2022 (11) TMI 432 - HC - VAT and Sales Tax

Validity of assessment order - recovery of arrears of tax - applicable rate of tax - Ujala Supreme - Ujala Stiff Shine - Section 25(1) of the KVAT Act - HELD THAT - The Hon'ble Supreme Court in MP Agencie's case 2015 (3) TMI 787 - SUPREME COURT held that the goods (Ujala Stiff and shine) remain in List A of Third Schedule which is taxable at 4%/5% and the inclusion of the goods in the residuary Entry 103 by the Revenue by no stretch of imagination can be made applicable. It was further held that if the assessee/appellant therein has paid the amount of VAT in excess of 4%/5% to the State Government, they will not be entitled to get refund of the said amount. Article 141 of the Constitution of India commands to follow the decision of the Hon'ble Supreme Court, if there is a law declared by the Hon'ble Supreme Court which obviously would be binding on all courts in India and the parties thereto. In the light of Articles 141 and 142, it is impermissible for the High Court to overrule the decision of the Apex Court on the ground that the Supreme Court has laid down the legal position without considering any other point. It is not only a matter of discipline for the High Courts in India, but also mandate of the Constitution as provided under Article 141, that the law declared by Supreme Court shall be binding on all courts within the territory of India. In this context, it is also relevant to look into Article 142 of Constitution of India. Admittedly, the petitioner has not challenged the judgment of this Court before the Apex Court but the respondents are not entitled to proceed with the recovery proceedings for recovery of the amount which is not authorized by law. When the Hon'ble Supreme Court has held that taxes paid by the assessee/appellant will not be refunded, it does not allow the Department to collect the differential taxes in the case of assessees who have not met the demands already made - It is trite that even though all statutory remedies are exhausted and held against the petitioner, it is legal to invoke powers under Article 226 to challenge the same as it vitiates the old law. The Exts.P3 and P4 revenue recovery notices demanding an amount of Rs.6,43,079/- is illegal and unenforceable and has to be set aside - petition allowed.

Summary

Issues:
Challenge to revenue recovery steps for alleged arrears of tax for the year 2011-12 based on disputed tax rate.

Analysis:
The petitioner, a dealer under the Kerala Value Added Tax Act, contested the assessment order applying a tax rate of 12.5% instead of the conceded rate of 4%. Various appeals were filed, including before the Tribunal and High Court, leading to dismissal. The Supreme Court clarified the correct tax rate for 'Ujala' products as 4%/5%, with no entitlement to refund for excess tax paid beyond this rate.

The petitioner argued that since the Supreme Court declared the tax rate as 4%/5%, the assessing authority cannot demand the amount based on the higher rate. The government pleader contended that the assessment order had become final before the Supreme Court's decision, making the petitioner liable for the demanded amount. However, the High Court emphasized the binding nature of Supreme Court decisions under Article 141 of the Constitution, preventing the High Court from overruling such decisions.

The High Court reiterated that the law established by the Supreme Court regarding the tax rate of 'Ujala' products at 4%/5% must be followed. The recovery notices demanding an amount exceeding this rate were deemed illegal and unenforceable. The court allowed the writ petition, setting aside the demand notices and directing the respondents to issue a fresh demand only if it is found that the petitioner had not paid tax at the correct rate.

In conclusion, the High Court ruled in favor of the petitioner, emphasizing the supremacy of Supreme Court decisions and directing compliance with the correct tax rate as determined by the apex court.