2005 (8) TMI 632 - AT - VAT and Sales Tax

Issues Involved:

1. Whether Section 14 of the West Bengal Sales Tax (Settlement of Dispute) Act, 1999 is ultra vires to the Constitution of India.
2. Whether the petitioner is entitled to a refund of the excess amount paid.

Issue-wise Detailed Analysis:

1. Constitutionality of Section 14 of the West Bengal Sales Tax (Settlement of Dispute) Act, 1999:

The petitioner challenged the refusal to refund the excess payment as illegal, ultra vires, and discriminatory, violating Article 14 of the Constitution of India. The main contention was that the denial of refund under Section 14 of the Act, 1999, was discriminatory because it treated dealers who paid more than 33% of the arrear tax differently from those who paid less, thus violating the principle of equality before the law.

Article 14 of the Constitution mandates that "The State shall not deny to any person equality before the law or equal protection of the laws within the territory of India." This means that the State cannot discriminate against individuals in similar circumstances. The court applied two tests to determine whether the classification made by Section 14 was reasonable: (1) the classification must be based on an intelligible differentia, and (2) the differentia must have a rational relation to the object sought to be achieved by the statute.

The court found that the classification made by Section 14 did not meet these criteria. The provision was deemed "fanciful and clearly unjust," as it created an unreasonable distinction between dealers who paid more than 33% of the arrear tax and those who did not. Therefore, the court declared the first part of Section 14 ultra vires to Article 14 of the Constitution and struck it down.

2. Entitlement to Refund of Excess Amount Paid:

The petitioner had deposited Rs. 2,50,000 before filing an application under Section 5 of the Act, 1999. The tax liability was later determined to be Rs. 1,91,558, leaving an excess payment of Rs. 58,442. The petitioner sought a refund of this excess amount, arguing that withholding it was illegal and discriminatory.

The respondents contended that the petitioner, having opted to deposit more than 33% of the arrear tax, was not entitled to a refund under Section 14 of the Act, 1999. They argued that the amount deposited was accepted as the final settlement of the dispute, and therefore, no refund was due.

The court examined the provisions of Sections 6 and 7 of the Act, 1999, which outline the determination of the amount payable for settlement of arrear tax. Section 14 explicitly states that "Any amount paid by an applicant under Section 6 shall not be refundable under any circumstances." However, the court found this provision to be discriminatory and unjust, as it unfairly penalized dealers who had paid more than the required 33%.

Given the court's decision to strike down the discriminatory part of Section 14, it held that the petitioner was entitled to a refund of the excess amount of Rs. 58,442. The court directed the respondents to refund this amount within three weeks from the date of the order.

Dissenting Opinion:

The dissenting opinion argued that the petitioner, having opted for the settlement scheme under the Act, 1999, was bound by its provisions, including Section 14, which prohibits refunds. It emphasized the principle that a person cannot approbate and reprobate, meaning that one cannot accept the benefits of a statute while rejecting its burdens. The dissenting judge held that Sections 7 and 14 of the Act, 1999, were not violative of Article 14 of the Constitution and that the petitioner was not entitled to a refund.

Conclusion:

In conclusion, the majority judgment declared the first part of Section 14 of the West Bengal Sales Tax (Settlement of Dispute) Act, 1999, ultra vires to Article 14 of the Constitution and directed the refund of the excess amount paid by the petitioner. The dissenting opinion, however, upheld the validity of Section 14 and denied the refund. The application was allowed without costs, and the refund was to be made within three weeks from the date of the order.

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