2004 (9) TMI 612 - HC - VAT and Sales Tax

Summary

Issues:
1. Challenge against imposition of sales tax on purchase of coal post-bifurcation.
2. Legal validity of exemption certificate and sales tax collection.
3. Refund of sales tax collected by respondent No. 3.

Analysis:

Issue 1: Challenge against imposition of sales tax on purchase of coal post-bifurcation
The petitioner, a company manufacturing soft coke, was granted exemption from sales tax on raw material purchases before the bifurcation of Bihar. Following the bifurcation, the State of Jharkhand coerced the petitioner to pay sales tax on coal purchases despite the exemption certificate. The High Court, relying on a division Bench judgment, held the petitioner not liable for sales tax. The matter escalated to the apex Court, where the petitioner's stance was upheld, emphasizing the continuity of the exemption despite the state division.

Issue 2: Legal validity of exemption certificate and sales tax collection
The Supreme Court affirmed the High Court's decision, emphasizing the unaltered nature of the exemption notification post-bifurcation. The Court reiterated that the petitioner was not liable for sales tax on raw material purchases as per the exemption certificate. The sales tax collection by respondent No. 3, Central Coalfields Limited, was deemed illegal, and the petitioner was entitled to a refund or adjustment of the tax amount.

Issue 3: Refund of sales tax collected by respondent No. 3
The petitioner filed a writ petition seeking a refund from respondent No. 3 for the sales tax collected on coal purchases. Despite reminders, respondent No. 3 did not act on the refund application. The Court directed respondent No. 3 to refund the sales tax to the petitioner within three months, with the option to adjust the amount against future purchases. The Court clarified that the sales tax collection by respondent No. 3 was illegal, and the petitioner was entitled to the refund based on the exemption certificate and judicial decisions.

In conclusion, the High Court ruled in favor of the petitioner, directing respondent No. 3 to refund the sales tax collected illegally on coal purchases. The judgment emphasized the continuity of the exemption post-bifurcation and the petitioner's entitlement to relief based on the exemption certificate and legal precedents.