2025 (7) TMI 142 - HC - VAT / Sales Tax

Rectification of mistake - error apparent on the face of record - Eligibility to avail tax incentives - purchase of Raw Petroleum Coke RPC within the State of Assam on payment of local taxes - validity of the claim for reimbursement if after conversion of Raw Petroleum Coke RPC into Calcined Petroleum Coke CPC the dealer sells the Calcined Petroleum Coke CPC in the course of inter-State trade or commerce paying taxes on such sold Calcined Petroleum Coke CPC as per the provisions of the CST Act - Power of judicial review - HELD THAT - A bare look at the Assessment Order would reveal that the Assessment Order was made under Section 36 1 of the AVAT Act read with Rule 22 1 x of the AVAT Rules. Section 36 of the AVAT Act has provided for Audit Assessment. In sub-section 1 of the Section 36 the reasons for which Audit Assessment can be undertaken are mentioned in sub-clauses a b c and d . As per sub-clause a of sub-section 1 of Section 36 a registered dealer can be selected for Audit Assessment by the prescribed authority on the basis of any criteria or on random basis - Even in the impugned Orders the respondent no. 2 has not made any remark on the Assessment Orders passed under Section 36 1 of the AVAT Act read with Rule 22 1 x of the AVAT Rules save and except observing that the Assessment Orders were silent on the issue of reimbursement under Section 15 b of the CST Act for the period. Therefore the contention advanced on behalf of the respondents that the Assessment Orders mis-quoted the provisions of law is clearly untenable and deserves to be rejected. Indubitably the general sales tax law of the State referred to in Section 9 2 of the CST Act for the case in hand is the AVAT Act. By the enabling provision of Section 9 2 of the CST Act the authorities under the AVAT Act have been dealing with matters of refund under Section 15 b of the CST Act. Apart from the Commissioner of Taxes Assam the other taxing authorities who assist the Commissioner for carrying out the purposes of the AVAT Act are mentioned in Section 3 2 thereof. As per the power of rectification provided in Section 83 1 of the AVAT Act any authority may rectify any error apparent on the face of the record within three years from the date of any order passed by it. Such rectification can be either on the basis of an application or even suo moto. The rectification carried out by the Assessing Officer in the case in hand be it on an application by the petitioner or on suo moto is of an error apparent on the face of the record. Following the law laid down by the High Court and the Hon ble Supreme Court as alluded in Paragraph 47 above. The rectification has been carried out on the basis of the settled position of law as regards validity of a claim of reimbursement of the Central Sale Tax paid for inter-State sale of Calcined Petroleum Coke CPC manufactured out of Raw Petroleum Coke RPC paying taxes under the AVAT Act as both Calcined Petroleum Coke CPC and Raw Petroleum Coke RPC are declared goods. In the present case there is no dispute that tax was levied on the purchase of Raw Petroleum Coke RPC within the State. As per the materials on record the petitioner purchased Raw Petroleum Coke RPC from Indian Oil Corporation Ltd. IOCL at Dhaligaon Assam and Numaligarh Refinery Ltd. NRL at Numaligarh Assam during the Assessment Years under reference. There is also no dispute that the petitioner after converting the purchased Raw Petroleum Coke RPC to Calcined Petroleum Coke CPC which remained to be declared goods under Section 14 of the CST Act was sold in the course of inter-State trade or commerce. This Court finds force in the submission advanced on behalf of the petitioner to the effect that the respondent no. 2 has erred in holding that since the full Central Sales Tax was not paid by the petitioner on the inter- State sale made by it the petitioner would not be entitled for reimbursement under Section 15 b of the CST Act. The expression tax has been paid appearing in Section 15 b of the CST Act cannot always be read as full tax has been paid under the CST Act if the full tax under the CST Act is not required to be paid in view of incentives / exemptions available to an assessee under any statutory scheme - In view of eligibility to get exemption during the reference period of assessment deposit of the full amount of Central Sales Tax cannot be termed as a condition precedent for claiming reimbursement of the Value Added Tax paid by the petitioner. The decision made in this connection by the respondent no. 2 in the impugned orders is clearly erroneous and is not sustainable. The power of judicial review under Article 226 of the Constitution of India to issue a writ in the nature of certiorari is exercisable when a statutory authority vested with a power to decide a matter within the four corners of the law decides the matter taking into account irrelevant factors and leaving out relevant factors as such procedural errors impact the legality and validity of the decision to the prejudice of a party like the petitioner in the case in hand which has a right for consideration of its valid claim for reimbursement of the Central Sales Tax paid on Calcined Petroleum Coke CPC manufactured out of Raw Petroleum Coke RPC paying Value Added Tax VAT sold in the course of inter-State trade and commerce as per the provisions of Section 15 b of the CST Act read with Section 50 and Section 52 of the AVAT Act as both Calcined Petroleum Coke CPC and Raw Petroleum Coke RPC were in the category of goods of special importance that is declared goods. The reasons assigned and the findings reached at as above the Orders dated 07.11.2022 passed by the respondent no. 2 and assailed in this batch of six writ petitions have been found to be unsustainable in law as the decision is based on clear ignorance and disregard of the provisions of law which is a manifest error apparent on the face of the proceedings and are therefore liable to be set aside. Therefore the impugned Orders dated 07.11.2022 are hereby set aside. Petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

