2008 (8) TMI 826 - HC - VAT and Sales Tax

Refund of sales tax - Held that - A very clear finding of fact has been recorded by the assessing authority that petitioner passed on the tax liability to the consumers. There is nothing on record to show that the aforesaid findings of fact recorded by the assessing authority are factually incorrect. There is nothing on record to show that the petitioner-assessee has not passed on the liability on the incident of sale to any other person. In such a fact-situation there can be no justification for the petitioner-assessee to claim refund as it would amount to unjust enrichment. Petition, therefore, lacks merit and is dismissed.

Summary

Issues:
Claim for refund of sales tax collected by the petitioner-company; Application of Industrial Policy Resolution, 1989 for tax exemption; Unjust enrichment in case of refund; Findings of fact by assessing authority regarding passing on tax liability to consumers.

Analysis:
The writ petition was filed seeking a direction to refund the sales tax collected from the petitioner-company by challenging the order and assessment dated February 4, 1998, and March 24, 1998, respectively. The petitioner, an industrial unit, claimed tax exemption under the Industrial Policy Resolution, 1989, which was initially denied. Subsequent recommendations for tax holidays were made but were rejected leading to the current petition. The petitioner argued that tax collected without legal authority is unconstitutional and entitles them to a refund. However, the court noted the absence of evidence showing that the tax burden was not passed on to consumers, which would result in unjust enrichment.

In the case of K.S. Satyanarayan v. V.R. Narayana Rao, the Supreme Court established the juristic basis for recovery in cases of unjust enrichment falling under quasi-contract or restitution. The court cited various precedents emphasizing the principle that only those bearing the ultimate burden of payment are entitled to refunds, preventing unjust enrichment. The judgment in State of Madhya Pradesh v. Vyankatlal further supported this stance, allowing the government to utilize unidentifiable funds for their intended purpose.

The assessing authority's findings indicated that the petitioner had passed on the tax liability to consumers during the tax holiday period, leading to the conclusion of unjust enrichment. The court upheld these findings, emphasizing the lack of evidence to dispute them. The judgment highlighted the necessity for the petitioner to demonstrate that the burden was not transferred to others to claim a refund, as observed in various Supreme Court cases addressing similar issues of unjust enrichment.

In conclusion, the court dismissed the petition, affirming the assessing authority's findings and rejecting the claim for refund due to the likelihood of unjust enrichment. Justice B.N. Mahapatra concurred with the decision, indicating unanimous agreement on the dismissal of the petition.