1993 (2) TMI 298 - HC - VAT and Sales Tax

Summary

Issues:
1. Clarification on entitlement to interest on refundable sums under various tax acts.
2. Refund of deposited amounts under different tax acts.
3. Provision for payment of interest under specific tax acts.
4. Direction for payment of interest on a specific sum.
5. Compensation for wrongful tax collection.

Analysis:

The High Court of Calcutta delivered a judgment stating that "gudakhu" or "gurakhu" falls under the category of "tobacco," entitling the respondent to exemption under the West Bengal Sales Tax Act and the Taxes on Entry of Goods into Calcutta Metropolitan Area Act, 1972. Consequently, previous assessments denying this exemption were set aside, and the petitioner was granted a refund of the collected sums under these Acts. The respondent sought clarification on the entitlement to interest on the refundable amounts under the Bengal Finance (Sales Tax) Act, 1941, West Bengal Sales Tax Act, 1954, and the Taxes on Entry of Goods into Calcutta Metropolitan Area Act, 1972.

Regarding the deposited sums before 1975 under the West Bengal Sales Tax Act, 1954, and as entry tax, the court noted that these amounts were subject to refund following the judgment. However, the judgment did not specify the payment of interest. The court referred to Section 10B of the Bengal Finance (Sales Tax) Act, 1941, and Section 8B of the West Bengal Sales Tax Act, 1954, which outline the payment of interest by the authorities for delays in refunds.

For the sum of Rs. 9,825.50, the petitioner was entitled to a refund along with interest as per the relevant tax acts. Notably, there was no provision for interest under the Entry Tax Act. Despite this, due to the delay in refunding Rs. 49,921.74 since 1975, the court directed the authorities to pay interest at a rate of 12% per annum from the date of the trial court's judgment in 1985 until the refund date. This decision was based on the wrongful collection of tax on "gudakhu" or "gurakhu," leading to the government compensating the assessee for the unlawful enjoyment of the money.

The court instructed the state respondents to comply with the order within two months. Before issuing any refund, the authorities were required to verify the correctness of the amounts based on the provided documents. The judgment concluded with no order as to costs and all parties instructed to act upon the dictated order.