2025 (7) TMI 143 - HC - VAT / Sales Tax

Rectification of mistake - error apparent on the face of record or not - 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 sold 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 - HELD THAT - The general principles of law which are laid down are that 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. A good declared as a good of special importance is also referred to as declared good . Though Petroleum Coke can be classified into two commercial commodities that is i Raw Petroleum Coke RPC and ii Calcined Petroleum Coke CPC both of them are treated to be within the ambit of the phrase Coke in all its forms and they were treated as one and the same for the purpose of Section 14 of the CST Act although the two were different physically. The general principle of law is also laid down to the effect that if a dealer purchased Raw Petroleum Coke RPC within the State by paying Value Added Tax VAT levied under the AVAT Act and the dealer after converting the purchased Raw Petroleum Coke RPC into Calcined Petroleum Coke CPC sold the Calcined Petroleum Coke CPC 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 CPC then the dealer would be entitled for reimbursement of the Value Added Tax VAT amount paid on the purchase of Raw Petroleum Coke RPC as per Section 15 b of the CST Act - the petitioner as a dealer has a valid claim for reimbursement of the Value Added Tax VAT paid on purchase of Raw Petroleum Coke RPC in the State. Reverting back to the facts of the case in hand it has emerged from the materials on record that originally Assessment Orders for the Assessment Years 2006-2007 2007-2008 and 2008-2009 were completed on 10.03.2012. It has been stated that the assessment proceedings for the Assessment Years 2009-2010 2010-2011 2011-2012 2012-2013 and 2013-2014 were completed on 03.03.2015/03.09.2015. For the Assessment Years 2006-2007 2007-2008 ad 2008-2009 the petitioner submitted its application on 26.04.2010 seeking reimbursement of the Value Added Tax VAT paid on purchase of Raw Petroleum Coke RPC inside the State. For the Assessment Years 2009-2010 the application was submitted on 10.04.2010. The dates of submission of similar applications for the Assessment Years 2010-2011 and 2011-2012 were 08.05.2011 and 01.08.2012 respectively. The date of submission of similar applications for the Assessment Years 2012-2013 2013-2014 and 2014-2015 was 23.12.2015. As the applications for reimbursement for the Assessment Years 2009-2010 2010-2011 and 2011-2012 were not available in the office of the State respondents those were resubmitted on 23.12.2015. From the procedure laid down in Rule 29 of the AVAT Rules it is evident that if the Prescribed Authority decides to reject any claim for refund filed before it by the dealer then the dealer is to be provided with a prior opportunity to show-cause in writing against such rejection. On the other hand when the Prescribed Authority is satisfied that the refund claim is due he shall record an order sanctioning the refund. When the audit assessment for the Assessment Years 2006-2007 was completed on 10.03.2012 the assessment order was silent as regards reimbursement under Section 15 b of the CST Act - Simply not dealing with a claim within a statutory order does not constitute a 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. Just because there was no mention in the audit assessments made on 10.03.2012 about reimbursement of Value Added Tax VAT paid on purchase on Raw Petroleum Coke RPC by the Prescribed Authority despite the petitioner s claim for refund on the said count it cannot be said that such silence on the part of the Prescribed Authority would require preference of an appeal by the petitioner as a dealer as such silence cannot be treated as rejection. Chapter-II of the AVAT Rules with the heading Tax Authorities and Appellate Tribunal have contained the relevant rules corresponding to Chapter-II of the AVAT Act. Rule 3 has provided for delegation of powers by the Commissioner. As per Rule 3 subject to the provisions of the AVAT Act and the AVAT Rules the Commissioner can delegate the powers to be exercised under Section 3 and specify the area in which powers are to be exercised by each of the classes of Officers by issuance of notifications in the Official Gazette. By virtue of Rule 4 Jurisdiction of Taxing Authorities the Officers to whom powers provided in Section 3 of the AVAT Act have been delegated shall exercise the powers in respect of such persons or classes of persons and in respect of such cases and areas as the Commissioner may direct. Rule 5 and Rule 6 of the AVAT Rules have provided for the restrictions and commissions of power on the delegatees and the restrictions on delegation of powers by the Commissioner - It is a settled proposition that when an authority passes an order in exercise of a power delegated to him by the delegating authority the delegating authority cannot sit in appeal on the order passed by the delegated authority. The proposition is based on the principle that once the power has been delegated and the delegated authority has passed an order in exercise of the powers delegated to him then the order passed by the delegated authority itself is an order of the delegating authority and the delegating authority ceases to have any power to overturn the decision made by the delegatee in exercise of that delegated power. When looked from this standpoint the orders passed by the jurisdictional Assistant Commissioner of Taxes as mentioned in Table-II above as a delegatee of the Commissioner of Taxes are in essence orders of the Commissioner of Taxes and therefore the Commissioner of Taxes is not authorized to criticize those orders which are to be passed by him albeit by a delegated authority. It has been consistently laid down that it is not necessary that every order which is found erroneous is also prejudicial to the interests of the Revenue. What is meant by the words prejudicial to the interests of the Revenue has not been defined. However giving the ordinary meaning to the words used in the statute they must mean that the orders under consideration are such as are not in accordance with law and in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. The well settled principle of considering the question as to whether an order is prejudicial to the interests of the Revenue or not is to address oneself to the question whether the legitimate revenue due to the exchequer has been realized or not or can be realized or not if the orders under consideration are allowed to stand. For arriving at this conclusion it becomes necessary and relevant to consider whether the income in respect of which tax is to be realized has been subjected to tax or not or if it is subjected to tax whether it has been subjected to tax at the rate at which it could yield the maximum revenue in accordance with law or not. The law is therefore well settled that the power of review is a creature of the statute and it is not an inherent power. It needs to be conferred by the statute either by express/specific provision or by necessary implication. No Court or quasi-judicial authority or statutory authority can review its judgment or order or decision unless it is legally empowered to do so. The clear view this Court has reached is that the impugned Order dated 19.09.2022 cannot stand the scrutiny of law. It turns out to be an order on change in the opinion without doubt in an impermissible and unauthorized manner which came into being only upon change in the person holding the office. Consequently the impugned Order dated 19.09.2022 is liable to be set aside and quashed. It is accordingly set aside and quashed. Petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

