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2013 (9) TMI 224 - HC - VAT and Sales Tax


Issues Involved:
1. Legality of the reassessment order under Section 21 (2) of the UP Trade Tax Act.
2. Validity of the refund of excess tax paid by the petitioner.
3. Compliance with the principles of natural justice in the reassessment process.
4. Applicability of the concept of unjust enrichment.

Issue-wise Detailed Analysis:

1. Legality of the Reassessment Order under Section 21 (2) of the UP Trade Tax Act:
The petitioner challenged the reassessment initiated by the Additional Commissioner, Trade Tax, Kanpur, under Section 21 (2) of the UP Trade Tax Act, arguing that none of the conditions for reassessment were met. The court noted that the original assessment had already considered the trade discounts and the refund of excess tax. The Additional Commissioner's order for reassessment lacked any specific reasons and merely stated that reassessment was necessary, even if it involved a change of opinion. The court emphasized that the reassessment order must contain reasons to justify the reopening of the assessment, which was absent in this case. The court referenced previous judgments, such as Yadav Traders vs. State of UP and others, to underscore the necessity of providing reasons in reassessment orders.

2. Validity of the Refund of Excess Tax Paid by the Petitioner:
The original assessment order had acknowledged that the petitioner had issued credit notes for trade discounts and refunded the excess tax to the consumers. The assessing authority had verified the credit notes and concluded that the petitioner was entitled to a refund of Rs. 29,04,735/-. The court found that the reassessment notice and the subsequent order did not dispute the fact that the discounts were passed on to the consumers. The court held that the reassessment was unwarranted as there was no new material or evidence to suggest that the discounts were not actually given to the consumers.

3. Compliance with the Principles of Natural Justice in the Reassessment Process:
The court observed that the Additional Commissioner's order for reassessment was mechanical and lacked any discussion or reasoning. The petitioner was not given adequate reasons for the reassessment, violating the principles of natural justice. The court reiterated that reasons are the soul of the orders and must be provided to inform the affected party and justify the exercise of jurisdiction.

4. Applicability of the Concept of Unjust Enrichment:
The respondents argued that the refund should be denied based on the concept of unjust enrichment, as the tax burden was ultimately borne by the consumers. They cited the Supreme Court judgment in Mafatlal Industries Ltd. vs. Union of India. However, the court noted that the petitioner had refunded the excess tax to the consumers through credit notes, as verified by the assessing authority. The court distinguished this case from the cited judgments, stating that the refund was justified as the excess tax had been returned to the consumers.

Conclusion:
The court concluded that the reassessment order under Section 21 (2) of the UP Trade Tax Act was invalid due to the lack of reasons and non-application of mind. The refund of excess tax to the petitioner was valid as it was based on verified credit notes indicating that the discounts were passed on to the consumers. The court set aside the impugned orders dated 3/4.3.2006 and 31.3.2006, and the demand of Rs. 29,04,735/- was annulled.

 

 

 

 

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