2014 (6) TMI 623 - HC - VAT and Sales Tax

Denial of refund claim - Unjust enrichment - Payment of TDS - stand of the petitioner was accepted in the assessment proceedings and the petitioner was not found to be exigible to sales tax (now trade tax) for the job works done by him - assessing authority in the assessment order directed the office to verify the T.D.S. certificate and, if the same was found to be correct, the amount deducted was directed to be paid to the petitioner - Held that - Contractee was duty bound to deduct the tax for the job works done by the petitioner under Section 8-D of the Act. The contractee issued T.D.S. certificate in favour of the petitioner. The said certificate was evidence that the payment of tax was deducted at source on the bills presented by the petitioner and credit was required to be given at the time when an assessment order was made. The Court finds that in the instant case, the petitioner presented the T.D.S. certificate before the Assessing Officer, who accepted the books of account as well as the T.D.S. certificate and found that the petitioner was not exigible to sales tax for the job work carried out by him and consequently, was eligible for refund of the tax that was deducted at source. The Assessing Officer, accordingly, directed the office to verify the T.D.S. certificate and if the same was found to be correct the deducted amount was to be paid to the petitioner. The respondents, as a counter blast, issued a notice dated 06.02.2006 alleging that the petitioner was not entitled for any refund of the T.D.S. amount as prima facie it was found to be a case of unjust enrichment. - the stand of the respondents is the same, namely, that it was a case of unjust enrichment and such tax collected by the petitioner cannot be refunded. The verification that was required to be done by the Assessing Officer was whether the deductee had deposited the money in the Government Treasury and if the amount was deposited, the refund was to be given by the petitioner. This was the only limited area of verification that was required to be done as per Rule 90 of the U.P. Trade Tax Rules, 1948. Consequently, the exercise done by the respondents could not have been gone and was without jurisdiction. The impugned orders cannot be sustained and is quashed. A writ of mandamus is issued directing the respondents to refund the amount along with interest as per the rate specified under Section 29(2) of the Act. The Assessing Officer will verify as to whether the amount shown in the T.D.S. certificate has been deposited in the Government s account by the deductee. Upon such verification the respondents will refund the amount along with interest - Decided in favour of assessee.

Issues Involved:
1. Refund of Tax Deducted at Source (TDS)
2. Application of the Doctrine of Unjust Enrichment
3. Interpretation and Application of Sections 8-D, 29, and 29-A of the U.P. Trade Tax Act, 1948

Issue-wise Detailed Analysis:

1. Refund of Tax Deducted at Source (TDS):
The petitioner, a registered dealer engaged in job works of fixing PVC flooring, sought a refund of TDS deducted for the assessment years 1987-88 to 1998-99. The assessing authority initially accepted the petitioner's claim that he was not liable to pay trade tax and directed the office to verify the TDS certificates for refund purposes. Despite this, the office failed to refund the balance amount of Rs. 2,88,081.00. The petitioner repeatedly applied for the refund, but the amount remained unpaid, prompting the petitioner to file a writ petition.

2. Application of the Doctrine of Unjust Enrichment:
The department issued notices alleging that the petitioner was not entitled to a refund due to unjust enrichment. The petitioner argued that the TDS was deducted as per Section 8-D of the U.P. Trade Tax Act and that he had not passed on the tax burden to the contractee. The assessing authority, however, rejected the refund claim, relying on the Supreme Court's decision in Mafat Lal Industries Ltd. Vs. Union of India, which established that a refund claim could only succeed if the claimant had not passed on the tax burden to another person.

3. Interpretation and Application of Sections 8-D, 29, and 29-A of the U.P. Trade Tax Act, 1948:
- Section 8-D: Mandates the deduction of tax at source for works contracts. The court noted that the contractee was duty-bound to deduct tax for job works done by the petitioner, and the TDS certificates issued were evidence of this deduction.
- Section 29: Pertains to the refund of any excess tax paid. Sub-clause (2) requires refunds to be made within three months, failing which interest is payable. Sub-clause (4), which enforces the doctrine of unjust enrichment, was deemed inapplicable as it was introduced after the relevant assessment years.
- Section 29-A: Deals with amounts wrongly realized as tax. The court found that this section was misapplied by the assessing authority, as the petitioner had not realized any amount as tax from any person.

The court concluded that the principle of unjust enrichment did not apply in this case. The petitioner had not collected tax from the contractee but had tax deducted at source by the contractee. The assessing authority's order was found to be beyond jurisdiction and was quashed.

Judgment:
The writ petition was allowed. The court issued a writ of mandamus directing the respondents to refund the amount along with interest as specified under Section 29(2) of the Act. The assessing officer was instructed to verify whether the amount shown in the TDS certificates had been deposited in the government's account by the deductee and to complete this verification within three months.

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