9911796707
TMI Blog2016 (11) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... rs arise in following factual background: Petitioner No.1 is a society registered under the Multi State Cooperative Societies Act,2002 and would be hereinafter to be referred to as the petitioner-society. The petitioner-society is engaged in manufacture and sale of fertilizers and is registered under the State as well as the Central Sales Tax Acts. The manufacturing unit of the petitioner-society at Kandla was holding sales tax exemption certificate. By virtue of this, the petitioner would claim set off on tax paid on purchase of raw materials on goods sold within as well as outside the State. The Sales Tax authorities though granted such set off for the goods sold within the State, denied the same with respect to the goods sold outside the State. 3. According to the petitioner, this stand of the Sales Tax authorities was contrary to the law laid down by the Gujarat Sales Tax Tribunal ['the Tribunal' for short] in case of M/s. Wood Polymer Ltd. This judgement of the Tribunal was brought to the notice of the Assessing authority. He, however, observed that this issue is sub judice. By an order dated 28.06.1980, he rejected the petitioner's claim ironically leaving the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 2,67,344/-. Under such rectified order, therefore, in all, the petitioner would receive total refund of Rs. 24,01,447/-. However, there was no direction for refunding the amount with interest. The petitioner, thereupon, preferred second appeals before the Tribunal questioning non-granting of interest on the delayed payment of refund. While these appeals were pending, the petitioner realized that the Tribunal being a creation of statute may not be able to grant such refund since in terms of Section 54(1)(aa) of the Gujarat Sales Tax Act ['the GST Act' for short], such interest would be available only in case of refund arising out of assessment orders passed for the years 1993-94 and onwards. The petitioner, therefore, withdrew the appeals before the Tribunal on 16.06.2015 and filed the present petition. In this petition, as noted, the petitioner has prayed for two reliefs. One is for declaring that Section 54(1)(aa) of the GST Act is discriminatory and arbitrary insofar as the same denies interest on refunds concerning the period prior to 1993-94. The second prayer of the petitioner is for granting interest on the delayed refund concerning the petitioner's cases for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existing at the time of legislation; and (f) that while good faith and knowledge of the existing conditions on the part of a legislature are to be presumed, if there is nothing on the face of the law or the surrounding circumstances brought to the notice of the court on which the classification may reasonably be regarded as based, the presumption of constitutionality cannot be carried to the extent of always holding that there must be some undisclosed and unknown reasons for subjecting certain individuals or corporations to hostile or discriminating legislation." The above principles will have to be constantly borne in mind by the court when it is called upon to adjudge the constitutionality of any particular law attacked as discriminatory and -violative of the equal protection of the laws." (ii) In case of Kunnathat Thathunni Moopil Nair vs. State of Kerala and anr reported in AIR 1961 SC 552 in which, it was observed as under: "7. The most important question that arises for consideration in these cases, in view of the stand taken by the State of Kerala, is whether Art. 265 of the Constitution is a complete answer to the attack against the constitutionality of the Act. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jected to different rates of taxation, but so long as there is a rational basis for the classification, Art. 14 will not be in the way of such a classification resulting in unequal burdens on different classes of properties. But if the same class of property similarly situated is subjected to an incidence of taxation, which results in inequality, the law may be struck down as creating an inequality amongst holders of the same kind of property. It must, therefore, be held that a taxing statute is not wholly immune from attack on the ground that it infringes the equality clause ill Art. 14, though the Courts are not concerned with the policy underlying a taxing statute or whether a particular tax could not have been imposed in a different way or in a way that the Court might think more just and equitable. The Act has, therefore, to be examined with reference to the attack based on Art. 14 of the Constitution." (iii) In case of The State of A.P and anr vs. Nalla Raja Reddy and ors reported in AIR 1967 SC 1458 in which, it was observed as under: "23. On the said facts the question is whether ss. 3 and 4 of the Act offend Art. 14 of the Constitution. The scope of Art. 14 has been so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . State of Gujarat and ors; (ii) In case of Sandvik Asia Ltd. vs. Commissioner of Income Tax and ors reported in 280 ITR 643; (iii) In case of Commissioner of Income Tax vs. Gujarat Fluoro Chemicals reported in 358 ITR 291; (iv) A Division Bench judgement dated 30.01.2015 in Special Civil Application No. 12855 of 1994 in case of Gujarat Flourochemicals Ltd. vs. Commissioner of Income Tax and ors; (vi) In case of State of Gujarat vs. Doshi Printing Press reported in [2015] 82 VST 384. 