2014 (3) TMI 737 - SC - VAT and Sales Tax

Refund of the excess tax paid - reduction of rate of tax with retrospective effect - What is the meaning to be assigned to and scope of the expression tax, if any, already collected at the higher rate shall be paid over to the government and tax, if any, already paid shall not be refunded - Held that - The plain reading of the notification would make it apparent that the State Government has expressly made it clear that if, for any reason, the assessee had collected and had paid the higher rate of tax to the State Government the same shall not be refunded - The prohibition of refund is only in respect of the tax collected at the higher rate by the dealer and remitted to the State Government - The intention of the State in issuing the said notification has been reflected in the clarification issued by the CC Taxes, Thiruvananthpuram in Civil Appeal No. 1827 of 2004 - It states that the notification is based on the intention of the State that retrospective operation given to the notification must not result in outflow of money from the Government exchequer - Having paid the higher rate of tax to the State the assessee is not entitled for refund of the aforesaid amount - We say so for the reason that the rate of tax at the relevant point of time was 8% - The appellant had paid that amount - By amendment, though the rate of tax was reduced to 4%, the assessee cannot take advantage of the same and gain undue monetary advantage not due to him - Assessing authority was justified in passing the order of rectification rectifying his earlier order wherein he had ordered for refund/adjustment of the excess tax paid for the future demands - The High Court has rightly concurred with the view of the assessing authority and rejected the claim of the assessee Decided against assessee.

Summary

Issues:
Interpretation of a notification reducing tax rate retrospectively and its impact on refund claims.

Analysis:
1. The case involved a dispute regarding the interpretation of a notification issued by the State Government that reduced the tax rate on areca nuts from 8% to 4% with retrospective effect from 01.01.2000. The notification also stated that tax collected at a higher rate shall be paid to the government and no refunds shall be issued for tax already paid.

2. The assessing authority rectified the assessment order for the year 1999-2000 based on this notification, denying the appellant's claim for a refund of the excess tax paid. The appellant challenged this decision, arguing that they had not collected the higher tax rate and, therefore, were entitled to a refund.

3. The High Court upheld the assessing authority's decision, emphasizing that the notification clearly prohibited refunds for taxes already paid, irrespective of whether they were collected or not. The Division Bench also supported this conclusion, leading to the appellants filing civil appeals before the Supreme Court.

4. The Supreme Court analyzed the notification and the relevant circumstances. It observed that the notification explicitly stated that tax paid at a higher rate shall not be refunded, particularly focusing on taxes remitted to the State Government. The Court noted that the intention behind the notification was to prevent financial losses to the government due to retrospective changes in tax rates.

5. Given that the appellant had paid tax at the increased rate of 8% from 01.01.2000, the Court held that they were not entitled to a refund following the subsequent rate reduction to 4%. The Court reasoned that the appellant could not benefit from the lower rate retrospectively after already paying the higher rate in compliance with the law at that time.

6. Consequently, the Supreme Court affirmed the decisions of the assessing authority and the High Court, dismissing the civil appeals. The Court found no justification to interfere with the lower courts' rulings, thereby upholding the denial of the appellant's refund claim.