2003 (9) TMI 733 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Imposition of interest under section 8(1) of the U.P. Trade Tax Act, 1948.
2. Maintainability of appeal against the order demanding interest.
3. Applicability of section 29 of the U.P. Trade Tax Act for refund.
4. Application of section 72 of the Contract Act, 1872 for refund of excess tax paid by mistake.

Detailed Analysis:

1. Imposition of Interest under Section 8(1) of the U.P. Trade Tax Act, 1948:
The applicant, a registered partnership firm, mistakenly deposited tax at a higher rate for the assessment year 1978-79 and sought to adjust the excess amount in subsequent years (1979-80 and 1980-81). The department imposed interest on the amounts due for these years under section 8(1) of the Act. The Tribunal justified the interest imposition on the grounds that the dealer became entitled to the refund only after the appellate authority's order dated July 19, 1983. However, the court found this reasoning flawed, as the excess amount was deposited due to a mistake and should be refunded or adjusted immediately upon detection of the mistake, independent of section 29 of the Act.

2. Maintainability of Appeal Against the Order Demanding Interest:
The Tribunal relied on a single Judge's judgment in Banwari Lal Buddha Sen v. Commissioner of Sales Tax, U.P., to hold that the order demanding interest was not appealable. However, this judgment was deemed not good law by a division Bench in Ram Lal & Sons v. Deputy Commissioner (Appeals), Sales Tax, and Hind Lamps Ltd. v. State of U.P. The court concluded that the Tribunal committed an illegality in holding that the order demanding interest is not appealable. Under section 9 of the Act, every order passed by the assessing authority is appealable except for orders under section 10-A.

3. Applicability of Section 29 of the U.P. Trade Tax Act for Refund:
Section 29 of the Act, which mandates a procedure for refund of excess tax, was argued by the department to be applicable only after an assessment, appellate, or revisional order. The court, however, noted that section 29 applies to refunds consequential upon such orders and does not preclude the refund or adjustment of excess amounts paid by mistake under the doctrine of quasi-contract and principles of restitution in section 72 of the Contract Act.

4. Application of Section 72 of the Contract Act, 1872 for Refund of Excess Tax Paid by Mistake:
Section 72 of the Contract Act mandates the repayment of money paid by mistake. The court referenced several precedents, including Sri Shiba Prasad Singh v. Maharaja Srish Chandra Nandi, and Sales Tax Officer, Banaras v. Kanhaiya Lal Makund Lal Saraf, to affirm that payments made under a mistake of law or fact must be refunded. The court emphasized that the term "mistake" in section 72 includes both mistakes of law and fact, and the doctrine of unjust enrichment and restitution supports the dealer's claim for refund or adjustment of the excess tax paid.

Conclusion:
The court allowed both revisions, holding that the applicant-dealer is not liable to pay any interest for the assessment years 1979-80 and 1980-81 under section 8(1) of the Act. The petitions were allowed, and the Tribunal's order was set aside.