9. On the other hand, learned advocate general opposed the petition contending that the Section 54(1)(aa) is neither arbitrary nor discriminatory. It provides for interest on delayed refunds. By amending Act 11 of 1993 the same was brought into force w.e.f. 01.04.1993. The cut off date of 01.04.1993, therefore, was chosen with specific purpose. It would not be possible to grant interest on all pending cases. The legislature, therefore, provided that such interest should be granted only in case of assessments pertaining to the period from 01.04.1993 onwards. Such choice of the date therefore, is neither arbitrary nor discriminatory. 10. In this context, counsel relied on the following dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate Legislature had imposed the building tax under the Kerala Building Tax Act, 1961, which came into force on March 2, 1961, and when that Act was finally struck down as unconstitutional by this Court's decision dated August 13, 1968, (Reported in AIR 1969 SC 378), the intention to introduce a fresh Bill for the levy was made clear in the budget speech of 1970-71. It will be recalled that the Bill was published in June 1973 and it was stated there that the Act would be brought into force from April 1, 1970. The Bill was introduced in the Assembly on July 5, 1973. The Select Committee however recommended that it may be brought into force from April 1, 1973. Two Ordinance were promulgated to give effect to the provisions of the Bill. The Bill was passed soon after and received the Governor's assent on April 2, 1978. It cannot therefore be said with any justification that in choosing April 1, 1973 as the date for the levy of the tax, the Legislature acted unreasonably, or that it was "wide of the reasonable mark." (iii) In case of Union of India vs. P.N.Menon and ors reported in (1994) 4 SCC 68 in which, the assessee in the context of making a contributory family pension s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not grant interest when an order granting refund does not carry such direction. (iv) In case of G.H.Industries vs. Collector of Central Excise, Ahmedabad reported in 1997 (94) ELT 483 in which it was observed as under: "5. As for as the impugned order dated April 5, 1991 passed by the Assistant Collector of Central Excise produced at Annexure-B is concerned, it cannot be said that the order is in any way unlawful, unjust or arbitrary. Be it noted that the officers appointed under 'the Act' and exercising powers under 'the Act' are bound by 'the Act'. They are creatures of the statute. They cannot go beyond the provisions of the statute. Learned Counsel for the petitioner has fairly conceded that the Act and the Rules framed thereunder did not make any provision whatsoever for payment of interest in respect of alleged or proved unlawful recovery of amount of excise duty. The Act and the Rules only provide in certain circumstances for refund of the amount of duty wrongly collected. The Act and the Rules did not provide for payment of interest on such wrongful collection of amount of tax. Therefore the order passed by the Assistant Collector of Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the financial year commencing from 01.04.1993 or onwards. The question is, was this specification of a cut off date of 01.04.1993 and onwards in any manner violative of Article 14 of the Constitution? Since the days of the Constitution Bench judgement in case of Budhan Chaudhary (supra), it is continuously followed that Article 14 prohibits class legislation but not reasonable classification. For classification, however, to be reasonable and to pass the test of Article 14, twin conditions must be satisfied viz. that the same distinguishes persons or things from those which are left out of such class and that the same is based on rational relation to the object sought to be achieved by the law. 14. It is equally well settled that there is a presumption of constitutionality of the legislature. The onus is on the person who ascertains that the same is unconstitutional to establish it by providing necessary material on record. A reference in this respect can be made to the decision of Supreme Court in case of The State of Jammu & Kashmir vs. Triloki Nath Khosa and ors reported in AIR 1974 SC 1. 