(a) Whether the petitioner, having purchased Raw Petroleum Coke (RPC) within Assam and paid Value Added Tax (VAT) thereon, and subsequently sold Calcined Petroleum Coke (CPC) in inter-State trade paying Central Sales Tax (CST), is entitled to reimbursement of the VAT paid under Section 15[b] of the Central Sales Tax Act, 1956 (CST Act).

(b) Whether the Assessing Authority validly exercised the power of rectification under Section 83 of the Assam Value Added Tax Act, 2003 (AVAT Act) read with Section 9[2] of the CST Act to grant such reimbursement after initial audit assessments had attained finality.

(c) Whether the petitioner's failure to challenge the original assessment orders and delay in claiming reimbursement disentitles it to relief on grounds of acquiescence, laches, or delay.

(d) Whether the petitioner's partial payment of CST (1% under the Assam Industries [Tax Exemption] Scheme, 2009) satisfies the condition of "tax paid" under Section 15[b] of the CST Act, or whether full CST payment is a precondition for reimbursement.

(e) The interpretation of the phrase "Coal, including Coke in all its forms" under Section 14 of the CST Act and whether RPC and CPC fall within this definition as declared goods of special importance in inter-State trade or commerce.

(f) The applicability and scope of the Assam Industries [Tax Exemption] Scheme, 2009, and its effect on the petitioner's liability and entitlement to reimbursement.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Entitlement to Reimbursement under Section 15[b] of the CST Act

The legal framework under Section 15[b] of the CST Act provides that where local tax is levied on declared goods and such goods are subsequently sold in inter-State trade with CST paid, the local tax paid shall be reimbursed to the dealer. The petitioner purchased RPC within Assam paying VAT and sold CPC in inter-State trade paying CST. The question was whether the petitioner is entitled to reimbursement of VAT paid on RPC.

Precedents including India Carbon Ltd. vs. Superintendent of Taxes (1971) and State of Bihar vs. Universal Hydrocarbons Co. Ltd. (1994) have established that Petroleum Coke, including both RPC and CPC, fall within "Coal, including Coke in all its forms" under Section 14 of the CST Act, thus qualifying as declared goods. The Assam High Court's Division Bench decision in M/s India Carbon and others vs. State of Assam (1992) also held that RPC and CPC are to be treated as one and the same for purposes of Section 14, despite physical differences.

