1956 (3) TMI 17 - HC - VAT and Sales Tax

Summary

Issues:
1. Refund of sales tax erroneously collected.
2. Jurisdiction of High Court under Article 226.
3. Alternative remedy under section 22 of the Act.
4. Suit for recovery of tax barred by Section 19 of the Act.
5. Application of limitation period for refund under Section 10(4).

Analysis:
The case involves a petition under Article 226 seeking a refund of sales tax erroneously collected from the Sugar Syndicate. The Syndicate imported and sold sugar, paying sales tax on sales made from January to March 1950. However, it was later acknowledged that the Syndicate was not liable to pay tax for this period. The Excise and Taxation Officer rejected the refund application, citing limitation, which was upheld in subsequent appeals. The petitioner then approached the High Court for relief.

The High Court acknowledged that the Syndicate was not liable to pay the sales tax for the disputed period. The Court emphasized that the realization of tax from customers did not affect the illegality of the levy or collection. It reiterated that a dealer is liable to pay tax on the taxable turnover, regardless of whether it is recovered from customers. The Court held that once it is established that tax was illegally collected, the High Court should intervene under Article 226 to grant relief, preventing injustice and unlawful tax collection.

Regarding the argument that the Syndicate did not utilize the remedy under section 22 of the Act, the Court noted that the Financial Commissioner rejected the revision petition based on propriety rather than a legal question. The Court opined that the existence of an alternative remedy does not bar relief under Article 226, especially when tax collection was unauthorized. The Court found the remedy under section 22 inadequate in this case due to the dismissal of the revision petition on non-legal grounds.

The Court dismissed the notion that the Syndicate should have pursued a civil suit for tax recovery, citing Section 19 of the Act, which prohibits challenging tax orders in civil courts. The Court highlighted that the application for refund was rejected based on a time bar under Section 10(4), but there was no evidence that the mistake was discovered within the stipulated time. Refunds under Section 12 do not have a limitation period, leading the Court to order the taxation authorities to refund the erroneously collected amount to the Syndicate.

In conclusion, the High Court accepted the petition, directing the Excise and Taxation Commissioner to refund the tax amount to the Syndicate. The Court emphasized adherence to constitutional provisions prohibiting unauthorized tax collection and left the parties to bear their own costs.