TaxTMI 
TaxTMI 
2020 (8) TMI 27
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.... admitted by this Court and is pending for hearing. 3. The Co-ordinate Bench of this Court on 12.06.2019 passed the following order : "The draft amendment is allowed. The same shall be carried out at the earliest. Let Notice be issued to the respondents, returnable on 19th June 2019. Direct service is permitted." Thereafter, fresh Notice was issued to the respondents, returnable on 4th July 2019 by order dated 20.06.2019. Thereafter, this court passed the following order on 09.01.2020:- "Having regard to the nature of this litigation, more particularly, the reliefs prayed for in this writ application, we are of the view that we should take up Tax Appeal No.652 of 2017 for hearing at the earliest. Let Tax Appeal No.652 of 2017 be notified along with this petition on 16th January, 2020." 4. In view of the aforesaid order, both the Special Civil Application No.8391 of 2019 and Tax Appeal No. 652 of 2017 are notified together and were heard analogously and are being disposed of by this common judgment. 5. Tax Appeal No.652 of 2017 is admitted for consideration of the substantial questions of law vide order dated 15.09.2017 by the Co-ordinate Bench of this Court, which reads ....
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....ioner. The recipient of the goods/machineries did not issue Form 'C' as required under the provisions of the Central Sales Tax Act, 1956 (for short the "CST Act") since a fixed price towards consideration of the goods supplied was to be paid in spite of there being an inter-state transaction. The petitioner therefore, had paid tax at the rate of 10% or 12.5% instead of paying the same at the rate of 4% in absence of Form 'C' under the CST Act by making a reverse working in accordance with Section 8A of the CST Act. (iv) According to petitioner such mistake on the part of the petitioner resulted into excess deposit of tax amounting to Rs. 1,81,49,641/-. It is the case of the petitioner that the authorities from the Central Sales Tax Department were supposed to refund the said amount to the petitioner as the petitioner would be liable to pay only 4% tax and not 10 0r 12.5% tax on the invoice price of the goods/machineries sold by it. (v) It appears that the petitioner was assessed by the Assistant Commissioner of Commercial Tax, Ghatak-4, respondent No.2 under Section 34 of the CST Act on 31.03.2013 for the year 2007-08 raising a demand of Rs. 35,85,464/- and impounded the refund a....
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....first appellate authority, a quasi-judicial authority, has all along been silent on this issue. (21) The appellant has submitted that it has, by mistake, made this excess payment to the tune of Rs. 1,81,49,641/- and that it was the mistake of his late tax consultant. We cannot buy this argument simply because the prices charged in the running bill issued in 2007-08 were inclusive of tax, and the tenders, subsequent quotations, etc for this contract had happened long back, perhaps in the year 2005-06 or 2006-07 (Tender no. date, quotation no., date, etc are not provided by any of the parties) when there was even no talk of the amendment likely to be made in Section 8(2) of the CST Act from 01-042007. Thus, during pre amendment period, when the tender was published and quotation was submitted, nobody knew that the rate of tax for the inter-State transaction without the support of Form C would be going to be 4% with effect from 01-04-2007 as against the rate of tax of 10% / 12.5 % prevalent during pre-amendment period. This means when the price inclusive of taxes was finalised, the tax constituent must have been considered at the rate of 10% or 12.5% as the case may be, only. And th....
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....n the Bombay High Court judgment in the case of Ramkrishna Kulvantrai (supra) and the Apex Court judgment in the case of Khemka & Co (supra), it is decided that in such a situation, it was not open to the department either to forfeit the amount which according to the department was collected by way of sales tax or to levy a penalty on the appellant in respect thereof. It was only open to the State to prosecute the appellant, if at all; any case is made out under section 10(f) of the CST Act. (23) Section 9A of the CST Act, prohibiting collection of tax save under the provisions of the CST Act, reads as under: "9A. Collection of tax to be only by registered dealers. No person who is not a registered dealer shall collect in respect of any sale by him of goods in the course of inter-State trade or commerce any amount by way of tax under this Act, and no registered dealer shall make any such collection except in accordance with this Act and the rules made there under." (24) There are two sections providing for penalties under the CST Act. Section 10 and Section 10A. (25) Though the heading of Section 10 is 'Penalties', in fact it is a list of 'the Central Act - specific' offe....
