1961 (3) TMI 63 - SC - VAT and Sales Tax

Whether by way of sales tax or otherwise and the period of limitation provided in the proviso to section 14 shall apply to the aforesaid claims? Held that - Appeal dismissed. When under the orders of assessment they paid amounts to the State, requirements of section 9B were complied with and the amount remained with the State in deposit, subject to the obligation, if a demand was made within the period prescribed, to restore the same to the persons from whom the assessees had recovered it. We do not think that there is any reason to hold that the assessees would be exposed to any enforceable claims at the instance of the purchasers to refund the tax collected by them if they have deposited it with the State in discharge of the statutory obligation incurred by them.

Summary

Issues:
1. Refund of sales tax paid by the assessees for transactions outside the State of Orissa.
2. Interpretation of section 14 of the Orissa Sales Tax Act, 1947 regarding the right to claim a refund.
3. Validity of the retrospective amendment introduced by the Orissa Legislature through section 14-A.
4. Legislative competence of the State Legislature to impose restrictions on refund claims.
5. Constitutionality of section 14-A in relation to Article 19(1)(f) of the Indian Constitution.

Analysis:

The judgment by the Supreme Court of India dealt with the case involving the Orient Paper Mills Ltd., a public limited company registered under the Orissa Sales Tax Act, 1947. The assessees collected tax on sales, including those made to dealers in other states, and subsequently sought a refund for sales tax paid for transactions outside the State of Orissa following a precedent set by the Supreme Court in a previous case.

The primary contention revolved around the interpretation of section 14 of the Act concerning the right to claim a refund. The taxing authorities initially refused the refund, citing finality of assessment orders and a limitation on the right to apply for a refund. However, the High Court of Orissa held that the assessees were entitled to a refund for transactions not subject to tax as per Article 286(1)(a) of the Constitution.

The Supreme Court, in its judgment, focused on the retrospective amendment introduced by the Orissa Legislature through section 14-A. This amendment specified that a refund of tax paid could only be claimed by the person from whom the dealer had actually realized the amount, thereby depriving the assessees of their common law right to claim a refund based on an error of law.

The Court analyzed the legislative competence of the State Legislature to enact such restrictions on refund claims. It concluded that the State Legislature had the authority to legislate on matters related to taxes on sales, including the power to grant or restrict refund claims. The Court found no restriction imposed on the legislative power in this regard.

Furthermore, the judgment addressed the constitutionality of section 14-A in relation to Article 19(1)(f) of the Indian Constitution, which guarantees the right to acquire, hold, and dispose of property. The Court held that the restriction imposed by section 14-A was in the interest of the general public and did not unreasonably infringe upon the fundamental rights of the assessees.

In conclusion, the Supreme Court dismissed the assessees' appeals and allowed the State's appeals, citing the validity of the retrospective amendment introduced by the Orissa Legislature. The Court directed that there shall be no order as to costs of the appeals in this matter.