Dealer converting Raw Petroleum Coke to Calcined form entitled to VAT reimbursement under Section 15(b) CST Act

The Gauhati HC held that a dealer who purchased Raw Petroleum Coke within Assam, converted it to Calcined Petroleum Coke, and sold it in inter-state commerce while paying CST, was entitled to VAT reimbursement under Section 15(b) of the CST Act. Both forms of petroleum coke fall under "Coke in all its forms" as declared goods. The court quashed the impugned order dated 19.09.2022, ruling it was an unauthorized change of opinion without legal basis, emphasizing that silence in assessment orders doesn't constitute rejection of claims.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

- Whether Raw Petroleum Coke (RPC) and Calcined Petroleum Coke (CPC) fall within the phrase "Coal, including Coke in all its forms" as declared goods under Section 14 of the Central Sales Tax Act, 1956 (CST Act), thereby entitling the petitioner to reimbursement of local taxes paid under Section 15[b] of the CST Act.

- Whether the petitioner is entitled to reimbursement of Value Added Tax (VAT) paid on intra-State purchase of RPC when the converted CPC is sold in inter-State trade or commerce and Central Sales Tax (CST) is paid thereon.

- The validity and effect of the assessment and reassessment orders passed under the Assam Value Added Tax Act, 2003 (AVAT Act), particularly those under Section 42 of the AVAT Act, and whether the Commissioner of Taxes had jurisdiction to review or reverse earlier decisions recommending reimbursement proposals.

- Whether the petitioner's claims for reimbursement were barred by delay, laches, acquiescence, or failure to challenge original assessment orders.

- The procedural correctness of rejection of reimbursement claims by the Commissioner of Taxes, Assam, including the requirement of prior government approval and adherence to statutory provisions under the AVAT Act and Rules.

- The applicability of interest on delayed refund claims under Section 52 of the AVAT Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether RPC and CPC fall within "Coal, including Coke in all its forms" under Section 14 of the CST Act

The Court examined extensive precedent, including the landmark Supreme Court decision in India Carbon Ltd. vs. Superintendent of Taxes (1971), which held that Petroleum Coke is a form of Coke and thus included within the phrase "Coal, including Coke in all its forms" under Section 14 of the CST Act. The Court noted that despite physical and chemical differences between RPC and CPC, both are treated as the same declared goods for CST purposes. This principle was further affirmed in the Patna High Court and Supreme Court decisions in State of Bihar vs. Universal Hydrocarbons Co. Ltd. (1994) and subsequent rulings, which rejected the State's contention that CPC was a different commodity for tax purposes. The Division Bench of the Gauhati High Court in M/s India Carbon (1992) also held that treating RPC and CPC as distinct commodities for taxation would violate Article 286(3) of the Constitution and Section 15 of the CST Act.

The Court concluded that the settled legal position is that both RPC and CPC fall within the declared goods phrase and the petitioner's intra-State purchase of RPC and inter-State sale of CPC with CST paid entitles it to reimbursement under Section 15[b] of the CST Act.

Issue 2: Entitlement to reimbursement of VAT paid on RPC under Section 15[b] of the CST Act read with AVAT Act provisions

The petitioner claimed reimbursement of VAT paid on intra-State purchase of RPC, asserting that after conversion to CPC and inter-State sale with CST paid, the VAT paid was reimbursable under Section 15[b] of the CST Act. The Court referred to Section 50 of the AVAT Act and Rule 29 of the AVAT Rules, which provide the procedural framework for refund claims. The Court emphasized that Section 15[b] of the CST Act is an independent provision allowing reimbursement where local tax is paid on declared goods subsequently sold in inter-State trade with CST paid.

The Court found that the petitioner had complied with the statutory requirements, submitted refund claims within prescribed timeframes, and paid CST on inter-State sales of CPC. The audit assessments initially did not deal with the reimbursement claims, which did not amount to rejection. The Court held that silence or omission in assessment orders cannot be construed as rejection, and thus the petitioner was not required to challenge those orders as rejected claims.

The Court also noted that the Commissioner of Taxes had earlier forwarded reimbursement proposals to the Government for approval, acknowledging the petitioner's entitlement. This established that the petitioner's claims were valid and meritorious under the law.

Issue 3: Validity of reassessment orders under Section 42 of the AVAT Act and Commissioner's jurisdiction to review earlier decisions

The respondent contended that reassessment orders passed under Section 42 of the AVAT Act were void as the assessment period was time-barred and no court order authorized reassessment. The Court examined the delegation of powers under the AVAT Act and Rules, noting that the Assistant Commissioner of Taxes, who passed the reassessment orders, was a delegated authority empowered to do so. The Court held that the reassessment orders were in essence orders of the Commissioner himself and could not be overturned by the Commissioner acting as a superior authority without following appellate procedures.