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....hich would have been levied under sub-section (2) of section 8 in respect of the sale to him of the goods, if the sale had been a sale falling within that sub-section; Provided that no prosecution for an offence under section 10 shall be instituted in respect of the same facts on which a penalty has been imposed under this section. (2) The penalty imposed upon any dealer under sub-section (1) shall be collected by the Government of India in the manner provided in subsection (2) of section 9 - (a) in the case of an offence falling under clause (b) or clause (d) of section 10, in the State in which the person purchasing the goods obtained the form prescribed for the purposes of sub-section (4) of section 8 in connection with the purchase of such goods; (b) in the case of an offence falling under clause (c) of section 10, in the State in which the person purchasing the goods should have registered himself if the offence had not been committed." It is to be noted that, though penalty under section 10A can be imposed for the offences under section 10(b),(c) and (d), it cannot be imposed for the offence under section 10(f). For the offence under section 10(f), the only course avail....
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....ot be enlarged by the provisions of machinery of the State Act incorporated for working out the Central Act. Per Beg, J. - Whatever may be the objects of levying a penalty, its imposition gives rise to a substantive liability which can be viewed either as an additional tax or as a fine for the infringement of the law. The machinery or procedure for its realization comes into operation after its imposition. In any case, it is an imposition of a pecuniary liability which is comparable to a punishment for the commission of an offence. It is a well-settled canon of construction of neither statutes that neither a pecuniary liability can be imposed nor an offence created by mere implication. It may be debatable whether a particular procedural provision creates a substantive right or liability. But the imposition of a pecuniary liability, which takes the form of a penalty or fine for a breach of a legal obligation, cannot be relegated to the region of mere procedure and machinery for the realization of the tax. It is more than that. Such liabilities must be created by clear, unambiguous and express enactment. The language used should leave no serious doubts about its effect so that the ....
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....here is also no discussion by the Kerala High Court of the decision on the subject of the Hon'ble Apex Court in Khemka 15 & Company (supra). Therefore, Leo Engineering (India) (supra) is not applicable to the facts of the appellant's case. (30) In view of the above discussion, we conclude that the appellant has collected excess tax to the tune of Rs. 1,81,49,641/- contravening the provisions of the Central Sales Tax Act, 1956, however, since, unlike the GVAT Act, the CST Act does not provide for forfeiture of such excess tax, the order of the first appellate authority, confirming the forfeiture of tax by the assessing authority, is required to be set aside. We also allow the appellant's plea under the GVAT Act for rectification of TDS amount of Rs. 22,287/- in absence of any adverse evidence produced by the department. We, therefore, pass the following order: ORDER Second Appeal Nos. 339 and 340 of 2016 are hereby allowed. Appellant's plea for grant of credit of TDS amount of Rs. 22,287/- in Second Appeal No.339 of 2016 is allowed in the absence of any adverse evidence produced by the department. The impugned order of the first appellate authority confirming the forfeiture of ....
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....the provisions under Section 8(2) of the Central Sales Tax Act w.e.f. 1st April 2007 in respect of the applicable rate of tax, mistakenly considered the applicable rate of tax at 10%/12.5% instead of correct rate of 4% while making reverse working in its sales invoices. The respondent-assessee therefore, deposited excess central sales tax of Rs. 1,81,49,641/- along with returns. 12. Mr. Chintan Dave, the learned AGP submitted that Assessing Officer, during the course of assessment proceedings for the year 2007-08 has rightly forfeited the alleged excess amount of Central Sales Tax deposited by the respondent-assessee under Section 9(2) of the Central Sales Tax Act read with Section 31 of the GVAT Act, on the ground that in the commercial invoices prepared by the respondent- assessee, the tax amount is shown separately and therefore, such tax would be part of the inclusive amount of sale price and would amount to the tax collected by the respondent-assessee. It was therefore, submitted by applying the provisions of Section 31 of the GVAT Act, if the refund is granted to the assessee, it would amount to unjust enrichment. 12.1 The learned AGP also placed reliance upon the following....
