2006 (11) TMI 602 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Rate of Sales Tax Applicable
2. Refund of Excess Tax Collected
3. Applicability of Residuary Clause in Notification
4. Procedural Aspects of Claiming Refund

Summary:

1. Rate of Sales Tax Applicable:
The appellant sought a declaration that he was liable to pay sales tax at the rate of 0.5% for transactions with the first respondent/bank, as per exhibit P1 notification S.R.O. No. 1075/1999, which was effective from April 1, 1999. The learned single judge found that the dispute should be resolved u/s 59A(d) of the Kerala General Sales Tax Act, 1963. However, it was agreed by all parties that the tax rate during the relevant period was 0.5%, not 1%.

2. Refund of Excess Tax Collected:
The appellant paid tax at 1% for transactions from April 6, 1999, to December 10, 1999, and sought a refund of the excess tax collected. The first respondent/bank, based on the Assistant Commissioner's letter (exhibit R1(B)), communicated that tax collected at a higher rate must be paid to the Government and cannot be refunded. The appellant argued that exhibit P1, which had retrospective effect from April 1, 1999, entitled him to a refund of the excess tax.

3. Applicability of Residuary Clause in Notification:
The Special Government Pleader contended that the residuary clause in S.R.O. No. 1728/1993, which states that tax collected at a higher rate shall not be refunded, applied to the appellant's case. However, the court found that exhibit P1, being a special provision with retrospective effect, overrode the general residuary clause. The court emphasized that special provisions prevail over general provisions.

4. Procedural Aspects of Claiming Refund:
The court noted that the appellant had requested a refund before the close of the relevant assessment year. The bank could have adjusted the tax liability in the final annual return but failed to do so. The court held that the bank, having collected excess tax, was responsible for seeking a refund from the assessing authority and paying it to the appellant. The court directed the first respondent/bank to refund Rs. 20,97,763.50 with 10% interest as per section 44(4) of the Kerala General Sales Tax Act, 1963, within two months.

Conclusion:
The appeal was allowed, and the first respondent/bank was directed to refund the excess tax collected, with interest, to the appellant. The bank retains the right to claim a refund from the assessing authority or the Government if the law permits.