- Whether Raw Petroleum Coke (RPC) and Calcined Petroleum Coke (CPC) fall within the phrase "Coal, including Coke in all its forms" as declared goods under Section 14 of the Central Sales Tax Act, 1956 (CST Act), thereby entitling the petitioner to reimbursement of local taxes paid under Section 15[b] of the CST Act.

- Whether the petitioner is entitled to reimbursement of Value Added Tax (VAT) paid on intra-State purchase of RPC when the converted CPC is sold in inter-State trade or commerce and Central Sales Tax (CST) is paid thereon.

- The validity and effect of the assessment and reassessment orders passed under the Assam Value Added Tax Act, 2003 (AVAT Act), particularly those under Section 42 of the AVAT Act, and whether the Commissioner of Taxes had jurisdiction to review or reverse earlier decisions recommending reimbursement proposals.

- Whether the petitioner's claims for reimbursement were barred by delay, laches, acquiescence, or failure to challenge original assessment orders.

- The procedural correctness of rejection of reimbursement claims by the Commissioner of Taxes, Assam, including the requirement of prior government approval and adherence to statutory provisions under the AVAT Act and Rules.

- The applicability of interest on delayed refund claims under Section 52 of the AVAT Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether RPC and CPC fall within "Coal, including Coke in all its forms" under Section 14 of the CST Act

The Court examined extensive precedent, including the landmark Supreme Court decision in India Carbon Ltd. vs. Superintendent of Taxes (1971), which held that Petroleum Coke is a form of Coke and thus included within the phrase "Coal, including Coke in all its forms" under Section 14 of the CST Act. The Court noted that despite physical and chemical differences between RPC and CPC, both are treated as the same declared goods for CST purposes. This principle was further affirmed in the Patna High Court and Supreme Court decisions in State of Bihar vs. Universal Hydrocarbons Co. Ltd. (1994) and subsequent rulings, which rejected the State's contention that CPC was a different commodity for tax purposes. The Division Bench of the Gauhati High Court in M/s India Carbon (1992) also held that treating RPC and CPC as distinct commodities for taxation would violate Article 286(3) of the Constitution and Section 15 of the CST Act.

The Court concluded that the settled legal position is that both RPC and CPC fall within the declared goods phrase and the petitioner's intra-State purchase of RPC and inter-State sale of CPC with CST paid entitles it to reimbursement under Section 15[b] of the CST Act.

Issue 2: Entitlement to reimbursement of VAT paid on RPC under Section 15[b] of the CST Act read with AVAT Act provisions

The petitioner claimed reimbursement of VAT paid on intra-State purchase of RPC, asserting that after conversion to CPC and inter-State sale with CST paid, the VAT paid was reimbursable under Section 15[b] of the CST Act. The Court referred to Section 50 of the AVAT Act and Rule 29 of the AVAT Rules, which provide the procedural framework for refund claims. The Court emphasized that Section 15[b] of the CST Act is an independent provision allowing reimbursement where local tax is paid on declared goods subsequently sold in inter-State trade with CST paid.

The Court found that the petitioner had complied with the statutory requirements, submitted refund claims within prescribed timeframes, and paid CST on inter-State sales of CPC. The audit assessments initially did not deal with the reimbursement claims, which did not amount to rejection. The Court held that silence or omission in assessment orders cannot be construed as rejection, and thus the petitioner was not required to challenge those orders as rejected claims.