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....le to pay only appropriate tax payable in accordance with law as the receiver Company was not concerned with regard to amount of tax to be paid by the assessee as the price was fixed irrespective of the amount of tax payable or irrespective of any other expenses, which were to be incurred by the assessee. 13.1 It was further submitted that considering fixed price payable for the goods supplied was arrived at and the recipient of goods never issued Form "C" for the goods received by them despite there being interstate transactions and were eligible to issue such tax concession forms and in such situation Section 8A of the Central Sales Tax Act provides for determining the tax liability of the vendor that the price is fixed at inclusive of tax and it is for the vendor like assessee to identify tax payable and thereafter pay the same. It was therefore, submitted that the assessee was not supposed to collect tax separately from the recipient of the goods and assessee was supposed to determine the turnover and identify the tax in accordance with the formula contemplated in Section 8A of the CST Act and the assessee was therefore, required to calculate the CST payable on the basis of th....
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....supposed to supply the goods to the buyer/receiver at specific price which would not be affected by tax paid/payable by the assessee and by applying the provision of Section 8A of the CST Act, the assessee arrived at tax payable on reverse working of the price charged to calculate the tax component imbedded therein. It was therefore, submitted that the amount of tax calculated by the respondent-assessee cannot be said to have been collected by it over and above the actual amount of tax payable by the assessee and the excess amount of CST deposited was due to the difference in the rate of the CST which has come into effect from 01.04.2007. 13.6 It was therefore, submitted that the Tribunal has rightly held that the respondent-assessee is entitled to refund of the excess amount of the CST and as such the appeal is without any merit and is liable to be dismissed and the assessee/petitioner is entitled to the refund as prayed by it in Special Civil Application 8391 of 2019. 14. Having heard the learned advocates for the respective parties and having gone through the materials on record and on perusal of the judgment of the Tribunal in order to appreciate the controversy raised in thi....
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....e of inter-State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority: Provided that the declaration is furnished within the prescribed time or within such further time as that authority may, for sufficient cause, permit.] (5) Notwithstanding anything contained in this section, the State Government may 2 [on the fulfillment of the requirements laid down in sub- section (4) by the dealer] if it is satisfied that it is necessary so to do in the public interest, by notification in the Official Gazette and subject to such conditions as may be specified therein direct,- (a) that no tax under this Act shall be payable by any dealer having his place of business in the State in respect of the sales by him, in the course of inter-State trade or commerce, 3 [to a registered dealer 4 [***]] from any such place of business of any such goods or classes of goods as may be specified in the notification, or that the tax on such sales shall be ca....
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....r.- (1) In determining the turnover of a dealer for the purpose of this Act, the following deductions shall be made from the aggregate of the sale prices, namely:- (a) the amount arrived at by applying the following formula- rate of tax x aggregate of sale Prices _ 100 + rate of tax Provided that no deduction on the basis of the above formula shall be made if the amount by way of tax collected by a registered dealer, in accordance with the provisions of this Act, has been otherwise deducted from the aggregate of sale prices. Explanation- Where the turnover of a dealer is taxable at different rates, the aforesaid formula shall be applied separately in respect of each part of the turnover liable to a different rate of tax; (b) the sale price of all goods returned to the dealer by the purchasers of such goods,- (i) within a period of three months from the date of delivery of the goods, in the case of goods returned before the 14th day of May, 1966; (ii) within a period of six months from the date of delivery of the goods, in the case of goods returned on or after the 14th day of May, 1966: Provided that satisfactory evidence of such return of goods and of refund or adj....
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.... tax law of the State; and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references, refunds, rebates, penalties, charging or payment of interest,] compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly: Provided that if in any State or part thereof there is no general sales tax law in force, the Central Government may, be rules made in this behalf make necessary provision for all or any of the matter specified in this subsection. (2A) All the provisions relating to offences, interest and penalties (including provisions relating to penalties in lieu of prosecution for an offence or in addition to the penalties or punishment for an offence but excluding the provisions relating to ma....
