2020 (3) TMI 140 - HC - VAT and Sales Tax

Grant of refund of tax collected from the petitioner by the seller and deposited with the respondent authorities - CST Act, 1956 - Refusal to issue C-Form - case of petitioners is that just like no statutory provisions are required for applying the principle of unjust enrichment, correspondingly no provision is required for refund to the person who has borne the tax - HELD THAT - It is an undisputed position that the petitioners have borne the burden of tax as the CST authorities at Rajasthan had refused to issue C forms after the coming into force of the GST regime. On account of non-issuance of C forms, the petitioners were not in a position to submit C form declarations in respect of the diesel purchased by them for their mining activity, as a result whereof, the petitioners could not purchase diesel at concessional rate of tax from the seller - Reliance Industries Limited, which collected tax at the rate of 20 % from the petitioners and deposited the same with the respondent authorities. The respondent authorities do not dispute that against the C form declarations, the tax collected from the petitioners and deposited by Reliance Industries Limited is required to be refunded. The sole refrain of the respondent authorities is that such refund can be made to the seller Reliance Industries Limited after its assessment for the period in question is concluded and not to the petitioners who are not registered as dealers in Gujarat. In the present case, in the absence of C forms having been issued by the Rajasthan authorities, the respondent authorities have collected excess tax from the seller-Reliance Industries Limited, who in turn has collected the same from the petitioners - once the Rajasthan authorities issue C forms against the sales made by Reliance Industries Limited to the petitioners and the petitioners produce the requisite documents/forms before the respondent authorities, the respondent authorities are required to process such claim within twelve weeks of the same being made in writing by the petitioners. Unjust enrichment - HELD THAT - In case of the petitioners, it is an admitted position that the HSD has been purchased by them from Reliance Industries Limited in the course of inter-State trade for use in mining activities and they are, therefore, the ultimate consumers thereof and hence, the question of passing on the tax burden to anyone would not arise. Consequently, the question of unjust enrichment would also not arise. The respondents are directed to forthwith process the refund claims of the respective petitioners and grant refund of the tax amount collected from the petitioners and deposited by the seller in accordance with law within a period of twelve weeks of the receipt of a copy of this judgment - Petition allowed - decided in favor of petitioner.

Issues Involved:
1. Entitlement to Refund of Excess Tax
2. Principle of Unjust Enrichment
3. Jurisdiction and Compliance with Rajasthan High Court's Order
4. Procedural Aspects of Refund Claims

Detailed Analysis:

1. Entitlement to Refund of Excess Tax:
The petitioners, public limited companies engaged in manufacturing and mining, sought a refund of ?2,12,09,162/- collected as tax by Reliance Industries Ltd. and deposited with the respondent authorities under the CST Act. The petitioners argued that they were entitled to a refund since the Rajasthan High Court had directed the authorities to issue C form declarations and refund the excess tax collected due to the wrongful refusal to issue such forms.

The court noted that the petitioners had borne the tax burden due to the non-issuance of C forms by the Rajasthan authorities. Consequently, Reliance Industries Ltd. charged and collected tax at a higher rate (20%) from the petitioners and deposited it with the Gujarat authorities. The Rajasthan High Court had already directed the issuance of C forms and refund of the excess tax, which was not contested by the respondent authorities.

2. Principle of Unjust Enrichment:
The respondents argued that the refund should be granted to Reliance Industries Ltd. since it was the entity that deposited the tax. However, the court highlighted that Reliance Industries Ltd. had collected the tax from the petitioners, and any refund claim by Reliance would be barred by the principle of unjust enrichment. The court cited the Supreme Court's decision in State of M.P. v. Vyankatlal, which held that only the persons who bore the ultimate tax burden are entitled to a refund.

The court also referenced the Supreme Court's decision in Mafatlal Industries Ltd. v. Union of India, which allows for a purchaser to claim a refund if they can establish that they bore the tax burden. The petitioners, being the ultimate consumers, had not passed on the tax burden to anyone else, negating the possibility of unjust enrichment.

3. Jurisdiction and Compliance with Rajasthan High Court's Order:
The court emphasized that the Rajasthan High Court had already directed the authorities to issue C forms and refund the excess tax collected. The petitioners had complied with the court's directions by submitting the requisite documents and making formal refund applications. The respondents' stance that the refund should be processed during Reliance Industries Ltd.'s assessment and then passed on to the petitioners was deemed legally untenable and impractical.

The court reiterated that the Rajasthan High Court's order was binding, and the respondent authorities were duty-bound to process the refund claims within twelve weeks of the application, as directed by the High Court.

4. Procedural Aspects of Refund Claims:
The court addressed the procedural argument that the refund should be processed during Reliance Industries Ltd.'s assessment. It noted that this approach could delay the refund for years and potentially lead to adjustments against Reliance's dues, depriving the petitioners of their rightful refund.

The court also referenced the Gujarat Value Added Tax Act, which allows for refunds to be made to any person, not just the dealer, reinforcing that the petitioners were entitled to the refund as they had borne the tax burden.

Conclusion:
The court concluded that the petitioners were entitled to the refund of the excess tax collected and deposited by Reliance Industries Ltd. The respondents were directed to process the refund claims within twelve weeks, in compliance with the Rajasthan High Court's order. The court clarified that Reliance Industries Ltd. would not be entitled to claim any refund once the petitioners' claims were processed. The petitions were allowed, and the rule was made absolute with no order as to costs.

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