1971 (5) TMI 60 - HC - VAT and Sales Tax

Summary

Issues:
1. Entitlement to refund of sales tax paid on inter-State sale of gingerly seeds under Mysore Sales Tax Act, 1957.
2. Interpretation of rule 39-A of the Mysore Sales Tax Rules regarding conditions for claiming refund.
3. Application of Article 286(3) of the Constitution and Section 15(b) of the Central Sales Tax Act, 1956 in the context of refund of tax on declared goods sold in inter-State trade.

Detailed Analysis:
The judgment by the High Court of Mysore involved three revision petitions concerning the entitlement to a refund of sales tax paid on inter-State sale of gingerly seeds under the Mysore Sales Tax Act, 1957 for the assessment years 1963-64, 1964-65, and 1965-66. The petitioner, a second purchaser of the seeds, claimed a refund based on the proviso to section 5(4) of the Act read with rule 39-A of the Mysore Sales Tax Rules. The Sales Tax Appellate Tribunal had denied the refund, stating that the petitioner had not paid the tax, which was a prerequisite condition according to their interpretation of rule 39-A.

The High Court analyzed the legal framework, specifically referring to Article 286(3) of the Constitution and Section 15(b) of the Central Sales Tax Act, 1956. Section 15(b) provides for the refund of tax on declared goods sold in inter-State trade, leaving the determination of the refund recipient to the State sales tax law. The Court emphasized that the State law must provide for the refund of tax on declared goods sold in inter-State trade, with the recipient specified by the State. The Court highlighted the importance of giving effect to the provisions of Section 15(b) of the Central Sales Tax Act in the context of refunding taxes on inter-State sales of declared goods.

Regarding the interpretation of rule 39-A of the Mysore Sales Tax Rules, the Court noted that the rule clearly stated that the refund should be made to the dealer who made the inter-State sale, without imposing a condition that the dealer must have paid the tax under the Act. The Court held that the petitioner, having met the conditions of tax collection on declared goods and sale in inter-State trade, was entitled to the refund, despite the tax being collected from the first purchasers. The Court concluded that the sales tax authorities were incorrect in rejecting the refund claim and allowed the revision petitions, directing the assessing authority to refund the tax to the assessee, who was also entitled to costs.

In summary, the judgment clarified the entitlement to a refund of sales tax on inter-State sales of declared goods under the Mysore Sales Tax Act, emphasizing the importance of State laws providing for such refunds in line with the Central Sales Tax Act. The Court's interpretation of rule 39-A highlighted that the refund should be made to the dealer involved in the inter-State sale, without requiring the dealer to have paid the tax directly.