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....class of goods that goods of such class are covered by his certificate of registration; or (c) not being a registered dealer, falsely represents when purchasing goods in the course of inter State trade or commerce that he is a registered dealer; or (d) after purchasing any goods for any of the purposes specified in 1 [clause (b) or clause (c) or clause (d)] of subsection (3) 2 [or sub section (6)] of section 8 fails, without reasonable excuse, to make use of the goods for any such purpose; (e) has in his possession any form prescribed for the purpose of sub section (4) 3 [or sub-section (8)] of section 8 which has not been obtained by him or by his principal or by his agent in accordance with the provisions of this Act or any rules made thereunder; (f) collects any amount by way of tax in contravention of the provisions contained in section 9A; he shall be punishable with simple imprisonment which may extend to six months, or with fine or with both; and when the offence is a continuing offence, with a daily fine which may extend to fifty rupees for every day during which the offence continues. 10A. Imposition of penalty in lieu of prosecution- (1)] If any person purchasin....
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....uyer/receiver of the goods. As per the terms of the contract the respondent-assessee was issuing running bills at a fixed price but prepared the commercial invoices for the purpose of payment of excise duty and the CST, but ultimately has received the fixed price only. 14.3 The Apex Court while upholding the Constitutional validity of Section 9(2A) of the CST Act has held as under in the case of Shiv Dutt Rai Fateh Chand etc. vs. Union of India and another reported in AIR 1984 Supreme Court 1194 held as under: "17. The first contention urged on behalf of the petitioners is that the lacuna in the Act which was pointed out by this Court in Khemaka's case (supra) namely that there was no specific provision levying penalties in the Act as it stood before its amendment in 1976 remains unfilled up even now and hence no penalties can be recovered by utilising the provisions of the general sales tax laws of the respective States. This argument is based upon the language of subsection (2A) of section 9 of the Act which is extracted above. It is contended that the words "(A) 11 the provisions relating to offences and penalties.. of the general sales tax law of each State shall with ne....
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....f States applicable to the proceedings under the Act prospectively, section 9 of the Amending Act makes all the provisions relating to penalties only in the general sales tax laws of the States applicable to the proceeding under the Act retrospectively by adopting the same language appearing in subsection (2-A) of section 9 of the Act. This pattern of legislation had to be adopted perhaps because Parliament wished rightly not to give retrospective effect to the provisions relating to offences also which are referred to in sub-section (2A) of section 9. Having thus given retrospective effect to section 2A of section 9 with effect from January 5, 1957 in so far as penalties were concerned by enacting sub-section (1) of section 9 of the Amending Act, Parliament removed the deficiency pointed out in Kheamaka's case (supra) in the Act. In view of the retrospective amendment, the basis of the judgment in Kheamka's case (supra) was also removed. Consequently the judgment delivered in that case could not stand in the way of realisation of penalties in accordance with the validating provisions of section 9 (2) of the Amending Act We are of the view that sub-section (2-A) of section ....
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....ffences and penalties in the general sales tax laws of the various States, adopted them for purposes of assessment, reassessment, collection and enforcement of the provisions of the Act it cannot be said that it has abdicated its legislative functions. In this connection it is necessary to refer to the decision of this Court in State of Madras v. N. K. Nataraja Mudaliar(1). In that case one of the contentions raised by the assessee related to the validity of section 8 of the Act as amended by Central Act 31 of 1958. By subsection (1) of section 8 every dealer who in the course of inter-State trade or commerce sold to the Government any goods or to a registered dealer, other than the Government, goods of the description referred to in sub-section (3) of section 8 was liable to pay tax under the Act at the rate of one per cent of his turnover. Under sub-section (2) of section 8 the tax payable on the turnover relating to inter- State sales not falling under sub-section (1) of section 8 was (a) in the case of declared goods, to be computed at the rate applicable to the sale or purchase of such goods inside the appropriate State and (b) in the case of goods other than declared goods at....
