2001 (1) TMI 83 - SC - VAT and Sales Tax

Claim of refund of the amount paid by the respondents as water cess under the provisions of the Water (Prevention and Control of Pollution) Cess Act, 1977? Held that - The stand of the petitioners that the respondents were not entitled for refund on the ground that the amount of cess collected was passed on to the State Government, which in turn gave it to the Central Government and the Central Government has appropriated the same by passing on money back to various State Pollution Control Boards does not help them. Before the High Court, they only stated that they made reference to the Government in regard to the claim made by the respondents for refund and they were waiting for response. It was also not made out by the petitioners as to how they had difficulties in making the refund to the respondents. The High Court in our view having taken all aspects into consideration was right in allowing the claims of the respondents made for refund in the writ petitions. We do not see any good ground or valid reason to interfere with the judgments and orders of the High Court impugned in these petitions. Hence the special leave petitions are dismissed. The parties shall bear their own costs.

Issues Involved:
1. Entitlement to refund of water cess.
2. Maintainability of writ petitions under Article 226 of the Constitution.
3. Impact of delay and laches on the claim for refund.
4. Applicability of principles of res judicata or estoppel.
5. Unjust enrichment and passing on the liability.

Issue-wise Detailed Analysis:

1. Entitlement to refund of water cess:
The respondents, owners of industrial units manufacturing sugar and liquor/alcohol, paid water cess under protest, contending that their industries were not covered by entry No. 15 of Schedule I to the Water (Prevention and Control of Pollution) Cess Act, 1977. The Supreme Court in Saraswati Sugar Mills v. Haryana State Board [1992] 1 SCC 418 held that sugar industries were not liable under the said entry. Following this judgment, respondents sought a refund of the cess paid. The High Court directed the petitioners to refund the amount after verification. The Supreme Court upheld the High Court's decision, stating that the collection was illegal and without authority of law.

2. Maintainability of writ petitions under Article 226 of the Constitution:
The petitioners argued that the writ petitions were not maintainable solely for refund claims. However, the Supreme Court referenced several judgments, including HMM Limited v. Administrator, Bangalore City Corporation [1990] 77 STC 17 (SC) and Salonah Tea Company Ltd. v. Superintendent of Taxes [1988] 173 ITR 42 (SC), which supported the maintainability of writ petitions for refund when the collection was without authority of law. The court distinguished between cases seeking refund as a primary relief and those seeking it as a consequential relief after a declaration of law.

3. Impact of delay and laches on the claim for refund:
The petitioners contended that the writ petitions were filed after an inordinate delay. The Supreme Court, however, noted that the respondents paid the cess under protest and filed for refund within a reasonable time after the judgment in Saraswati Sugar Mills' case. The court referenced Dehri Rohtas Light Railway Company Limited v. District Board, Bhojpur [1992] 2 SCC 598, emphasizing that the rule against delay is a rule of practice, not law, and each case must depend on its own facts. The court found no unreasonable delay or laches on the respondents' part.

4. Applicability of principles of res judicata or estoppel:
The petitioners argued that the respondents' earlier unsuccessful writ petitions challenging the levy should bar the current claims. The Supreme Court rejected this argument, citing Shenoy and Co. v. Commercial Tax Officer [1985] 155 ITR 178 (SC), which held that a Supreme Court judgment on the validity of a levy binds all, not just the parties before the court. The court emphasized the binding nature of its judgments under Article 141 of the Constitution.

5. Unjust enrichment and passing on the liability:
The respondents claimed they did not pass on the water cess liability to their customers, a point not denied by the petitioners. The Supreme Court noted that 65% of the sugar was sold through the public distribution system, negating the possibility of unjust enrichment. The court also dismissed the petitioners' argument that the refund was impracticable because the cess money had been passed to the State and Central Governments, emphasizing that the collection was illegal from the outset.

Conclusion:
The Supreme Court upheld the High Court's decision to refund the water cess to the respondents, dismissing the special leave petitions. The court found that the collection of the cess was illegal and without authority of law, the writ petitions were maintainable, there was no undue delay or laches, and principles of res judicata or estoppel did not apply. The court also found no unjust enrichment on the respondents' part.

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