2015 (10) TMI 1107 - HC - VAT and Sales Tax

Denial of refund claim - Whether the Tribunal was justified in rejecting the appellant s claim on the ground of unjust enrichment - Held that - Tribunal had by the order dated 23.12.2002 upheld the levy of purchase tax upon the appellant as the appellant was the last purchaser of taxable goods to be used for the purpose of manufacturing non taxable goods. In view of this order the appellant filed the above review application before the Tribunal. As we also mentioned earlier thereafter the respondents issued the eligibility certificate in favour of M/s. Haryana Organics for 9 years which included the assessment years 1998-99 and 1999-2000 which are relevant in this appeal. - Assuming that the tax had been paid by the appellant and had been recovered from the consumers the matter would end there. The appellant would not be burdened with any tax itself. However the appellant was compelled to deposit the entire purchase tax element with the Assessing Authorities as a condition precedent to the maintainability of its appeal. Far from being unjustly enriched the appellant in this manner is actually out of the pocket to the extent of the amount paid as a condition precedent to the maintainability of the appeal. In the event of the same being refunded there would be no question of unjust enrichment. Conversely assuming that the appellant had not paid the tax it would be reasonable to presume on the same line of reasoning adopted by the Tribunal that the appellant had not recovered the amount from the consumers. In any event the Tribunal has not come to any finding against the appellant to the effect that it actually recovered the amount from the consumers. There would be no justification for us to speculate to this effect in the appellant s appeal. In that event also the appellant would be out of pocket to the extent of the amount deposited by it as a condition precedent for the maintainability of its appeal. The amount therefore must even in that event be refunded. - Decided in favour of assessee.

Summary

Issues:
Appeal against the order of Haryana Tax Tribunal for review under Section 41 of the Haryana General Sales Tax Act, 1973 - Justification of levying tax on selling dealer and appellant for the same transaction - Tribunal's rejection based on unjust enrichment.

Analysis:
1. The appeals were filed against the Haryana Tax Tribunal's order rejecting the appellant's review application under Section 41 of the Haryana General Sales Tax Act, 1973. The key question raised was whether the Tribunal was justified in rejecting the appellant's claim on the grounds of unjust enrichment. The Tribunal's decision was based on the presumption that the appellant had factored the tax element into the price of alcohol sold to consumers, leading to the rejection of the review application.

2. The appellant, a liquor manufacturer, purchased ethyl alcohol from M/s. Haryana Organics. Ethyl alcohol was taxable under the Act, while liquor was not taxable during the relevant assessment year. M/s. Haryana Organics issued certificates stating that the rate of spirit supplied included sales tax and other levies. Despite this, the appellant was assessed to purchase tax as neither the appellant nor M/s. Haryana Organics had paid the tax. The Tribunal upheld the levy of purchase tax on the appellant, considering them the last purchaser of taxable goods for manufacturing non-taxable goods.

3. The Tribunal, after M/s. Haryana Organics became entitled to exemption, admitted the review application and concluded that the appellant was no longer liable to pay tax. However, the review was rejected on the grounds of unjust enrichment, assuming that the appellant had included the tax element in the selling price. The High Court found this reasoning flawed, emphasizing that the appellant had deposited the tax amount with the authorities as a condition for appeal, making them out of pocket. The Court highlighted that even if the tax was not paid, there was no evidence that the appellant had recovered it from consumers.

4. The High Court held that there was no basis for unjust enrichment in either scenario. Therefore, the appeals were allowed, and the respondents were directed to refund the amount within 12 weeks. The judgment clarified that the appellant would be entitled to a refund regardless of whether the tax was paid or not, as there was no evidence of unjust enrichment in either case.

This detailed analysis of the judgment provides insights into the legal issues, factual background, Tribunal's decision, and the High Court's reasoning, ultimately leading to the allowance of the appeals and the direction for refund of the amount by the respondents.