2020 (3) TMI 140 - HC - VAT and Sales Tax

Public companies entitled to tax refund from Reliance Industries Ltd.

The court held that the petitioners, public limited companies, were entitled to a refund of excess tax collected and deposited by Reliance Industries Ltd. ... Refund of excess tax collected - C form declarations - buyer bearing ultimate burden - unjust enrichment - eligibility to claim refund by purchaser - inter state trade for use in mining - processing of refund claim within specified periodRefund of excess tax collected - C form declarations - eligibility to claim refund by purchaser - buyer bearing ultimate burden - unjust enrichment - Whether the petitioners (buyers) who paid tax charged by the seller are entitled to direct refund of the excess tax after C form declarations are issued, notwithstanding that the seller deposited the tax with the respondent authorities. - HELD THAT: - The court found as an undisputed fact that the petitioners bore the ultimate burden of the tax because the Rajasthan authorities initially refused to issue C forms, resulting in Reliance Industries Limited charging and depositing tax collected from the petitioners. Applying the principle that only the person who ultimately bore the burden is entitled to a refund and the related doctrine precluding refund to a party who merely collected and passed on the tax (to avoid unjust enrichment), the court held that Reliance Industries Limited would not be entitled to claim refund in respect of amounts it merely collected. The Rajasthan High Court had earlier directed issuance of C forms and entitlement to refund/adjustment for those who paid on account of wrongful refusal; once C forms were issued and requisite documents furnished, the petitioners qualify to claim refund. The respondents' contention that refund must be made only to the seller and only after completion of the seller's assessment was rejected as legally untenable and practically unworkable, because it would deny or unduly delay relief to the petitioners and could result in adjustment against the seller's dues. The court further noted that as ultimate consumers of HSD for mining, the petitioners could not be said to have passed on the tax burden to others, removing the prospect of unjust enrichment by granting them refund. [Paras 14, 15, 16, 20]The petitioners are entitled to direct refund of the excess tax collected and deposited by the seller once C forms and requisite documents are produced; the seller shall not be entitled to claim such refund.Processing of refund claim within specified period - C form declarations - refund of excess tax collected - Whether the respondent authorities are bound to process and grant the petitioners' refund claims within the time specified by the Rajasthan High Court and, if so, the appropriate timetable for compliance. - HELD THAT: - The Rajasthan High Court had directed that in cases where petitioners paid excess tax due to wrongful refusal to issue C forms, the concerned authorities must process refund claims within twelve weeks of receipt of the claim and requisite documents. The petitioners filed written applications with the Gujarat authorities enclosing the Rajasthan orders, C forms and supporting details. The Gujarat authorities acknowledged that refund is due against C forms but maintained that refund must await processing of the seller's assessment and be paid to the seller. The court found this stance contrary to the Rajasthan High Court's directions and to principles of law and practicality, and concluded that upon receipt of a refund application accompanied by the required documents, the respondent authorities must process and, if due, grant the refund within twelve weeks. The court clarified that once the petitioners' refund is processed and paid, Reliance Industries Limited shall have no entitlement to that refund. [Paras 17, 18, 19, 21]Respondent authorities must process the petitioners' refund claims and grant the refund in accordance with law within twelve weeks of receipt of this judgment and the petitioners' applications with requisite documents.Final Conclusion: The writ petitions are allowed: the respondents are directed to process and grant the petitioners' refund claims of excess tax (relating to interstate purchases of HSD for mining and backed by C forms and supporting documents) within twelve weeks of receipt of this judgment; once refunded to the petitioners, the seller shall not be entitled to claim the same. Issues Involved:1. Entitlement to Refund of Excess Tax2. Principle of Unjust Enrichment3. Jurisdiction and Compliance with Rajasthan High Court's Order4. Procedural Aspects of Refund ClaimsDetailed Analysis:1. Entitlement to Refund of Excess Tax:The petitioners, public limited companies engaged in manufacturing and mining, sought a refund of Rs. 2,12,09,162/- collected as tax by Reliance Industries Ltd. and deposited with the respondent authorities under the CST Act. The petitioners argued that they were entitled to a refund since the Rajasthan High Court had directed the authorities to issue C form declarations and refund the excess tax collected due to the wrongful refusal to issue such forms.The court noted that the petitioners had borne the tax burden due to the non-issuance of C forms by the Rajasthan authorities. Consequently, Reliance Industries Ltd. charged and collected tax at a higher rate (20%) from the petitioners and deposited it with the Gujarat authorities. The Rajasthan High Court had already directed the issuance of C forms and refund of the excess tax, which was not contested by the respondent authorities.2. Principle of Unjust Enrichment:The respondents argued that the refund should be granted to Reliance Industries Ltd. since it was the entity that deposited the tax. However, the court highlighted that Reliance Industries Ltd. had collected the tax from the petitioners, and any refund claim by Reliance would be barred by the principle of unjust enrichment. The court cited the Supreme Court's decision in State of M.P. v. Vyankatlal, which held that only the persons who bore the ultimate tax burden are entitled to a refund.The court also referenced the Supreme Court's decision in Mafatlal Industries Ltd. v. Union of India, which allows for a purchaser to claim a refund if they can establish that they bore the tax burden. The petitioners, being the ultimate consumers, had not passed on the tax burden to anyone else, negating the possibility of unjust enrichment.3. Jurisdiction and Compliance with Rajasthan High Court's Order:The court emphasized that the Rajasthan High Court had already directed the authorities to issue C forms and refund the excess tax collected. The petitioners had complied with the court's directions by submitting the requisite documents and making formal refund applications. The respondents' stance that the refund should be processed during Reliance Industries Ltd.'s assessment and then passed on to the petitioners was deemed legally untenable and impractical.The court reiterated that the Rajasthan High Court's order was binding, and the respondent authorities were duty-bound to process the refund claims within twelve weeks of the application, as directed by the High Court.4. Procedural Aspects of Refund Claims:The court addressed the procedural argument that the refund should be processed during Reliance Industries Ltd.'s assessment. It noted that this approach could delay the refund for years and potentially lead to adjustments against Reliance's dues, depriving the petitioners of their rightful refund.The court also referenced the Gujarat Value Added Tax Act, which allows for refunds to be made to any person, not just the dealer, reinforcing that the petitioners were entitled to the refund as they had borne the tax burden.Conclusion:The court concluded that the petitioners were entitled to the refund of the excess tax collected and deposited by Reliance Industries Ltd. The respondents were directed to process the refund claims within twelve weeks, in compliance with the Rajasthan High Court's order. The court clarified that Reliance Industries Ltd. would not be entitled to claim any refund once the petitioners' claims were processed. The petitions were allowed, and the rule was made absolute with no order as to costs.