15. When the legislature frames a new provision which either creates or extinguishes e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mahaliram Ramjidas, India United Mills Ltd. v. Commissioner of Excess Profits Tax, Bombay and Gursahai Saigal v. CIT, Punjab). But it must also be realised that provision by which the authority is empowered to levy and collect interest, even if construed as forming part of the machinery provisions, is substantive law for the simple reason that in the absence of contract or usage interest can be levied under law and it cannot be recovered by way of damages for wrongful detention of the amount. (See Bengal Nagpur Railway Co. Ltd. v. Ruttanji Ramji and Union of India v. A.L.Rallia Ram) Our attention was, however, drawn by Mr Sen to two cases. Even in those cases, CIT v. M. Chandra Sekhar and Central Provinces Manganese Ore Co. Ltd. V. CIT, all that the Court pointed out was that provision for charging interest was, it seems, introduced in order to compensate for the loss occasioned to the Revenue due to delay. But then interest was charged on the strength of a statutory provision, may be its objective was to compensate the Revenue for delay in payment of tax. But regardless of the reason which impelled the Legislature to provide for charging interest, the Court must give that meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the larger Bench since the correctness of the decision of Supreme Court in Sandvik Asia Ltd. was questioned. The three Judge Bench of the Supreme Court in case of Gujarat Fluoro Chemicals observed that in Sandvik Asia Ltd., the Court had noticed that there was delay of various periods ranging from 12 to 17 years in payment of interest by the Revenue. The Court, in view of such inordinate delay on part of the Revenue in refunding the amount, thought it fit that the assessee should be properly and adequately compensated. The Court, therefore. observed as under: "6. In our considered view, the aforesaid judgment has been misquoted and misinterpreted by the assessees and also by the Revenue. They are of the view that in Sandvik case (supra) this Court had directed the Revenue to pay interest on the statutory interest in case of delay in the payment. In other words, the interpretation placed is that the Revenue is obliged to pay an interest on interest in the event of its failure to refund the interest payable within the statutory period. 7. As we have already noticed, in Sandvik case (supra) this Court was considering the issue whether an assessee who is made to wait for refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, approached the Tribunal. The Tribunal on the basis of section 54(1)(aa) of the GST Act held that the assessee would be entitled to interest. This decision of the Tribunal was challenged before the High Court. The main contention of the department was that section 54(1)(aa) grants interest on refund arising out of original order of assessment under section 41 of the GST Act. In the present case, since the right to receive refund arose by virtue of an appellate order, interest could not be claimed. The Division Bench upheld the view of the Tribunal that right to receive interest would accrue even in case of refund arising out of an appellate order. The Court held that appeal is a continuation of the original proceedings. The order of assessment would merge with that of the appellate order. In essence, what the appellate authority would be doing would be to correct the order of assessment. Primarily on these grounds, the department's appeals were dismissed. While doing so, the Division Bench also examined whether such interest should be paid on the basis of compensatory measure. The Court referred to the decision of Supreme Court in case of Gujarat Fluoro Chemicals and held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision is rendered by the Assessing Authority, it is always open for the Government to question the correctness thereof by way of an appeal or revision as may be available. 24. The matter does not end there. The asssessee preferred appeals before the First appellate authority. The appeals which were filed in the year 1980 remained dormant for nearly 14 years. The same were disposed of in the year 2004 without proper notice to the petitioner. The orders were also not dispatched for service. Nearly five years later, when the petitioner was served with notice for demand, that it came to know that the appeals were dismissed. The appellate authority while dismissing the appeals ex parte proceeded to decide the same on merits, nevertheless did not trouble himself to find out as to what had happened to the department's appeal in the High Court in case of Wood Polymer (supra). The High Court had decided such appeals by judgement dated 05.03.1982. The first appellate authority therefore when dismissed the petitioner's appeal on 26.02.2004, the law sofar as the State is concerned was laid down by the judgement of the High Court. It was the duty of the appellate authority to ascertain this ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
