2014 (8) TMI 1247 - SC - Indian Laws

Refund of amount paid under protest - Constitutionality of imposts - cess - tax - Challenge to Validation Act - HELD THAT - This Court in UNION OF INDIA VERSUS SOLAR PESTICIDE PVT. LTD. 2000 (2) TMI 237 - SUPREME COURT once again had to deal with the question whether the doctrine of unjust enrichment is applicable in respect of raw material imported and consumed in the manufacture of a final product is a question which arises for consideration in these appeals . In substance, this Court held that a person who passes on the burden of tax to some other person, either directly or indirectly is not entitled to claim the refund of tax, the levy and/or collection of which by the State is declared to be illegal or unconstitutional - the existence or otherwise of such a provision makes no difference for the correctness of the above stated principle of law Any person carrying on the activity of manufacture of goods utilising some raw material which had already suffered some tax would normally include both the tax component and the cost of such raw material into the cost of the final product and pass on the same to the consumer of the manufactured product. There are no reason to interfere with the impugned judgment under appeal - The appeal is dismissed.

Summary

Issues involved:
The appeal involves the constitutionality of two imposts, a cess and a tax levied under specific Acts, and the subsequent challenge to the Validation Act in relation to these imposts. The main issue is the entitlement of the Appellant to seek a refund of the amounts paid under protest for the period when the imposts were in force.

Constitutionality of Two Imposts:
The Appellant, a cement manufacturing company, challenged the constitutionality of two imposts - a cess and a tax levied under specific Acts - successfully before the High Court based on the judgment of the Constitution Bench of the Supreme Court. This led various States to face the need for refunds due to the declaration of unconstitutionality. The Parliament then enacted the Validation Act to address this situation.

Challenge to Validation Act:
The constitutionality of the Validation Act itself was challenged by the Appellant before various courts. The Appellant initially did not pay the imposts under interim orders of the High Court but later paid the amounts due under protest after the vacation of the interim orders. The Supreme Court had previously upheld the constitutionality of the Validation Act in a separate case.

Refund of Amounts Paid:
The High Court declared that the Appellant was entitled to a refund of the cess and mineral rights tax paid for a specific period, following a judgment by the Supreme Court. However, a review petition was filed by the Respondents, arguing against the automatic entitlement of the Appellant for a refund, citing a previous ruling related to passing on tax liability to consumers.

Principle of Passing on Tax Liability:
The Appellant claimed entitlement to a refund based on the principle that passing on tax liability to consumers should not preclude the refund. Reference was made to previous cases where refund claims were allowed due to the absence of passing on the tax burden. The Supreme Court clarified that a person passing on the tax burden to another party is not automatically entitled to a refund of the tax deemed unconstitutional, unless it is proven that the tax liability was not transferred to a third party.

Dismissal of Appeal:
The Supreme Court dismissed the appeal, upholding the restriction on the Appellant's right to seek a refund unless the Appellant can demonstrate that the tax burden was not passed on to consumers. The Court allowed the Appellant the opportunity to establish this before the competent authority within a specified period, emphasizing the need for evidence to support the claim.

Separate Judgement:
In related special leave petitions, the Court disposed of the matters in line with the order in the main appeal, noting the similarity in the issues involved. No costs were awarded in these matters.