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.... prospective traders from purchasing a commodity and to resort to other sources of supply, in its own interest the State will adjust the rate to attract purchasers ...Again, in a democratic constitution political forces would operate against the levy of an unduly high rate of tax. The rate of tax on sales of a commodity may not ordinarily be based on arbitrary considerations but in the light of the facility of trade in a particular commodity, the market conditions internal and external-and the likelihood of-consumers not being scared away by the price which includes a high rate of tax. Attention must also be directed to sub-s. (S) of s. 8 which authorises the State Government, notwithstanding anything contained in s. 8 in the public interest to waive tax or impose tax on sales at a lower rate on inter-State trade or commerce. It is clear that the legislature has contemplated that elasticity of rates consistent with economic forces may be maintained. Prevalence of differential rates of tax on sales of the same commodity cannot be regarded in isolation as determinative of the object to discriminate between one State and another. Under the Constitution as originally framed, revenue fr....
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....s Recovery Act. A penalty is a statutory liability. The Central Act contains specific provisions for penalty. Those are the only provisions for penalty available against the dealers under the Central Act. Each State Sales Tax Act contains provisions for penalties. These provisions in some cases are also for failure to submit return or failure to register. It is rightly said that those provisions cannot apply to dealers under the Central Act because the Central Act makes similar provisions. The Central Act is a self contained code which by charging section creates liability for tax and which by other sections creates a liability for penalty and impose penalty. Section 9(2) of the Central Act creates the State authorities as agencies to carry out the assessment, reassessment, collection and enforcement of tax and penalty by a dealer under the Act." 14.5 The Allahabad High Court in the case of Swadeshi Polytex Limited (supra) has held as under: "7. I find substance in the argument of learned counsel for the applicant. Section 8-A (1) of the Central Act provides determination of the turnover for the purpose of the Act. By permitting a deduction from the aggregate of the sale price a....
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.... case the applicant has not realised any tax in the bills of cash memos. 11. Therefore, neither the provisions of Section 8-A (2) of the Act applies nor there is any contravention of the said provisions and, therefore, Section 29-A of the Act has no application. 12. For the foregoing discussion, in view of the fact that there is no evidence that any tax has been realized what to say, the tax in excess of the tax due, any amount deposited cannot be retained and refund cannot be denied under section 29-A of the Act, which is made applicable under the Central Sales Tax Act. On the facts and circumstances, the assessing authority is directed to refund the amount which is in excess of the tax due forthwith within a period of three months from the date of presentation of the certified copy of this order in accordance to Section 29 of the Act along with the interest in accordance to law." 14.6 The aforesaid decision of the Allahabad High Court was confirmed by Supreme Court by dismissing the Special Leave Petition vide order dated 04.07.2012. 14.7 The Supreme Court in the case of India Carbon Ltd. and Ors. Vs. State of Assam held has held as under : "10. The words "charging or pay....
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....9; sales tax authorities only if the Central Act makes a substantive provision for the levy and charge of interest on Central sales tax and only to that extent. There being no substantive provision in the Central Act requiring the payment of interest on Central sales tax the States' sales tax authorities cannot, for the purpose of collecting and enforcing payment of Central sales tax, charge interest thereon. 14. The requirement of the 1st respondent's sales tax authorities that the appellants should pay interest at the rate of 24% p.a. on delayed payments of Central sales tax under the provisions of Section 35(A) of the State Act must, therefore, be held to be bad in law." 14.8 The Bombay High Court in the case of Ramkrishna Kulvantrai (supra), while considering the provisions of Sections 37, 39, 46 and 61 of the Bombay Sales Tax Act, 1959 and Section 9A of the CST Act has held as under : "4. Under clause (f) of section 10 of the Central Sales Tax Act, 1956, any person collecting any amount by way of tax in contravention of the provisions contained in section 9A of the said Act commits an offence and is liable to simple imprisonment which may extend to six months, or ....
