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TMI Blog2014 (9) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... njust enrichment and such refund, therefore, should not be granted. In the present case, from the available material on record, it is neither possible nor our desire to ascertain as to what extent the burden of tax deposited by the petitioner with the Government authorities was passed on to the third party. Learned counsel for the petitioners strenuously urged that in majority of the cases, transactions were in such a nature that the taxes were paid/collected by the transferor and the transferee-companies and no third party transactions were involved. We are not inclined to go into such an issue. This is so because we propose to permit the Commissioner to hear the revision application on the merits. Secondly, full records are not before us. Thirdly, in such complex situation, we would not like to examine the issue at the first instance which can be better done by the Commissioner in the process of hearing revision application. In the result, subject to the declaration made above, namely, that the order of the High Court sanctioning the amalgamation scheme would relate back to the effective date as envisaged in the scheme and that therefore, the merger should be effective from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted, Cadila Chemicals Limited, Cadila Antibiotics Limited, Cadila Exports Limited and Cadila Veterinary Private Limited amalgamated with two companies, namely, Cadila Healthcare Private Limited (the present petitioner) and Cadila Pharmaceuticals Limited. We may hasten to add that even under such amalgamation scheme, Cadila Laboratories Limited did not merge completely with the above-mentioned two transferee-companies. We may record that unlike routine amalgamations, this scheme did not involve amalgamation of a single transferor-company into a single transfereecompany, but five different companies (one of them partially) merged in different proportions and with respect to different products into two transferee-companies. The scheme provided that June 1, 1995 would be the date from which the scheme for amalgamation will be effective also referred to as the appointed date. Such scheme was presented before the Gujarat High Court in different company petitions filed by various concerned companies. Learned company judge of the Gujarat High Court by his order dated May 2, 1997 sanctioned the said scheme as presented before him. Significantly, the order was silent on the effective date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the High Court on August 16, 1997. The assessment proceedings for the year 1995-96 were consolidated in case of all companies and assessment was made considering the transfers made during the interregnum as branch transfers which is not acceptable. He further indicated that it is necessary to decide the tax liability examining the transactions of transfers of all companies made internally totalling to ₹ 14,88,05,000. He, therefore, gave an opportunity to the petitioners to raise their objections by remaining present on September 27, 2001. 7. In response to such notice, the petitioners raised detailed objections under a communication dated July 2, 2001. 8. Despite such objections, since the revisional authority did not drop the proceedings, the petitioners have approached this court challenging the very initiation of the revision proceedings. As noted above, prayer 18(A) pertained to several other aspects which the petitioners have not pressed before us. We have, therefore, confined our scrutiny to the validity of the notice issued by the Deputy Commissioner taking the assessment framed by the assessing officer in revision. 9. The learned counsel Shri Soparkar for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scheme of amalgamation cannot be regarded as branch transfer till the date the scheme was sanctioned by the High Court. She submitted that the petitioners having passed on the burden of such taxes would be unjustly enriched if such amount is allowed to be retained by the petitioners. 13. Counsel further submitted that there was a complex web of transfers from one company to another with a clear intention of evasion of tax through such modality of transfers followed by amalgamation of companies. She submitted that such tax evasion should not be permitted. From the affidavit, she pointed out that the modus operandi adopted by the petitioners came to the light of the sales tax authorities during search and seizure operations in case of Cadila Healthcare Limited. 14. Counsel relied on the decision of the apex court in the case of McDowell and Co. Ltd. v. Commercial Tax Officer [1985] 59 STC 277 (SC); [1985] 154 ITR 148 (SC); [1985] 3 SCC 230, to contend that such dubious tax planning should not be permitted. 15. Before proceeding to examine the rival contentions, we may notice certain statutory provisions contained in the Act. The term sale is defined in section 2(28) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order which are not appealable. Section 67 pertains to revision and is of considerable importance to us. Section 67 reads as under: 67. Revision.-(1) Subject to the provisions of section 66 and to any rules which may be made in this behalf,- (a) the Commissioner of his own motion within three years or on application made to him within one year from the date of any order passed by any officer appointed under section 27 to assist him, may call for and examine the record of any such order and pass such order thereon as he thinks just and proper within twelve months from the date of service of notice for revision; (b) the Tribunal, on application made to it against an order of the Commissioner (not being an order passed under sub-section (2) of section 65 in second appeal or under clause (a) in revision on an application) within four months from the date of the communication of the order may call for and examine the record of any such order, and pass such order thereon as it thinks just and proper. (2) Where an appeal lies under section 65 and no appeal has been filed, no proceedings in revision under this section shall be entertained upon application: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve months from the date of service of notice of revision and secondly, no such order could be passed without hearing the person who is likely to be adversely affected by such order. 19. Bearing in mind such revisional powers of the Commissioner, we may examine the challenge of the petitioners. In this respect, it is not in dispute that petitioner No. 1 was one of the companies which was a transfereecompany in the scheme of amalgamation. Under the scheme of amalgamation, five different companies agreed to be amalgamated into two different companies in different proportions and product-wise division was made into petitioner No. 1 and another transferee-company. Such scheme envisaged its appointed date as June 1, 1995. The said scheme was duly sanctioned by the Gujarat High Court by an order dated May 2, 1997. We have perused the order of the High Court. Such order does not specify any effective date of amalgamation of the scheme. That being the position, as per the well-settled legal proposition, the order of the High Court sanctioning the scheme would relate back to the date mentioned in the scheme for amalgamation of the companies. In this respect, we may make a reference to a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y may carry on business, as has happened in this case, but normally provision is made for this aspect also in the scheme of amalgamation. In the scheme before us, clause 6(b) does expressly provide that with effect from the transfer date, the transferor-company (subsidiary company) shall be deemed to have carried on the business for and on behalf of the transferee-company (holding company) with all attendant consequences. It is equally relevant to notice that the courts have not only sanctioned the scheme in this case, but have also not specified any other date as the date of transfer/amalgamation. In such a situation, it would not be reasonable to say that the scheme of amalgamation takes effect on and from the date of the order sanctioning the scheme. We are, therefore, of the opinion that the notices issued by the Income-tax Officer (impugned in the writ petition) were not warranted in law. The business carried on by the transferor company (subsidiary company) should be deemed to have been carried on for and on behalf of the transferee company. This is the necessary and the logical consequence of the court sanctioning the scheme of amalgamation as presented to it. The order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court sanctioning the scheme relating back to the date envisaged in the scheme, ceased to have any legal existence, any transfer from the transferor to the transferee-companies must be treated as branch transfer. This was also the view expressed by the Bombay High Court in the case of National Organic Chemical Industries Ltd. [2004] 135 STC 50 (Bom); [2004] 118 Comp Cas 556 (Bom). In the said case, this precisely was the issue presented before the High Court. A Division Bench of the High Court ruled that the company loses its corporate personality from the date declared by the competent authority under the Companies Act. In case of amalgamation of a company, the High Court being the competent authority, when the High Court sanctions the scheme for amalgamation and declares the effective date from which such amalgamation would operate, from such date, the corporate personality of the company gets destroyed. On such principle, the Bombay High Court ruled that no sales tax was payable on the transfer by the transferor-company to the transferee company during the period when the scheme for amalgamation was framed till the same was sanctioned by the High Court. We may notice t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a stage when the Deputy Commissioner has merely issued a notice for taking the assessment order in suo motu revision. The petitioners' fundamental opposition to such initiation of proceedings was that being branch transfers, no tax was exigible and the assessing officer, therefore, committed no error. This contention, however, shall have to be examined in the light of various factors. Firstly, this is not a case where one company merges into another company and thus there is a clear case of single transferor-company merging into single transferee-company. This is a complex case where five companies joined together to create a scheme for amalgamation into two companies. Secondly, even these five companies did not totally merge. One of them merged partially and retained its independent entity. Further, the merger was divided into two separate companies, including petitioner No. 1 herein. Which are the exact transactions that took place between these seven corporate bodies from 1st June 1995 till 2nd May, 1997 are obviously not on record before us. Such complex transactions naturally cannot be made subject-matter of our scrutiny in a writ petition at a stage when the Deputy Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he merger scheme and the date of the High Court sanctioning the merger, became those in the nature of branch transfers. 27. Secondly, the petitioner has approached this court invoking writ jurisdiction under article 226 of the Constitution. Writ jurisdiction, as is well known is very wide and powers of a writ court, undoubtedly, are vast. Nevertheless, the writ jurisdiction is essentially one of equity jurisdiction. When the court is examining a legal challenge presented before it, while deciding whether a particular writ prayed for by the petitioner should or should not be granted, the court cannot and should not close its eyes to all facts which arise from the record. It would be incorrect to suggest that while examining the prayers of a petitioner, writ court should look into the prayers alone and even if equity so demands, refuse to examine other elements relatable to such prayers. July 16, 2012 28. Writ jurisdiction under article 226 of the Constitution has a wide amplitude. It empowers the High Courts to issue writs of various natures. Such powers are thus extraordinary in nature. The writ jurisdiction traces its origin to prerogative writs issued by the Crown in Eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under this Act; (d) the duty of excise and interest, if any, paid on such duty paid by the manufacturer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person; (e) the duty of excise and interest, if any, paid on such duty borne by the buyer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person; (f) the duty of excise and interest, if any, paid on such duty borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify: Provided further that no notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government, the incidence of duty and interest, if any, paid on such duty has not been passed on by the persons concerned to any other person. (3) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any court or in any other provision of this Act or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State enactments which empowered the municipalities to levy the impost. All the same a close reading of the said decisions does indicate that they have read the words 'sale therein' occurring in entry 52 of List II as meaning 'a sale of goods within a local area for consumption or use therein'-though as a matter of fact, in a given case, the goods may be taken out and consumed there. The decisions clearly say that where the goods are sold within a local area for the purpose of being taken out of that local area and are actually taken out, no levy is permissible under entry 52. It is not possible to distinguish the said decisions on the grounds suggested by Shri Murthy. There is yet another reason. Octroi or any impost in the nature of that impost has always been looked upon with certain amount of disfavour. Acceptance of the State's contention in this case would ultimately result in driving up the price of these goods to the consumer. It would become another sales tax in effect. In the circumstances, we are inclined to-indeed we have no option but to affirm the decision of the Karnataka High Court on the meaning of the words 'sale therein' in section 3 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of State of Rajasthan v. Novelty Store [1998] 9 SCC 570, the apex court reversed the decision of the High Court only on the ground that the respondent therein after paying octroi had passed on the burden to the consumers and collected from the customers on the cloth purchased and sold by them. The apex court held that therefore order of refund would be unjust enrichment to them. 34. Such question indirectly came up for consideration once again before the apex court in the case of Mafatlal Industries Ltd. v. Union of India [1998] 111 STC 467 (SC); [1997] 5 SCC 536. In the context of Central excise and customs duties, the apex court in the majority decision held that in all situations refund can only be allowed where the manufacturer-assessee has not passed on the burden of tax to the third parties, viz., consumers. There would be a presumption of passing on the burden on the consumers and it would be the burden on the manufacturer to rebut the presumption by establishing to the contrary. 35. From the above, it can be seen that even in absence of statutory provisions, in case of indirect taxes, Indian Courts have been applying the principle of unjust enrichment on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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