TaxTMI 
TaxTMI 
2015 (2) TMI 722
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....lected in the nature of fringe benefit tax (FBT) between 2005 and 2009 from the members of the petitioner-association despite repeated demands, as illegal, arbitrary and contrary to the provisions of the Income-tax Act, 1961 (for short "the Act"), apart from being unconstitutional. Consequential direction for refund of the amount of Rs. 7,40,69,450 with interest at the rate of 14.75 per cent. per annum is sought. The facts, in brief, are that at the Visakhapatnam Port, several ships arrive for loading and unloading purposes. The Visakhapatnam Dock Labour Board (for short "the Board") was constituted with a view to regulate the work force needed for that purpose. The board would supply the required manpower for loading and unloading of th....
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.... and still the fringe benefit tax was collected. They submit that whatever may have been the justification for collecting the amount, when there was some uncertainty as to the liability of the second respondent to pay the fringe benefit tax, at least when the Tribunal decided finally in the year 2010 that the second respondent is not liable to pay the fringe benefit tax, the amount ought to have been refunded, more so, when it was not remitted to the Income-tax Department. A detailed counter-affidavit is filed by the second respondent. The fact that the fringe benefit tax at the rate of Re. 1 per metric tonne of handled material at the port was collected, is not disputed. It is, however, stated that the amount had to be collected, to be ....
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....e contractors for the purpose of loading or unloading the ships. Though the wages for the allotted employees/workers are paid by the concerned stevedore contractors, the second respondent happens to be the actual employer. Therefore, the obligation, if any, to pay the fringe benefit tax, rests with the second respondent. In case the Income-tax Department made any demand against the second respondent for payment of fringe benefit tax and that, in turn, collected the corresponding amount from the members of the petitioner- association, there would not have been any serious objection. The reason is that the agency, which is under obligation to pay the wages and fringe benefits, is equally, under obligation to pay the tax also. It is a matte....
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....5." Accordingly, the amounts were being collected from the concerned members of the petitioner-association, and by 2012, it aggregated to about Rs. 8 crores. The fact, however, remains that neither there was any demand by the Income-tax Department against the second respondent for payment of fringe benefit tax nor in fact any amount was paid on that account. The amount recovered from the members of the petitioner-association was deposited in a separate account, from time to time, and it is also earning interest. The petitioner has been making demand for refund of the amount of Rs. 8,30,03,737. Even in the counter-affidavit, the second respondent did not plead any justification, worth its name, for withholding the amount. The only p....
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....y even be difficult to identify the persons, from whom it is collected. As regards the first contention, it has to be kept in mind that the collection of the amount by the second respondent was not in exercise of any sovereign powers. It is only when a Government, in its sovereign power, collects the amount, and there is likelihood of the benefit, not reaching the end customer, that the principle of undue enrichment will come into play. The underlying principle is that if a trader collected tax from the customer and paid to the exchequer, the refund thereof, on account of the adjudication must, naturally reach the person who paid it, and not an intermediary. Even where such amount is withheld, it goes to the State exchequer and becomes avai....