2011 (7) TMI 1068 - HC - VAT and Sales Tax

Refund of ₹ 31,04,742 consequent to the order of the Sales Tax Appellate Tribunal seeked - also claim interest under section 33F of the Andhra Pradesh General Sales Tax Act, 1957 Held that - Granting, the relief sought for by the petitioner would enable them to unjustly enrich themselves at the cost of the State, and retain the tax collected by them in excess, even though the burden of tax has been passed by them to persons who have purchased packing material from them. Grant of such relief would not be in larger public interest. Failure to grant relief would neither result in substantial injustice to the petitioner, nor would they suffer real loss or prejudice thereby, as they have already passed on the tax burden to their customers, thus no reason, therefore, to exercise discretion under article 226 of the Constitution of India to grant the relief sought for. Appeal dismissed.

Summary

Issues Involved:
1. Refund of excess tax collected.
2. Interest on the refund amount.
3. Applicability of the doctrine of unjust enrichment.
4. Discretionary power of the court under Article 226 of the Constitution of India.

Detailed Analysis:

1. Refund of Excess Tax Collected:
The petitioner, a public limited company, sought a refund of Rs. 31,04,742 following an order from the Sales Tax Appellate Tribunal (STAT) which set aside the forfeiture of the said amount. The STAT ruled in favor of the petitioner on the grounds that the forfeiture was barred by limitation under section 30C and no separate forfeiture order was passed by the assessing authority. The petitioner argued that since the STAT's order had attained finality, the respondent was obligated to refund the amount without requiring an application. However, the respondent contended that the petitioner had collected excess tax from its customers, which was liable to be forfeited under section 30B of the Andhra Pradesh General Sales Tax Act, 1957 (APGST Act), and thus, the petitioner had no right to claim a refund.

2. Interest on the Refund Amount:
The petitioner also claimed interest under section 33F of the APGST Act, arguing that the assessing authority should refund the amount due with interest. The petitioner referenced section 33F and rule 43 of the APGST Rules, stating that the order of the STAT should be implemented by the assessing authority. The respondent, however, maintained that the excess tax collected could not be refunded as the petitioner had passed on the tax burden to its customers, thus invoking the doctrine of unjust enrichment.

3. Applicability of the Doctrine of Unjust Enrichment:
The court examined the doctrine of unjust enrichment, which prevents a dealer from unduly enriching themselves by collecting tax from both ends-i.e., from the purchaser and then claiming a refund from the State. The court emphasized that the petitioner had passed on the tax burden to its customers and had not provided proof that the excess tax collected was refunded to each purchaser. The court cited precedents, including Mafatlal Industries Ltd. v. Union of India, to support the principle that a refund is not warranted unless the petitioner proves that the tax burden was not passed on to another party.

4. Discretionary Power of the Court under Article 226 of the Constitution of India:
The court highlighted that the exercise of jurisdiction under Article 226 is discretionary and is not to be exercised as a matter of right or course. The court must consider whether substantial injustice has ensued or is likely to ensue and weigh the larger public interest. In this case, the court concluded that granting the relief sought by the petitioner would result in unjust enrichment and would not serve the larger public interest. Therefore, the court decided against exercising its discretionary power to grant the refund.

Conclusion:
The writ petition was dismissed, and the court ruled that granting the relief sought by the petitioner would enable them to unjustly enrich themselves at the cost of the State. The court found no substantial injustice or real loss to the petitioner, as the tax burden had been passed on to the customers. Thus, the petitioner's request for a refund and interest on the excess tax collected was denied.