THE HON'BLE SRI JUSTICE V.V.S.RAO AND THE HON'BLE SRI RAMESH RANGANATHAN WRIT PETITION No.1948 of 2000
Ms.The Associated Cement Co. Ltd.
The Commercial Tax Officer,Secunderabad and another
Counsel for the Appellant: Sri G.Narendra Chetty
Counsel for respondent :Sri P. Balaji Verma, Learned Special Standing Counsel for Commercial Taxes
:ORDER: (Per Hon'ble Sri Justice Ramesh Ranganathan)
The petitioner seeks refund of Rs.31,04,742/- consequent to the order of the Sales Tax Appellate Tribunal (STAT) in T.A. No.17 of 1994 dated 22.12.1998 relating to the assessment year 1988-89 (APGST). They also claim interest under Section 33-F of the Andhra Pradesh General Sales Tax Act (hereinafter referred to as the "Act").
2. The petitioner, a public limited company with its registered office at Mumbai and its regional marketing office at Secunderabad, is engaged in the business of manufacture, purchase and sale of cement, and is a registered dealer both under the Andhra Pradesh General Sales Tax Act, 1957 and the Central Sales Tax Act, 1956. For the assessment year 1988-89 (APGST), the assessing authority passed an order dated 30.12.1992 forfeiting Rs.31,04,742/-, under Section 30-B of the Act, towards excess collection of tax. Aggrieved thereby the petitioner filed an appeal under Section 19 of the APGST Act before the Appellate Deputy Commissioner who, by his order dated 15.07.1993, dismissed the appeal. Aggrieved thereby the petitioner preferred a second appeal, in T.A. No.17 of 1994, and the STAT, by its order dated 22.12.1998, allowed the appeal and set aside the order of forfeiture of Rs.31,04,742/- both on the ground that it was barred by limitation as prescribed under Section 30-C, and as no separate order of forfeiture was passed by the assessing authority.
3. Sri G. Narendra Chetty, Learned Counsel for the petitioner, would contend that, since the order of the STAT has attained finality, the respondent had no authority to retain the said amount, and was bound to refund it to the petitioner without their having to submit an application in this regard. Reference is made by the Learned Counsel to Section 33-F of the Act and Rule 43 of the APGST Rules to contend that the order of the STAT should be given effect to by the assessing authority, and that he should refund the amount due with interest. He would further contend that, though the petitioner was not required to make an application, they had filed a claim for refund in Form XXXIII, under Rule 44-AA, to the respondent on 04.02.1999 along with a copy of the order of the STAT, but to no avail. He would rely on Hyderabad Asbesetos Cement Products Ltd v. State of Andhra Pradesh1.
4. Sri P. Balaji Verma, Learned Special Standing Counsel for Commercial Taxes, would submit that the assessing authority had recorded that the petitioner had collected excess tax of Rs.31,04,742/-, and this amount was liable to be forfeited under Section 30-B of the Act; the petitioner, a manufacturer of cement, had collect sales tax on packing material like gunny bags, H.D.P.E. bags etc., at the rate applicable to its contents i.e., cement, even though the rate of tax on such packing material was lower than that of cement; at the time of passing the final assessment order the assessing authority had levied tax at the lower rate, necessitating the excess tax, collected by the petitioner, being forfeited; as the petitioner had collected tax from their purchasers, they were bound pay the tax; the excess tax collection could not be retained by them as it was not their money; unjust enrichment by a dealer at the cost of the public exchequer could not be permitted; the petitioner had no right to claim refund of such tax collected in excess; the assessee had not provided proof of the excess tax collection being remitted to each individual purchaser; having collected tax from their purchasers, the petitioner was seeking to unjustly enrich themselves claiming refund from the government; and, in view of Section 33-B of the Act, no refund could be made since the petitioner had merely remitted the tax collected from their purchasers to the Government. He would rely on Mafatlal Industries Ltd. v. Union of India2.
5. Before examining the rival contentions it is necessary to briefly refer to the relevant provisions. Section 30-B(1) of the APGST Act prohibited a dealer from collecting any sum by way of tax, in respect of sale or purchase of any goods, which are not liable to tax under the Act. Under sub-section (2) thereof no dealer shall collect any amount by way of tax in excess of the amount of tax payable by him on the sale by him under the provisions of the Act.
