2017 (9) TMI 977 - HC - VAT and Sales Tax

Exemption from payment of central sales tax - The case set up by the petitioner is that though some other concessions were granted to the petitioner, however, the benefit of concessional rate of central sales tax was not granted, as a result of which the petitioner per force paid 4% central sales tax to the State - Held that - No doubt, the petitioner was granted Letter of Intent and agreement was also signed with the State for grant of certain benefits, but for non-compliance of certain formalities, the benefit of concessional rate of central sales tax could not be availed of by the petitioner - It is undisputed that the petitioner has charged central sales tax @ 4% from its customers and paid the same to the State. If the petitioner was aggrieved of any in-action on the part of the State at the relevant time when the expanded unit came into production, on account of which he could not avail of the concession, the grievance could be raised but the petitioner continued making representations and charged and paid tax @ 4% - petition dismissed - decided against petitioner.

Summary

Issues:
Petitioner seeking exemption from central sales tax and refund of tax already paid.

Analysis:
The petitioner approached the court seeking direction to grant exemption from central sales tax under the Central Sales Tax Act, 1956 and refund the tax already paid. The petitioner, engaged in manufacturing crank shafts and heavy forging press line, expanded its unit and was entitled to benefits under the Industrial Policy 2003, including a reduced central sales tax rate from 4% to 1% for 5 years. The petitioner claimed that despite approval of incentives, the concessional rate of central sales tax was not granted, leading to overpayment of tax. The State contended that the petitioner failed to provide necessary information timely, resulting in the inability to avail the benefit. The State argued against refund, stating that since the tax was already collected from buyers, refunding it would unjustly enrich the petitioner at the State's expense. The court noted the petitioner's failure to comply with formalities, charged customers 4% tax, and paid it to the State. The court emphasized that allowing the petitioner to retain the tax would amount to unjust enrichment, dismissing the petition due to lack of merit.

In the judgment, the court highlighted that despite the petitioner being granted a Letter of Intent and signing an agreement with the State for benefits, non-compliance with formalities led to the inability to avail the concessional rate of central sales tax. The court noted the production commencement dates of the expansion unit and the correspondence indicating issues preventing benefit availing. It was established that the petitioner had charged customers 4% tax and remitted it to the State. The court emphasized that once tax is collected and paid to the State, retention by the petitioner would result in unjust enrichment. The court rejected the petition, stating that if the petitioner had grievances regarding State inaction during benefit eligibility, it should have raised concerns instead of continuing tax payment at 4%.

In conclusion, the court dismissed the petition, stating that the petitioner's failure to fulfill formalities and continuous payment of tax at 4% despite issues did not warrant refund. The court highlighted the principle of unjust enrichment, emphasizing that allowing the petitioner to retain the tax collected from buyers would be inequitable. The judgment underscored the importance of compliance with formalities and timely actions to avail statutory benefits, ultimately ruling against the petitioner's claim for exemption and refund of central sales tax.