The Court also noted that the Commissioner of Taxes had earlier forwarded reimbursement proposals to the Government for approval, acknowledging the petitioner's entitlement. This established that the petitioner's claims were valid and meritorious under the law.

Issue 3: Validity of reassessment orders under Section 42 of the AVAT Act and Commissioner's jurisdiction to review earlier decisions

The respondent contended that reassessment orders passed under Section 42 of the AVAT Act were void as the assessment period was time-barred and no court order authorized reassessment. The Court examined the delegation of powers under the AVAT Act and Rules, noting that the Assistant Commissioner of Taxes, who passed the reassessment orders, was a delegated authority empowered to do so. The Court held that the reassessment orders were in essence orders of the Commissioner himself and could not be overturned by the Commissioner acting as a superior authority without following appellate procedures.

The Court further held that the Commissioner did not have inherent or statutory power to review or reverse the earlier decision of forwarding reimbursement proposals to the Government, absent any express provision conferring review power. The impugned order rejecting reimbursement claims was thus a change of opinion by a successor Commissioner without jurisdiction and was illegal.

Issue 4: Effect of delay, laches, acquiescence, and failure to challenge original assessment orders

The respondent argued that the petitioner's claims were barred by delay, laches, and acquiescence, and failure to challenge original assessment orders which had attained finality. The Court distinguished between acquiescence and delay/laches, explaining that acquiescence requires active or tacit consent to a violation of a right, while laches involves passive delay. The Court found that the petitioner's claims were never rejected in original assessments, and thus there was no wrongful action to acquiesce to.

The Court further held that the petitioner was not a party to the Supreme Court case relied upon by the respondents but that the general principles of law declared by the Supreme Court are binding on all, including non-parties. The Court rejected the respondents' contention that the petitioner was a fence-sitter, noting that the petitioner had submitted claims timely and that delay in processing refunds by the authorities attracts statutory interest rather than forfeiture of claims.

Issue 5: Procedural correctness and statutory framework for refund claims and government approval

The Court reviewed the procedural provisions under Section 50 of the AVAT Act and Rule 29 of the AVAT Rules, which require refund claims to be processed by the prescribed authority, with prior approval of the Government for amounts exceeding Rs. 50 lakh. The Commissioner had forwarded proposals to the Government with reasons recorded, satisfying the procedural requirements.

The Court observed that the impugned order did not constitute a review of any passed order but was an unauthorized reconsideration of earlier proposals. Further, the Commissioner failed to consider the Government's directive to process the petitioner's claims similarly to other successful claimants, thereby overstepping his jurisdiction.

Issue 6: Applicability of interest on delayed refund claims

The Court noted that the petitioner submitted an undertaking to accept simple interest at 10% per annum from 12.07.2013 as per the Supreme Court's interim order. The Legal Remembrancer's opinion supported payment of interest at 9% per annum after the initial period. The Court directed that interest be paid as per statutory provisions and undertakings given.

3. SIGNIFICANT HOLDINGS

The Court made the following crucial legal determinations and principles, preserving verbatim excerpts where significant:

- "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."

- "If a dealer purchased Raw Petroleum Coke [RPC] within the State by paying Value Added Tax [VAT] levied under the AVAT Act and the dealer after converting the purchased Raw Petroleum Coke [RPC] into Calcined Petroleum Coke [CPC], sold the Calcined Petroleum Coke [CPC] 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 [CPC], then the dealer would be entitled for reimbursement of the Value Added Tax [VAT] amount paid on the purchase of Raw Petroleum Coke [RPC] as per Section 15[b] of the CST Act."

- "Silence on an important issue like reimbursement of the local tax paid on the purchase of Raw Petroleum Coke [RPC] within the State in the statutory order, that is, the audit assessment order cannot amount to rejection of the claim for reimbursement under Section 15[b] of the CST Act."

- "When an authority passes an order in exercise of a power delegated to him by the delegating authority, the delegating authority cannot sit in appeal on the order passed by the delegated authority."

- "The Commissioner does not have jurisdiction to review or reverse earlier decisions forwarding reimbursement proposals in absence of any statutory power of review."

- "Delay and laches or acquiescence cannot be invoked to defeat a valid claim where there was no wrongful action or rejection of the claim at the time of original assessments."

- "The general principle of law declared by the Supreme Court is binding on all, including parties not before the Court."

- "The impugned Order dated 22.09.2022 is an order on change in opinion, without jurisdiction and is liable to be set aside and quashed."

- The Court directed the respondent authorities to process all pending reimbursement claims for the Assessment Years 2006-2007 to 2017-2018 in accordance with Section 15[b] of the CST Act and Sections 50 and 52 of the AVAT Act, within six weeks.