2023 (8) TMI 986 - HC - VAT and Sales Tax

Levy of luxury tax under the provisions of the Tamil Nadu Tax on Luxuries Act, 1981 - amendment Act No.24/2002 to the Tamil Nadu Tax on Luxuries Act, 1981, imposing 1% on gold, silver, platinum jewellery and other precious stones at every point of purchase - HELD THAT - The respondent ought to have called upon the petitioner to show cause as to why the amount that was paid by the petitioner covered by the impugned order should be refunded back to the petitioner as the petitioner would have passed on the incidence of tax to its customers - If the petitioner had produced evidence that the incidence of tax was not passed on to the customers, it is not on the part of the duty of the Department/State Government to retain the tax, which was otherwise not due to it. The impugned order set aside and case remitted back to the respondent to pass a fresh order after calling upon the petitioner to show cause as to how the tax amount, which has been paid by the petitioner pursuant to the impugned order should not be retained by the State Government on account of unjust enrichment. The respondent shall pass appropriate orders keeping note of Paragraphs 97 and 98 of the decision of the Hon'ble Supreme Court in M/s.Godfrey Phillips India Limited case - petition allowed.

Summary

Issues involved:
The judgment involves challenging an impugned order regarding the levy of luxury tax under the Tamil Nadu Tax on Luxuries Act, 1981. The issues include the imposition of luxury tax on specific items, the exemption granted by the Government, the legality of the assessment order, the claim for refund, and the concept of unjust enrichment.

Imposition of Luxury Tax:
An amendment in 2002 imposed a 1% luxury tax on gold, silver, platinum jewelry, and precious stones at every point of purchase. The Supreme Court clarified that the term "luxuries" refers to indulgence or enjoyment, not articles themselves. The Tamil Nadu government exempted certain stockists from luxury tax in line with the Supreme Court's decision.

Legality of Assessment Order and Claim for Refund:
Despite the exemption, an assessment order in 2015 demanded a substantial sum from the petitioner for sales in 2002-2003. The petitioner, approaching the court in 2020, contested the arbitrary demand and sought a refund based on the exemption and Supreme Court decisions.

Principles of Natural Justice and Unjust Enrichment:
The petitioner argued that the assessment order was arbitrary and violated natural justice principles. The Government Advocate highlighted the delay in filing the writ petition and the availability of an appellate remedy. The court considered the issue of unjust enrichment, citing relevant Supreme Court decisions, and emphasized the need for the petitioner to demonstrate that the tax incidence was not passed on to customers.

Decision and Remedy:
The court set aside the impugned order and directed the respondent to reassess the case, considering the unjust enrichment principle. The respondent was instructed to evaluate whether the tax amount should be retained by the State Government. The judgment referenced specific paragraphs from the Supreme Court decisions in M/s.Godfrey Phillips India Limited and M/s.Mafatlal Industries Limited. The writ petition was allowed with observations, and no costs were awarded.