2011 (1) TMI 376 - SC - VAT and Sales Tax

Refund Claim - Sale Tax - The appellant claim for refund of tax collected from them by the seller at the time of purchase of tea - The said claim was rejected by the Assessing authority and it was held that they cannot claim for refund under Section 44 of the KGST Act since they have not paid the tax to the Department but it was the sellers who have paid the tax and therefore under the provisions of Section 44 of the KGST Act, the refund that could be made is to the dealer only and the assessee being not a dealer no such refund could be made to the appellant/assessee - State cannot retain the tax which is overpaid, but at the same time such overpaid tax cannot be paid to the assessee/appellant here - on the basis of the mandate of the provisions of the State Act, the decision does not call for any interference at our end - Hence, refund is not permissible. Export - Exemption u/s 5(3) of the Central Sales Tax Act, 1956 - Central Sales Tax - The appellants are exporters of tea - The appellants purchased tea from the tea planters directly in open auction and thereafter exported the same - There is no agreement available on record to indicate that the aforesaid purchase was made for the purpose of export - At the time of auction sale when the appellant purchased the tea from the dealer, there is nothing on record to show that a definite stand was taken by the purchaser that the aforesaid purchase of tea is for the purpose of occasioning an export for which an agreement has been entered into -Since, no such claim was made at that stage, so therefore sales tax was realised which was paid to the government by the dealer - It is a clear finding recorded by the assessing authority himself that the export documents were verified by him with the accounts from which it is indicated that the entire exports were effected pursuant to the prior contract or prior orders of the foreign buyers and that the export sales are supported by bills of lading, export invoices and such other valid documents - Hence, the assessing Authority clearly held that the claim for exemption was genuine and the same has to be allowed in full.

Issues Involved:
1. Entitlement for refund of tax under Section 44 of the Kerala General Sales Tax Act, 1963 (KGST Act).
2. Entitlement to claim exemption under Section 5(3) of the Central Sales Tax Act, 1956 (CST Act).

Detailed Analysis:

1. Entitlement for Refund of Tax under Section 44 of the KGST Act:

The primary issue is whether the appellant/assessee is entitled to a refund of the tax paid to the seller under Section 44 of the KGST Act. The appellant, an exporter of tea, purchased tea in open auctions and claimed a refund of the tax collected by the seller at the time of purchase. The Assessing Authority rejected this claim, stating that the refund under Section 44 is to be made only to the dealer who paid the tax to the Department, not to the appellant who is not a dealer.

The Deputy Commissioner (Appeals) upheld this decision, noting that the liability to pay tax lies with the seller, and it is the seller who must prove that the sales were made to an exporter in pursuance of a prior contract or order from foreign buyers. The Kerala Sales Tax Appellate Tribunal also dismissed the appeal, emphasizing that refunds under Section 44 are applicable only to dealers who have paid excess tax. Since no tax was demanded from the appellant for the four years in question, there could be no refund.

The Supreme Court agreed with the findings of the lower authorities. It was noted that Section 44 of the KGST Act is clear in stipulating that only the dealer who paid the tax can claim a refund. The Court emphasized the principle of statutory interpretation that when the language of a statute is clear and unambiguous, nothing can be added to it. The Court cited the case of Sales Tax Commissioner v. Modi Sugar Mills, which established that taxing statutes must be interpreted strictly based on their wording, without implying anything not expressly stated.

The Court concluded that the appellant, not being a dealer, cannot claim a refund of the tax collected from the seller. The provisions of Section 44 of the KGST Act are specific and do not allow for a proactive stance to be taken. The decision in Mafatlal Industries Ltd. v. Union of India, which dealt with Section 11B of the Central Excise and Salt Act, 1944, was deemed inapplicable as it involved a different statutory context where the expression "any person" was used.

2. Entitlement to Claim Exemption under Section 5(3) of the CST Act:

The additional issue is whether the appellant is entitled to claim exemption under Section 5(3) of the CST Act. The appellant claimed exemption on the grounds that the purchase was the penultimate sale preceding the export. The Assessing Authority accepted the exemption claim, finding that the export sales were supported by valid documents such as bills of lading and export invoices.

However, the State contended that the appellant could not produce any agreement at the time of purchase indicating that the purchase was made in relation to export. Section 5(3) of the CST Act stipulates that the last sale or purchase preceding the export must be for the purpose of complying with an agreement or order related to the export. The Constitution Bench in the case of State of Karnataka v. Azad Coach Builders Pvt. Ltd. laid down principles for determining when a sale is in the course of export, emphasizing the need for an inextricable link between the local sale and the export.

The Supreme Court noted that there was no agreement on record to indicate that the purchase was made for the purpose of export. Despite this, the Assessing Authority found that the export documents verified indicated that the exports were made pursuant to prior contracts or orders from foreign buyers. The exemption claim was thus deemed genuine and allowed.

However, the claim for a refund was denied as the appellant was not the dealer who paid the tax. The Court upheld this decision, stating that the clear and unambiguous language of Section 44 of the KGST Act must be followed, and only the dealer who paid the tax can claim a refund.

Conclusion:

The Supreme Court dismissed the appeals, affirming that the appellant is not entitled to a refund of the tax collected from the seller under Section 44 of the KGST Act, and that the exemption under Section 5(3) of the CST Act was rightly allowed by the Assessing Authority based on the verified export documents. The Court emphasized strict adherence to the statutory provisions and principles of statutory interpretation.

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