2010 (1) TMI 1119 - HC - VAT and Sales Tax

Whether the petitioner had passed on the sales tax burden to the distributors? Held that - When the authenticity of the credit notes had been admitted by the respondent all along and the factum of those credit notes being inclusive of sales tax had been confirmed by the distributors and supported by the documents furnished before the respondent by the petitioner, the Joint Commissioner totally misdirected himself in reviewing the entire case including the authenticity of the credit notes and completely exceeded the limited direction given to it by the order of this court dated May 23, 2008. Predicated on the documents filed before the respondent and annexed to this writ petition, we are satisfied that the petitioner had not passed on the burden of sales tax to the distributors and dealers and is, as such, entitled to a refund of the same. In the result, the impugned order dated July 4, 2008 is quashed, the writ petition is allowed and the respondent is directed to refund the amounts in respect of the assessment years 1997-98, 1998-99 and 1999-2000 along with interest thereon in accordance with law to the petitioner within a period of four weeks from the date of this order.

Summary

Issues:
1. Rejection of refund by Joint Commissioner under rule 29 of the Delhi Sales Tax Rules, 1975.
2. Disallowance of trade discounts by assessing officer for assessment years 1997-98, 1998-99, and 1999-2000.
3. Reopening of assessments and denial of refund claims.
4. Challenge of reassessment order and show-cause notices through writ petitions.
5. Decision on entitlement for refund based on passing on tax burden.
6. Rejection of refund claims by Joint Commissioner based on lack of documentary evidence.
7. Misdirection by Joint Commissioner in re-examining credit notes and discounts scheme.
8. Analysis of documents provided by petitioner to establish non-passing of tax burden.
9. Quashing of the impugned order and direction for refund with interest.

Detailed Analysis:
1. The judgment concerns the rejection of a refund by the Joint Commissioner under rule 29 of the Delhi Sales Tax Rules, 1975. The petitioner, a limited company engaged in the sale-purchase of electronic items, had filed refund claims for the assessment years 1997-98, 1998-99, and 1999-2000. The Joint Commissioner rejected the refund applications, leading to the filing of writ petitions challenging this decision.

2. The assessing officer initially disallowed trade discounts claimed by the petitioner for sales made to distributors and dealers. However, after appeals and reassessments, refunds were granted for all three assessment years. Subsequently, show-cause notices were issued for reopening assessments, leading to the denial of refund claims. The petitioner challenged these actions through writ petitions.

3. The court addressed the reopening of assessments and denial of refund claims through the writ petitions. The Department withdrew reassessment orders and show-cause notices for certain years. However, further disputes arose regarding the entitlement of the petitioner for refunds, leading to subsequent legal actions.

4. The petitioner filed writ petitions against the rejection of refund claims and a suo motu revision order passed by the Joint Commissioner. One writ petition was disposed of, quashing the revision order, while the other was allowed, remitting the matter back to the Joint Commissioner for further consideration.

5. The court focused on determining the entitlement for a refund based on whether the petitioner had passed on the tax burden to distributors and dealers. The decision was to be made considering principles of unjust enrichment.

6. The Joint Commissioner rejected the refund claims citing lack of availability of books of account with distributors and dealers. The court analyzed documents provided by the petitioner, including credit notes and ledger accounts, to establish the non-passing of the tax burden.

7. The court criticized the Joint Commissioner for misdirection in re-examining credit notes and discounts scheme beyond the scope of verification required. The Joint Commissioner's actions were deemed unwarranted and exceeding the limited direction given by the court.

8. The court found that the petitioner had provided sufficient evidence, including credit notes stating they were inclusive of sales tax, to support their claim that the tax burden was not passed on to distributors and dealers. The Joint Commissioner's reliance on the manner of credit note preparation was deemed unjustified.

9. Ultimately, the court quashed the impugned order, allowed the writ petition, and directed the respondent to refund the amounts for the assessment years 1997-98, 1998-99, and 1999-2000, along with interest, within a specified period.