under the sanctioned scheme for the period from October 2005 to March 2011. However, AAIFR held that the petitioner did not avail the exemption during the scheme period and continued to collect and deposit VAT/Sales Tax, making the refund claim untenable.

2. Binding Nature of the Sanctioned Scheme:
The sanctioned scheme, approved by BIFR, provided for exemptions from VAT/Sales Tax and Electricity Duty for seven years. However, the State of Gujarat objected to the scheme, and BIFR sanctioned it without considering these objections, violating Section 19(2) of SICA, which mandates consent from the State Government. The AAIFR concluded that the scheme was not binding on Gujarat due to the lack of consent. The State of Maharashtra was not aware of the scheme until much later, and thus, its consent could not be deemed either.

3. Jurisdiction of BIFR and AAIFR to Order Refunds:
The AAIFR held that BIFR and AAIFR had no jurisdiction to order refunds. The petitioner should have sought enforcement of the scheme's provisions from the relevant state tax authorities. The AAIFR emphasized that the scheme provided for exemptions, not refunds, and the petitioner’s claim for refunds was a new relief not included in the scheme.

4. Applicability of the Doctrine of Unjust Enrichment:
The AAIFR and BIFR applied the doctrine of unjust enrichment, stating that the petitioner collected VAT/Sales Tax from customers and deposited it with the State. Since the burden of tax was passed on to the customers, the petitioner could not seek a refund. The Supreme Court’s ruling in Mafatlal Industries v. Union of India was cited, which held that if the burden of a tax is passed on to customers, the claimant cannot seek a refund.

5. Interpretation of Exemption from Tax versus Refund of Tax:
The AAIFR distinguished between exemption from tax and refund of tax. Exemption means relief from paying tax, while refund involves returning tax already paid. The AAIFR noted that the scheme only provided for exemptions, not refunds. The Supreme Court in Amrit Banaspati Co. Ltd v. State of Punjab and State of Bihar v. Kalyanpur Cements held that refund of tax is not permissible if the tax was lawfully collected and paid.

Conclusion:
The High Court upheld AAIFR’s decision, stating that the sanctioned scheme was not binding on the State Governments due to lack of consent. The petitioner’s claim for refunds was not part of the sanctioned scheme and was barred by the doctrine of unjust enrichment. The court also emphasized that the petitioner should have sought timely enforcement of the scheme’s provisions and approached the relevant state tax authorities for any relief. The writ petition was dismissed.

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