2012 (8) TMI 888 - HC - VAT and Sales Tax

Refund of sales tax Sales in course of inter-State trade - Amount realized by Sales Tax Officer, Bhubaneswar-II Circle, Bhubaneswar illegally and arbitrarily or not Petitioner contended that a sum of ₹ 8,10,516 deducted from the petitioner even though the same is not realizable u/s 54 of the Orissa Value Added Tax Act, 2004 - whether a writ in the nature of mandamus directing opposite Party No. 2-Commissioner of Sales Tax, Orissa and opposite Party No. 3-Sales Tax Officer, Bhubaneswar-II Circle, Bhubaneswar can be issued to refund ₹ 8,10,516 alleged to have been illegally collected by IOCL from the petitioner and deposited with the Government - Held that - Law is well-settled that a particular sale may either be intra-State or inter-State sale, but cannot be both - a transaction of sale is a single transaction whereby the property of goods passes through the seller to the buyer and there can never be two transactions of sale in one sale - Thus a single transaction of sale can be assessed either under the State Act or under the Central Sales Tax Act and can never be under both the Acts - whether a particular sale is an inter-State sale or an intra-State sale would depend upon the factual scenario and nature of evidence produced - Without examining the evidence it cannot be definitely said whether the transaction is an intra-State or inter-State transaction - The nature of transaction cannot be decided in the writ petition because the material produced along with the writ petition can be more effectually examined by the assessing authority - The stand that the petitioner is not liable to be registered under the Orissa Value Added Tax Act, 2004, does not improve the situation because the High Court cannot examine the material as an original forum - the petitioner has to establish that there is no breaking of chain of inter-State movement which has to be factually established. It was incumbent on the part of the petitioner-contractor to make an application as provided under subsection (5)(a) of section 54 to the assessing authority and satisfies him that no tax is deductible from the payments made to the petitioner as the materials supplied by it to IOCL is sale in course of inter-State trade and it is protected by Explanation appended to section 54 the AO has to examine the case of the petitioner and if is satisfied, he is obliged under the statute to issue no deduction of tax certificate to the petitioner and on production of such certificate before the IOCL, IOCL is bound not to deduct any tax from the payments made to the petitioner as provided under section 54(5)(b) of the Act, otherwise for contravention of the provision of section 54(5)(b) penalty shall be imposed on the IOCL as provided under sub-section (6) of section 54 of the Act -section 54 is a complete provision so far as deduction of tax from the payment made to the contractor is concerned - admittedly, the petitioner has not availed of the remedy provided u/s 54(5) of the Act. Whether in exercise of power under articles 226 and 227 of the Constitution, a direction can be issued to the State to refund the tax alleged to have been collected from the petitioner by IOCL illegally and deposited with the State Held that - As held in Suganmal v. State of Madhya Pradesh 1964 (11) TMI 7 - SUPREME Court it has been held that a petition under article 226 of the Constitution of India solely for issue of a writ of mandamus directing the State to refund money alleged to have been illegally collected by the State as tax was not ordinarily maintainable because a claim for such refund is ordinarily made in a suit against the authority which had illegally collected the money as tax - the question whether the State was bound under section 72 of the Contract Act to refund the amount on the ground that it was paid under a mistake was a matter for decision in a regular suit and not in a proceeding under article 226 - in view of the detailed provision made u/s 54 with regard to the deduction of tax and no deduction of tax and deduction of tax at a lower rate from the payment made to the contractor with reference to nature of the contract and the Explanation to section 54 of the Orissa Value Added Tax Act thus, the prayer made by the petitioner for a direction to refund ₹ 8,10,516 cannot be granted Decided against petitioner.

Summary

Issues Involved:
1. Whether the tax deducted by IOCL from the petitioner and deposited with the State is legally justified.
2. Whether the petitioner is liable to be registered under the Orissa Value Added Tax Act, 2004.
3. Whether a writ of mandamus can be issued to the State to refund the tax alleged to have been illegally collected.

Issue-wise Detailed Analysis:

1. Legality of Tax Deducted by IOCL:
The petitioner contended that the materials supplied to IOCL were in the course of inter-State sales, and thus, not subject to tax under the Orissa Value Added Tax Act (OVAT Act). The petitioner argued that the tax deducted by IOCL was not realizable under Section 54 of the OVAT Act since the transactions were inter-State sales as defined under Section 3 of the Central Sales Tax Act. The petitioner relied on the Supreme Court's decision in Gannon Dunkerley & Co. v. State of Rajasthan, which held that turnover relating to inter-State transactions should be excluded from the State Sales Tax Act. The court, however, noted that the determination of whether a sale is inter-State or intra-State depends on the factual scenario and evidence, which cannot be conclusively determined in a writ petition. The court emphasized that the petitioner should have applied for a "no deduction certificate" under Section 54(5) of the OVAT Act to prevent tax deduction.

2. Liability for Registration under OVAT Act:
The petitioner argued that it was not liable to be registered under the OVAT Act since the transactions were inter-State sales. The court, however, pointed out that the petitioner did not avail the remedy provided under Section 54(5) of the OVAT Act, which allows for obtaining a certificate from the assessing authority to prevent tax deduction. The court highlighted that without such a certificate, the deduction made by IOCL was in accordance with the statutory provisions.

3. Issuance of Writ of Mandamus for Tax Refund:
The petitioner sought a writ of mandamus directing the State to refund the tax deducted by IOCL. The court referred to the Constitution Bench decision in Suganmal v. State of Madhya Pradesh, which held that a writ petition solely for refund of money alleged to have been illegally collected as tax is not ordinarily maintainable. The court reiterated that such claims should be pursued through a regular suit. The court also dismissed the petitioner's argument of unjust enrichment, citing the Supreme Court's decision in Shree Digvijay Cement Co. Ltd. v. Union of India, which stated that the doctrine of unjust enrichment does not apply to the State.

Conclusion:
The court dismissed the writ petition, stating that the petitioner should have pursued the remedy under Section 54(5) of the OVAT Act to obtain a no deduction certificate. The court also held that a writ of mandamus for refund of tax is not maintainable, and such claims should be addressed through a regular suit. The court found no merit in the petitioner's arguments and upheld the tax deduction made by IOCL.