6. 33-BB relates to non refund of tax in certain cases and, where a levy and collection of tax is held invalid by any judgment or order of a Court or Tribunal, it shall not be necessary to refund any such tax to the dealer unless it is proved by the dealer to the satisfaction of the assessing authority that the tax has not been collected from the purchaser. The legislative mandate, under Section 33-BB of the APGST Act, is that refund is not automatic on the finding recorded by a judicial body that tax was illegally collected from the assessee, but the assessee is required to establish that he had not already passed on the liability to some other person (purchaser). In substance, the provision is based on the well established legal principle, in the realm of indirect taxes, that an assessee shall not unduly enrich himself by taking advantage of an illegality committed by the officers of the State. (State of A.P. v. Jindal Strips (Limited) (Previously M/s. Jindal Ferro Alloys Limited) Jindalnagar, Kothavalsa3).
7. Section 30-C of the APGST Act relates to imposition of penalty for contravening certain provisions and, under sub-section (1) thereof, if any person collects tax, in contravention of the provisions of Section 30-B, any sum so collected shall be forfeited either wholly or partly to the State Government, and in addition he shall be liable to pay a penalty of an amount not exceeding two thousand and five hundred rupees. The first proviso thereto disables the assessing authority from levying penalty if it is evident that, due to a bonafide mistake, the dealer had collected tax in contravention of the provisions of Section 30-B, and the tax so collected in excess has been remitted to the Government along with the tax payable for that month. Under the second proviso the assessing authority is required, while imposing penalty or forfeiture, to take into consideration the amounts refunded to the purchaser from out of the amounts collected by way of tax in contravention of Section 30- B, or for the refund of which satisfactory arrangement has been made. Under sub-section (2), no order for forfeiture under Section 30-C shall be made after expiration of three years from the date of collection of the amount referred to in sub-section (1).
8. Section 33-B relates to Refund on appeal and where, as a result of any order passed in appeal or other proceeding under the Act, refund of any amount becomes due to the assessee, the assessing authority shall refund the amount to the assessee without his having to make any claim in that behalf, or adjust or apply such amount as provided in Section 33. Under Section 33-F(1) of the Act where a refund is due to the assessee, in pursuance of an order referred to in Section 33 B, and the assessing authority does not grant the refund within a period of six months from the date of such order, the State Government shall pay to the assessee simple interest at twelve percent per annum on the amount of refund due from the date immediately following the expiry of the period of six months till the date on which the refund is granted.
9. Under Rule 43 of the A.P.G.S.T. Rules 1957, every order passed by the Appellate Tribunal shall, on authorization by it, be given effect to by the assessing authority, who shall refund without interest, within two months from the date of communication of the authorization, any excess tax found to have been collected. Under Rule 44-AA, every claim for refund under Section 33 shall be made to the assessing authority in Form XXIII, and shall be verified in the manner specified therein.
10. As noted hereinabove, Section 30-B(2) of the APGST Act prohibits a dealer from collecting any amount by way of tax in excess of the tax payable by him on the sales made under the provisions of the Act. It is not in dispute that the petitioner has collected excess tax from their customers on the sale of packing material like gunny bags, H.D.P.E. bags etc., at the rate applicable to its contents i.e., cement even though the rate of tax on such packing material was lower than that of cement. The justification put forth by the petitioner for seeking refund is that, for contravention of the provisions of Section 30-B of the Act, Section 30-C prescribes penalty and forfeiture of the sum so collected by the dealer; Section 30-C(2) prohibits any order of forfeiture being made after expiry of three years from the date of collection; and, as the STAT had set aside the forfeiture order of the assessing authority, the respondents were bound to refund the tax paid by the petitioner even if the said amount represented excess tax collections by them over and above what is stipulated under the Act.
11. In Hyderabad Asbestos Cement Products Ltd.1 reliance on which is placed on behalf of the petitioner, railway freight was added to the value of the goods, and sales tax was collected by the petitioner from their purchasers. This, according to Revenue, showed that the true effect of the agreement between the parties was that the price was inclusive of railway freight. It is in this context that the Supreme Court observed that the form in which the invoice was made out was not determinative of the contract between the petitioner and its customers; if, apprehending that it may have to pay sales tax on freight, the petitioner had collected sales tax on freight, the true nature of the contract between them and their purchasers could not be altered on that account; the petitioner may be liable to refund the amount of excess sales tax to its purchasers; but that was a matter between the petitioner and its purchasers; and the State could not seek to levy tax on railway freight if it was not made a part of the price. Refund by the State, of the excess tax collected by a dealer and which had been passed on to their customers, or the doctrine of unjust enrichment did not arise for consideration in Hyderabad Asbestos Cement Products Ltd1.
