1961 (10) TMI 56 - SC - VAT and Sales Tax

The High Court was of the opinion that the amount of tax due and paid under orders of assessment made within the period prescribed by the proviso was recoverable. But it has to be noted that a claim for refund was never made in the High Court by the company, and the High Court was not competent to pass that order. We are told at the Bar that a number of applications were filed before the High Court relying upon the judgment of the Madras High Court in Gannon Dunkerley s case 1954 (4) TMI 30 - MADRAS HIGH COURT and a stereotyped order was issued by the High Court which was transcribed in the proceedings in the diverse applications. The order relating to refund was, however, manifestly inappropriate in the present case, there being no claim for refund of tax. The consolidated order for assessment was passed on April 7, 1954 - Appeal dismissed.

Summary

Issues:
- Assessment of sales tax on works contracts
- Claim for refund of tax
- Application of Section 14 of the Orissa Sales Tax Act
- Competency of the High Court to pass orders on refund

Analysis:
The judgment by the Supreme Court of India involved a case where a private limited company, engaged in construction contracts with the State of Orissa, was assessed for sales tax by the Sales Tax Officer. The company, relying on legal precedents, filed a petition in the High Court seeking a writ to restrain the State from levying sales tax on their contracts. The High Court, following previous decisions, declared the assessment of sales tax on building or works contracts as invalid and directed no steps be taken for tax recovery. However, the High Court also issued directions on refund of tax, which was deemed inappropriate as the company had not claimed a refund. The Supreme Court noted that the High Court was not competent to pass the order on refund without a claim being made. The company was entitled to relief from sales tax on building contracts, but the issue of refund was not applicable.

The Supreme Court analyzed Section 14 of the Orissa Sales Tax Act, which provides for the refund of excess tax paid by a dealer within a specified timeframe. The Court clarified that the High Court's order on refund was erroneous as the company had not made a claim for refund. The Court highlighted that the State's adjustment of tax liability against outstanding bills without the company's consent did not fall under the purview of Section 14. The Court modified the High Court's direction on refund and instead declared that the State was not entitled to adjust sales tax against outstanding bills without the company's consent. The Court directed that if any such adjustments had been made, the accounts would be reopened and readjusted accordingly.

In conclusion, the Supreme Court dismissed the appeal while modifying the High Court's order on refund. The Court upheld the relief granted to the company regarding the non-applicability of sales tax on building contracts. The appeal was dismissed with no order as to costs, subject to the modification regarding the adjustment of sales tax against outstanding bills.