1986 (10) TMI 151 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the petitioners are entitled to a refund of the Central Sales Tax levied and collected for the assessment years 1981, 1982, 1983, and 1984.
2. Whether the principles of res judicata apply to bar the petitioners' claim for refund.
3. Whether the theory of unjust enrichment can be used to refuse the refund of the tax collected without authority of law.
4. Whether the petitioners are entitled to interest on the refund amount.

Summary:

1. Entitlement to Refund:
The petitioners, a small-scale industry, claimed exemption from Central Sales Tax u/s 8(2A) of the Central Sales Tax Act, 1956. The Sales Tax Authorities initially rejected this claim, leading to Writ Petition No. 21/84, which resulted in the quashing of the assessment order for 1979 and recognition of the petitioners' exemption. Subsequent assessment orders for 1981, 1982, and 1983 acknowledged the exemption but denied the refund on grounds of unjust enrichment and the petitioners' alleged waiver of the refund claim in Writ Petition No. 21/84. The court held that the petitioners did not give up their right to seek a refund by other legal means and thus were entitled to the refund.

2. Principles of Res Judicata:
The respondents contended that the petitioners' claim for refund was barred by res judicata, as the petitioners did not press for the refund in Writ Petition No. 21/84. The court rejected this argument, stating that the issues in the previous and current petitions were not substantially the same, and the prayer for refund in the earlier petition was not finally decided. The court concluded that res judicata did not apply.

3. Theory of Unjust Enrichment:
The respondents argued that refunding the tax would result in unjust enrichment for the petitioners, as the tax was collected from customers. The court referred to the Supreme Court's ruling in M/s. D. Cawasji and Co. v. State of Mysore, which held that taxes collected without authority of law must be refunded, irrespective of unjust enrichment. The court found that the theory of unjust enrichment was not a valid defense to refuse the refund of illegally collected taxes.

4. Entitlement to Interest:
The petitioners sought interest on the refund amount from the date of collection. The court denied this request, noting that the Department could have reasonably interpreted the interim order in Writ Petition No. 21/84 as indicating that the petitioners had surrendered their claim for refund. Therefore, the court did not grant interest on the refund amount.

Conclusion:
The court ruled in favor of the petitioners, granting the refund of the Central Sales Tax for the assessment years 1981, 1982, and 1983, and partially for 1984, limited to the admitted sum of Rs. 3,13,173.50. The court upheld the assessment orders with modifications and rejected the respondents' applications for leave to appeal to the Supreme Court and for a stay of the order.