12. It is not in dispute that, in the present case, the tax burden has been passed on by the petitioner to their purchasers. Neither have the persons, who paid the tax to the petitioner, come forward seeking refund nor have such purchasers been identified to enable refund of the amount to them. The petitioner is seeking to retain the excess tax collected though they were precluded from collecting such excess tax under Section 30-B(2) of the Act. It is no doubt true that the order of forfeiture, passed under Section 30-C(1) of the Act, has been set at naught by the STAT. It must, however, be borne in mind that what the petitioner is now seeking is for a direction to the respondents to refund the tax collected by them in excess of what is prescribed under the Act. In effect, the petitioner seeks a direction from this Court to permit them to unjustly enrich themselves at the cost of the State. The doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect tax from both ends. In other words, he cannot collect the said amount from his purchaser at one end and also collect the same amount from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. The State represents the people of the country. No one can speak of the people being unjustly enriched. Article 265 of the Constitution has to be construed in the light of the goal and the ideals set out in the Preamble to the Constitution, and in Articles 38 and 39 thereof. The concept of economic justice demands that, in the case of indirect taxes, the tax collected without authority of law shall not be refunded to the petitioner unless he alleges and establishes that he has not passed on the tax burden to a third party, and that he has himself borne the burden of the said tax. Where the petitioner has suffered no real loss or prejudice, having passed on the burden of tax to another person, it would be unjust to allow 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. (Mafatlal Industries Ltd.2)
13. A claim for refund, whether made under the provisions of the Act or in a Writ Petition, can succeed only if the petitioner alleges and establishes that he has not passed on the tax burden to another/other person. 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. 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, it is just and appropriate that the amount is retained by the State, i.e., by the people. There is no immorality or impropriety involved in such a proposition. (Mafatlal Industries Ltd.2)
14. Even otherwise, exercise of jurisdiction under Article 226 of the Constitution of India is discretionary, and a Writ is not issued as of right or as a matter of course. (C.R.Reddy Law College Employees' Association, Eluru W.G.District vs. Bar Council of India, New Delhi4). The discretionary power of this Court, under Article 226 of the Constitution of India, need not be exercised in every case where there is an error of law. One of the limitations imposed by this Court, on itself, is that it would not exercise jurisdiction unless substantial injustice has ensued or is likely to ensue. (Sangram Singh v. Election Tribunal, Kotah5). One of the principles inherent is that exercise of discretionary power should be for the sake of justice and, if granting relief results in greater harm to the society, the Court may refrain from exercising the power. (State of Maharashtra Vs. Prabhu6). This Court exercises its discretionary power, under Article 226 of the Constitution of India, with great caution and only in furtherance of public interest, and not merely on the making out of a legal point. This Court is required to keep larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to the conclusion that overwhelming public interest requires interference, would it intervene in the matter. (Master Marine Services Pvt. Ltd v. Metcalfe and Hodgkinson Pvt Ltd7; Air India Ltd v. Cochin International Airport Ltd.8)
15. Granting the relief sought for by the petitioner would enable them to unjustly enrich themselves at the cost of the State, and retain the tax collected by them in excess, even though the burden of tax has been passed by them to persons who have purchased packing material from them. Grant of such relief would not be in larger public interest. Failure to grant relief would neither result in substantial injustice to the petitioner, nor would they suffer real loss or prejudice thereby, as they have already passed on the tax burden to their customers. We see no reason, therefore, to exercise discretion under Article 226 of the Constitution of India to grant the relief sought for.
16. The writ petition fails and is, accordingly, dismissed. However, in the circumstances, without costs.
?1 (1969) 24 STC 487 (A.P.H.C.DB)
2 (1998) 111 STC 467 (SC)
3 (2006) 43 APSTJ 1
4 2004(5) ALD 180 (DB)
5 AIR 1955 SC 425
6 (1994) 2 SCC 4817 (2005) 6 SCC 138