The Court noted that the petitioner complied with the statutory condition of paying CST on inter-State sale of CPC and VAT on intra-State purchase of RPC. Therefore, the petitioner's claim for reimbursement under Section 15[b] is legally sustainable.

(b) Validity of Rectification under Section 83 of the AVAT Act

The initial audit assessments under Section 36[1] of the AVAT Act were completed in December 2017, rejecting the petitioner's claim for reimbursement. The petitioner did not challenge these orders, which attained finality. Subsequently, in October 2019, the Assessing Officer rectified the assessment orders under Section 83 of the AVAT Act read with Section 9[2] of the CST Act to allow reimbursement, based on the settled legal position and the petitioner's Eligibility Certificate and Certificate of Entitlement under the 2009 Scheme.

The Court examined the scope of rectification powers, referencing the Supreme Court's decision in Assistant Commercial Taxes Officer vs. Makkad Plastic Agencies (2011), which restricts rectification to correction of "mistake apparent on the face of the record" and not a review or re-appreciation of evidence.

Further, the Court relied on the principle from Saurashtra Kutch Stock Exchange Ltd. (2008) that non-consideration of binding judicial decisions constitutes a "mistake apparent from the record" warranting rectification.

The Court held that the rectification was valid as it corrected the omission of reimbursement in the original assessment orders, in light of binding Supreme Court and High Court precedents. The rectification was within the three-year limitation period and properly exercised.

(c) Effect of Delay, Laches, and Acquiescence

The respondents contended that the petitioner's delay in claiming reimbursement and failure to challenge the original assessments amounted to acquiescence and laches, disqualifying it from relief. They invoked the doctrine that a party who sits on the fence cannot claim parity with others who earlier succeeded.

The Court distinguished between acquiescence and delay/laches, citing State Bank of India vs. M.J. James (2022). Acquiescence implies active or tacit consent to a violation of rights, whereas delay/laches involves mere passivity. The Court found no evidence that the petitioner actively consented to any wrongful rejection of its claim at the time of original assessments, as the assessments were silent on reimbursement claims.

The Court further observed that delay alone does not bar relief where the claim was not previously rejected or adjudicated adversely. The petitioner's claim was pending and unaddressed, and delay in processing refund applications attracts statutory interest rather than forfeiture of rights.

Consequently, the Court rejected the plea of acquiescence and laches as a ground to deny reimbursement.

(d) Requirement of Full Payment of CST for Reimbursement

The respondents argued that the petitioner did not pay the full CST amount due, as it paid only 1% under the Assam Industries [Tax Exemption] Scheme, 2009, and thus was not entitled to reimbursement of VAT paid.

The Court analyzed the distinction between "levy" and "payment" of tax, referring to Privy Council's Whitney vs. Commissioners of Inland Revenue (1926), and Supreme Court decisions in Associated Cement Companies Ltd. (2004), National Tobacco Co. of India Ltd. (1972), Somaiya Organics (2001), and Peekay Re-Rolling Mills (2007). These cases establish that liability to pay tax and actual payment are distinct concepts; exemption or remission schemes affect the amount payable but do not negate the liability or the fact that tax is levied.

The Court noted that the 2009 Scheme grants eligible units 99% remission, requiring only 1% CST payment, which the petitioner complied with. The Scheme was notified under statutory powers and the petitioner had valid Eligibility Certificate and Certificate of Entitlement.

The Court held that Section 15[b] of the CST Act does not mandate payment of the full CST amount, only that CST be paid. The petitioner's payment under the Scheme suffices to satisfy the statutory condition for reimbursement.

(e) Interpretation of "Coal, including Coke in all its forms" and Classification of RPC and CPC

The Court traced the litigation history on whether Petroleum Coke, including RPC and CPC, fall within "Coal, including Coke in all its forms" under Section 14 of the CST Act. The Supreme Court in India Carbon Ltd. (1971) held Petroleum Coke is covered within this phrase.