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....x (Amendment) Act, 1969 ?" 6. In view of the judgment of the Supreme Court referred to above, Mr. Desai on behalf of the petitioner has stated that he does not press before us questions Nos. (1), (3) and (4) but was confining this application only to question No. (2) set out above. It was not urged before us that this question was wrongly decided, but what was urged was that it was not necessary for the Tribunal to give a finding that the collection of Central sales tax on the said transactions of the aggregate value of Rs. 99,640, which were admittedly not sales, did not amount to contravention of section 9A of the Central Sales Tax Act, 1956, and the Tribunal's finding on this point was, therefore, unnecessary and academic. It was further submitted on behalf of the petitioner that though in view of the above Supreme Court decision it was not open to the department either to forfeit the amount which according to the department was collected by way of sales tax on these transactions or to levy a penalty on the respondents in respect thereof, it was open to the State to prosecute the respondents in respect thereof and that though they may not in this particular case prosecute ....
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....section 61(1) of the Bombay Sales Tax Act, 1959, which applies by reason of the provisions of section 9(2) of the Central Sales Tax Act, 1956, a reference can only lie in respect of a question of law arising out of an order of the Tribunal "which affects the liability of any person to pay tax or penalty, or to forfeiture of any sum of which affects the recovery from any person of any amount under section 39". No reference can lie only in order to determine a person's liability to be prosecuted. Since question No. (2) above in respect of which a reference is now asked for does not fall under any of the three heads provided for by section 61(1) of the Bombay Sales Tax Act, 1959, the application must fail on this ground also." 14.9 In view of the above decisions, the question arises whether the decision of the Constitutional bench of the Supreme Court in the case of Mafatlal Industries Ltd. v Union of India and Ors. reported in (1997) 5 SCC 536 would be applicable to the provisions of CST Act so as to forfeit the excess amount of CST deposited by the respondent-assessee on the ground of unjust enrichment. The Apex Court in view of the provisions of the Central Excise Act, 1944, h....
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....ed of in the light of and in accordance with the provisions of Section 11-B. This is for the reason that the power under Article 226 has to be exercised to effectuate the rule of law and not for abrogating it. The said enactments including Section 11-B of the Central Excises and Salt Act and Section 27 of the Customs Act do constitute "law" within the meaning of Article 265 of the Constitution of India and hence, any tax collected, retained or not refunded in accordance with the said provisions must be held to be collected, retained or not refunded, as the case may be, under the authority of law. Both the enactments are self-contained enactments providing for levy, assessment, recovery and refund of duties imposed thereunder. Section 11-B of the Central Excises and Salt Act and Section 27 of the Customs Act, both before and after the 1991 (Amendment) Act are constitutionally valid and have to be followed and given effect to. Section 72 of the Contract Act has no application to such a claim of refund and cannot form a basis for maintaining a suit or a writ petition. All refund claims except those mentioned under Proposition (ii) below have to be and must be filed and adjudicated u....
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....ssed on the burden of the duty or to the extent he has not so passed on, as the case may be. Whether the claim for restitution is treated as a constitutional imperative or as a statutory requirement, it is neither an absolute right nor an unconditional obligation but is subject to the above requirement, as explained in the body of the judgment. Where the burden of the duty has been passed on, the claimant cannot say that he has suffered any real loss or prejudice. The real loss or prejudice is suffered in such a case by the person who has ultimately borne the burden and it is only that person who can legitimately claim its refund. But where such person does not come forward or where it is not possible to refund the amount to him for one or the other reason, it is just and appropriate that that amount is retained by the State, i.e., by the people. There is no immorality or impropriety involved in such a proposition. The doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has be....
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....l loss or prejudice, having passed on the burden of tax or duty to another person, it would be unjust to allow or decree his claim since it is bound to prejudicially affect the public exchequer. In case of large claims, it may well result in financial chaos in the administration of the affairs of the State. (viii) The decision of this Court in STO v. Kanhaiya Lal Mukundlal Saraf must be held to have been wrongly decided insofar as it lays down or is understood to have laid down propositions contrary to the propositions enunciated in (i) to (vii) above. It must equally be held that the subsequent decisions of this Court following and applying the said propositions in Kanhaiya Lal have also been wrongly decided to the above extent. This declaration - or the law laid down in Propositions (i) to (vii) above - shall not however entitle the State to recover the taxes/duties already refunded and in respect whereof no proceedings are pending before any authority/Tribunal or Court as on this date. All pending matters shall, however, be governed by the law declared herein notwithstanding that the tax or duty has been refunded pending those proceedings, whether under the orders of an author....