2004 (12) TMI 694 - HC - VAT and Sales Tax

Summary

Issues:
Whether the Trade Tax Tribunal was legally justified to direct the Assessing Authority to refund the amount of tax realized by the dealer on the discount given to the purchaser despite the absence of a provision in the U.P. Sales Tax Act for such refunds.

Analysis:
The judgment involves three revisions under Section 11 of the U.P. Trade Tax Act, challenging the Tribunal's orders for the Assessment Years 1989-90, 1990-91, and 1991-92. The common question raised in all three revisions pertains to the legality of directing the Assessing Authority to refund tax realized by the dealer on discounts provided to customers. The dealer had given discounts and collected tax on those discounts, later refunded to the purchasers. The Assessing Authority considered this as an excess realization of tax, ordering forfeiture. However, the Tribunal, relying on the Division Bench decision in the case of Mores (India) Limited, Kanpur v. State of U.P., held that prior to 1993, there was no rule for refunding such amounts, making the dealer's actions valid.

The Division Bench decision in the case of Mores (India) Limited, Kanpur v. State of U.P., for the Assessment Year 1980-81, highlighted a similar scenario where the dealer realized tax at 8% instead of the actual 6%. The court emphasized that in the absence of a prescribed procedure for refunds, the dealer's refunding of excess tax to customers was not unjustified. The court emphasized that the absence of a refund procedure does not warrant forfeiture of the excess amount realized. The judgment emphasized the importance of providing substantial justice and rejected the notion that lack of a refund procedure automatically leads to forfeiture.

Subsequent decisions by various Division Benches further supported the principle established in the Mores case, reinforcing that in the absence of specific provisions for refunds, excess tax amounts realized by dealers should be returned to the customers. The court concluded that the present revisions lacked merit in light of the established legal precedents. Consequently, all three revisions were dismissed based on the consistent application of the legal principles established in previous cases.

In conclusion, the judgment reaffirms the principle that in the absence of clear provisions for refunding excess tax amounts realized by dealers, such amounts should be returned to the customers. The court emphasized the importance of ensuring substantial justice and rejected the notion of automatic forfeiture due to the lack of a prescribed refund procedure.