The Assam High Court Division Bench in India Carbon and others (1992) held that RPC and CPC, although chemically and physically distinct, are to be treated as one and the same for CST Act purposes, as both fall within "Coke in all its forms."

The Supreme Court in State of Bihar vs. Universal Hydrocarbons Co. Ltd. (1994) reaffirmed this interpretation, rejecting the State's contention that CPC is a different product for taxation.

The Court found no subsequent judicial pronouncement overruling these precedents and accordingly held that RPC and CPC are declared goods under the CST Act, entitling the petitioner to reimbursement.

(f) Applicability of the Assam Industries [Tax Exemption] Scheme, 2009

The petitioner was granted Eligibility Certificate (EC) and Certificate of Entitlement (CE) under the 2009 Scheme, which provides for 99% remission of tax payable by eligible industrial units manufacturing goods in Assam.

The Scheme requires eligible units to pay only 1% of the tax payable and allows charging of tax in invoices. The petitioner complied with these provisions.

The Court observed that the Scheme's remission does not affect the petitioner's liability to pay tax but reduces the payable amount, which is consistent with the statutory framework and judicial precedents distinguishing liability and payment.

The Court held that the petitioner's entitlement under the Scheme does not disqualify it from reimbursement under Section 15[b] of the CST Act.

3. SIGNIFICANT HOLDINGS

"The rectifications of the Assessment Orders by the Assessing Officer, be it on an application by the petitioner as the assessee or by the Assessing Officer suo moto, in exercise of the powers under Section 83 of the AVAT Act read with Section 9[2] of the CST Act are found to be in accordance with the statutory provisions in presence of an error on the face of the records."

"The action of the petitioner cannot be brought within the purview of the doctrine of acquiescence. In the same breath, the petitioner's claim for reimbursement cannot be negated by taking resort to the plea of delay and laches and the petitioner, by no stretch, can be termed as a fence-sitter for negating its claim which the petitioner is entitled to claim under Section 15[b] of the CST Act read with Section 50 and Section 52 of the AVAT Act."

"Deposit of full amount of the Central Sales Tax is not a condition precedent for claiming reimbursement of the Value Added Tax amount as per the provisions of Section 15[b] of the CST Act in view of the distinct concepts of leviability and payability and the entitlement of the petitioner to seek exemption from depositing 99% of the tax payable as per the Scheme, 2009."

"Petroleum Coke is one of the forms of Coke and it is covered within the phrase, 'Coal, including Coke in all its forms' under Section 14 of the CST Act and it was declared as a good of special importance in inter-State trade or commerce. Both Raw Petroleum Coke and Calcined Petroleum Coke are treated as one and the same for the purpose of Section 14 of the CST Act although the two were different chemically and physically."

"Simply not dealing with a claim within a statutory order does not constitute rejection. For rejection of a claim permissible to be made under a statute, specific reasons are to be assigned in a statutory order. Absence of a decision or maintaining silence on a claim within a statutory order cannot amount to rejection of a claim."

"The general principle of law is also laid down to the effect that if a dealer purchased Raw Petroleum Coke within the State by paying tax levied under the local tax law and the dealer after converting the purchased Raw Petroleum Coke into Calcined Petroleum Coke sold the Calcined Petroleum Coke outside the State in the course of inter-State trade or commerce and the dealer had paid the Central Sales Tax under the CST Act on such sold Calcined Petroleum Coke, then the dealer would be entitled for reimbursement of the local tax amount paid on the purchase of Raw Petroleum Coke as per Section 15[b] of the CST Act."

Final determinations:

• The impugned orders rejecting the petitioner's refund claims are set aside as unsustainable in law.
• The petitioner is entitled to reimbursement of the VAT paid on intra-State purchase of RPC under Section 15[b] of the CST Act read with Sections 50 and 52 of the AVAT Act.
• The respondent authorities are directed to process the petitioner's reimbursement claims within six weeks in accordance with law.