1986 (4) TMI 50 - SC - VAT and Sales Tax

Supreme Court upholds tax refund due to lack of legal authority - fairness in fiscal statutes

Commissioner Of Sales Tax, UP. Versus Auraiya Chamber Of Commerce, Allahbad

The Supreme Court affirmed the High Court's decision and upheld the direction of the Additional Judge (Revisions), Sales Tax, for the refund of the amount ... Whether there is any prohibition prohibiting the assessee from getting the refund as claimed for? Held that:- The assessee filed revision before the Court of Additional judge (Revisions) rejecting the claim for refund. If the law of limitation is applicable, then section 5 of the Limitation Act is also applicable and it is apparent that the application originally was made within time within two years as contained in the proviso. Article 96 of the First Schedule of the Limitation Act, 1908, prescribes a period of limitation of three years from the date when the mistake becomes known for filing a suit. If that principle is also kept in mind, then, when the judgment came to be known in May, 1954, in our opinion, when the assessee had made an application in 1955, it was not beyond time. Where indubitably there is in the dealer legal title to get the money refunded and where the dealer is not guilty of any laches and where there is no specific prohibition against refund, one should not get entangled in the cobweb of procedures but do substantial justice. The above requirements in this case, in our opinion, have been satisfied and, therefore, we affirm. the direction of the Additional judge (Revisions), Sales Tax, for refund of the amount to the dealer and affirm the High Court's judgment on this basis. Appeal dismissed. Issues Involved:1. Applicability of the Indian Limitation Act to cases under the U.P. Sales Tax Act.2. Consideration of the period of limitation under Article 96 of the Limitation Act for refund claims under Section 72 of the Indian Contract Act.3. Legality of the Additional Judge (Revisions), Sales Tax, directing the refund of sales tax deposited by the company.4. Justification of the Additional Judge (Revisions), Sales Tax, in entertaining the revision application after a significant lapse of time from the date of the assessment order.Issue-wise Detailed Analysis:Issue 1: Applicability of the Indian Limitation Act to cases under the U.P. Sales Tax ActThe High Court did not find it necessary to answer this question in light of its previous decision in Commissioner, Sales Tax, U.P. v. Auraiya Chambers of Commerce. The Supreme Court also agreed with this view, emphasizing that the question was framed in the abstract without relevance to the facts of the present case.Issue 2: Consideration of the period of limitation under Article 96 of the Limitation Act for refund claims under Section 72 of the Indian Contract ActThe Supreme Court held that the period of limitation under Article 96 of the Limitation Act should be considered. The Sales Tax Officer initially dismissed the refund claim as time-barred under Article 96. However, the Supreme Court noted that the tax was collected without authority of law, making it refundable. The Court emphasized that under Article 265 of the Constitution, no tax shall be levied or collected except by authority of law. The Court further noted that the mistake of law was recognized under Section 72 of the Indian Contract Act, which mandates the repayment of money paid by mistake or under coercion.Issue 3: Legality of the Additional Judge (Revisions), Sales Tax, directing the refund of sales tax deposited by the companyThe Supreme Court affirmed the decision of the Additional Judge (Revisions), Sales Tax, who directed the refund of sales tax for multiple years. The Court noted that the tax was collected on forward contracts, which was later declared ultra vires. The Court emphasized that there was no period of limitation for refund claims at the time the tax was paid and that the introduction of Section 29 in 1959, which provided a limitation period, did not apply retroactively. The Court also highlighted that the assessee filed for a refund within a reasonable time after becoming aware of the mistake.Issue 4: Justification of the Additional Judge (Revisions), Sales Tax, in entertaining the revision application after a significant lapse of time from the date of the assessment orderThe Supreme Court held that the Additional Judge (Revisions), Sales Tax, was justified in entertaining the revision application despite the lapse of time. The Court noted that the assessee made the application for revision within a year of the Supreme Court's decision declaring the tax ultra vires. The Court emphasized that procedural rules should not hinder the delivery of substantial justice and that the assessee's application was timely and justified.Conclusion:The Supreme Court dismissed the appeals, affirming the High Court's judgment and the direction of the Additional Judge (Revisions), Sales Tax, for the refund of the amount to the assessee. The Court held that the tax collected was without authority of law and refundable, and that the assessee's application for refund was justified and timely. The Court emphasized the importance of fairness and justice in interpreting procedural provisions, even in fiscal statutes. The appeals were dismissed with costs.