1994 (4) TMI 324 - SC - VAT and Sales Tax

Refund claim as the levy of duty was not justified in law - Held that - Appeal partly allowed. As it is not brought to our notice that the respondents have alleged and/or established that they have not passed on the duty to the purchasers/consumers. The normal presumption is that they have done so. If they say otherwise, it is for them to allege and establish the same. In the absence of any such allegation and proof, the direction of refund is not called for. The directions of the High Court to re-do the orders in accordance with the law and in the light of this order and the further direction to the authorities to refund the amount to which each of the petitioners is entitled within three months as well as the directions to the said effect in the several orders under appeal are set aside

Summary

Issues: Interpretation of legislative entry, scope of tax on entry of goods, applicability of previous judgments, refund of excess tax paid.

The Supreme Court analyzed the interpretation of legislative entry 52 in the Seventh Schedule to the Constitution regarding the tax on the entry of goods into a local area for consumption, use, or sale therein. The appellant argued for a liberal construction of the entry, emphasizing that the tax should not be restricted to sales for consumption or use within the local area. However, the Court referred to past decisions like Burmah-Shell, Hiralal Thakorlal, and Parekh Automobiles, which limited the tax to sales intended for consumption or use within the local area. The Court noted that these decisions viewed the words "sale therein" as pertaining to sales within the local area, even if the goods were taken out for consumption elsewhere. The appellant's contention that the levy under the Karnataka Act should not be restricted like octroi levies imposed by local authorities was not accepted by the Court.

The respondent, relying on previous judgments, argued that the issue had been settled by the decisions in Burmah-Shell, Hiralal Thakorlal, and Parekh Automobiles. The Court highlighted that these cases had interpreted entry 52 to mean sales within the local area for consumption or use therein, even if the goods were taken out later. The respondent contended that the matter should not be re-agitated, given the previous rulings. The Court agreed with the respondent's position based on the precedents and declined to give effect to the appellant's arguments.

Regarding the refund of excess tax paid, the Court disagreed with the Karnataka High Court's direction to refund any overpaid amounts to the respondents. Citing previous cases like State of Madhya Pradesh v. Vyankatlal and Amar Nath Om Prakash v. State of Punjab, the Court emphasized that refunding the tax in such cases would lead to unjust enrichment of the dealers who had passed on the burden to consumers. The Court referenced a similar principle in Indian Oil Corporation v. Municipal Corporation, Jullundhar, where it was held that there was no equity in favor of the appellant to claim a refund of the tax collected. The Court concluded that unless the respondents could prove they had not passed on the tax burden to consumers, a refund was not warranted. Consequently, the Court allowed the appeals partially, set aside the directions for refund, and held that there would be no order as to costs.