The Court further held that the Commissioner did not have inherent or statutory power to review or reverse the earlier decision of forwarding reimbursement proposals to the Government, absent any express provision conferring review power. The impugned order rejecting reimbursement claims was thus a change of opinion by a successor Commissioner without jurisdiction and was illegal.

Issue 4: Effect of delay, laches, acquiescence, and failure to challenge original assessment orders

The respondent argued that the petitioner's claims were barred by delay, laches, and acquiescence, and failure to challenge original assessment orders which had attained finality. The Court distinguished between acquiescence and delay/laches, explaining that acquiescence requires active or tacit consent to a violation of a right, while laches involves passive delay. The Court found that the petitioner's claims were never rejected in original assessments, and thus there was no wrongful action to acquiesce to.

The Court further held that the petitioner was not a party to the Supreme Court case relied upon by the respondents but that the general principles of law declared by the Supreme Court are binding on all, including non-parties. The Court rejected the respondents' contention that the petitioner was a fence-sitter, noting that the petitioner had submitted claims timely and that delay in processing refunds by the authorities attracts statutory interest rather than forfeiture of claims.

Issue 5: Procedural correctness and statutory framework for refund claims and government approval

The Court reviewed the procedural provisions under Section 50 of the AVAT Act and Rule 29 of the AVAT Rules, which require refund claims to be processed by the prescribed authority, with prior approval of the Government for amounts exceeding Rs. 50 lakh. The Commissioner had forwarded proposals to the Government with reasons recorded, satisfying the procedural requirements.

The Court observed that the impugned order did not constitute a review of any passed order but was an unauthorized reconsideration of earlier proposals. Further, the Commissioner failed to consider the Government's directive to process the petitioner's claims similarly to other successful claimants, thereby overstepping his jurisdiction.

Issue 6: Applicability of interest on delayed refund claims

The Court noted that the petitioner submitted an undertaking to accept simple interest at 10% per annum from 12.07.2013 as per the Supreme Court's interim order. The Legal Remembrancer's opinion supported payment of interest at 9% per annum after the initial period. The Court directed that interest be paid as per statutory provisions and undertakings given.

3. SIGNIFICANT HOLDINGS

The Court made the following crucial legal determinations and principles, preserving verbatim excerpts where significant:

- "Petroleum Coke is one of the forms of Coke and it is covered within the phrase, 'Coal, including Coke in all its forms' under Section 14 of the CST Act and it was declared as a good of special importance in inter-State trade or commerce."

- "If a dealer purchased Raw Petroleum Coke [RPC] within the State by paying Value Added Tax [VAT] levied under the AVAT Act and the dealer after converting the purchased Raw Petroleum Coke [RPC] into Calcined Petroleum Coke [CPC], sold the Calcined Petroleum Coke [CPC] outside the State in the course of inter-State trade or commerce and the dealer had paid the Central Sales Tax under the CST Act on such sold Calcined Petroleum Coke [CPC], then the dealer would be entitled for reimbursement of the Value Added Tax [VAT] amount paid on the purchase of Raw Petroleum Coke [RPC] as per Section 15[b] of the CST Act."

- "Silence on an important issue like reimbursement of the local tax paid on the purchase of Raw Petroleum Coke [RPC] within the State in the statutory order, that is, the audit assessment order cannot amount to rejection of the claim for reimbursement under Section 15[b] of the CST Act."

- "When an authority passes an order in exercise of a power delegated to him by the delegating authority, the delegating authority cannot sit in appeal on the order passed by the delegated authority."

- "The Commissioner does not have jurisdiction to review or reverse earlier decisions forwarding reimbursement proposals in absence of any statutory power of review."

- "Delay and laches or acquiescence cannot be invoked to defeat a valid claim where there was no wrongful action or rejection of the claim at the time of original assessments."

- "The general principle of law declared by the Supreme Court is binding on all, including parties not before the Court."

- "The impugned Order dated 22.09.2022 is an order on change in opinion, without jurisdiction and is liable to be set aside and quashed."

- The Court directed the respondent authorities to process all pending reimbursement claims for the Assessment Years 2006-2007 to 2017-2018 in accordance with Section 15[b] of the CST Act and Sections 50 and 52 of the AVAT Act, within six weeks.

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