1998 (12) TMI 633 - HC - VAT and Sales Tax

Summary

Issues:
Prayer for refund of purchase tax deposited under protest for the period 1986-87 to 1992-93. Application rejected based on the principle of unjust enrichment. Contention whether unjust enrichment applies when goods sold are different from the original goods used as raw material.

Analysis:
The judgment revolves around the application seeking a refund of purchase tax deposited under protest for a specific period. The petitioner's claim for refund was initially heard by a Division Bench and later transferred to the current Court due to the transfer of one of the judges. The controversy stems from the Division Bench's decision in Vam Organic Chemicals Ltd. case, where the petitioner was directed to apply for a refund, leading to the current application after rejection of the refund request by the authorities.

The central issue in this case pertains to the application of the principle of unjust enrichment as established by the Supreme Court in the Mafatlal Industries Ltd. case. The question at hand is whether this principle can be extended to a scenario where the goods sold are different from the original goods used as raw material. In this case, the petitioner contends that they sold chemicals manufactured using industrial alcohol, not the alcohol itself, raising the query of entitlement to a refund.

The learned Additional Advocate-General cited the Somaiya Organics (India) Ltd. case to emphasize the necessity for the applicant to assert that the purchase tax amount was not included in the sale price of the goods. Additionally, reference was made to the Supreme Court's observation in the Mafatlal Industries Ltd. case to support this argument. However, the applicant's counsel relied on the Bhadrachalam Paperboards Ltd. case, where the Supreme Court ruled in favor of refund based on specific circumstances, contradicting the Allahabad High Court's decision in Somaiya Organics case.

The Court, after detailed analysis, found that the principle of unjust enrichment does not apply when goods are not sold as they are but are transformed into new products. Drawing parallels with the Bhadrachalam case, where the Supreme Court allowed a refund as the original goods were used in manufacturing new products without passing on the tax burden to consumers, the Court granted the refund in the present case. The respondents were directed to refund the amount within three months, and the plea for approaching the Supreme Court was rejected, citing the precedent set by the Bhadrachalam Paperboards case.