2014 (7) TMI 1182 - HC - VAT and Sales Tax

Seeking of remission of tax on account of loss suffered in the riots of 1984 - Denial of benefit of Section 25 of the Madhya Pradesh General Sales Tax Act, 1958 - Remission of tax denied on two ground viz., no tax was paid by the petitioner and therefore, the question of granting benefit does not arise as section 25 of the Act is not applicable and even if the petitioner has paid the tax through the dealer, from whom the petitioner has purchased the stocks, then also, the benefit of remission of tax as contemplated under section 25 of the Act cannot be extended to the petitioner as he is not the person who actually remitted the tax - Held that - the provisions of section 25 of the Act has to be given a liberal interpretation, as ultimately, it is the petitioner, who has suffered the riots and had paid the tax, may be through the registered dealer, from whom the purchases were made, the fact remains that the actual recovery of tax is made from the petitioner through registered dealer and, therefore, the benefit of section 25 of the Act should be extended to the petitioner. As the State Government has overlooked this aspect of the matter and the action of the State Government to deny the benefit of section 25 of the Act, as done, would frustrate the very purpose, for which the benefit indicated under section 25 of the Act is made, the State Government shall cause an enquiry into the matter with regard to purchases made by the petitioner, the fact with regard to actual payment of tax and further, the fact that the dealer deposited the tax with the Revenue and if it is found that the petitioner has paid the tax, even if through the another dealer, the amount should be refunded back to the petitioner with interest of six per cent per annum from the date of deposit of tax with the Department. Decided in favour of petitioner.

Summary

Issues:
Tenability of order denying remission of tax under section 25 of the Madhya Pradesh General Sales Tax Act, 1958 due to loss suffered in riots.

Analysis:
The petitioner, a registered dealer, sought remission of tax under section 25 of the Act due to losses in riots in 1984. The State Government rejected the claim on grounds that the petitioner did not pay tax directly and that the tax was collected by the dealer. The court examined section 25 of the Act, which allows remission of tax in case of financial losses due to riots, and rule 48, which outlines the procedure for remission. It noted that the State had granted similar benefits to other affected parties previously.

The court emphasized that even though the tax was deposited by the dealer, the petitioner ultimately bore the tax burden as it was recovered from them during purchases. It highlighted that the purpose of section 25 was to provide relief to the dealer who suffered losses and paid the tax. Ignoring that the petitioner paid the tax indirectly through the dealer would defeat the legislative intent behind the provision. The court stressed the need for a liberal interpretation of section 25 to ensure the intended benefit reaches the affected dealer.

The court criticized the State Government for overlooking the crucial aspect of tax payment by the petitioner and directed an inquiry into the purchases, actual tax payment, and deposit details. If found that the petitioner indeed paid the tax, even indirectly, the court ordered the State to refund the amount with interest. The court mandated a detailed investigation within three months to ensure the petitioner receives the entitled benefit under section 25 of the Act.

In conclusion, the court allowed the petition, highlighting the necessity for a thorough examination of the tax payment process and emphasized the importance of interpreting section 25 liberally to fulfill its intended purpose.