TMI Blog2006 (7) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... inafter following the appropriate procedure of law prescribed under the Companies Act with effect from April 1, 1995. The said date is the effective date agreed upon by both the companies under the scheme of amalgamation, which was approved by two High Courts having jurisdiction over the holding company and the subsidiary company. Though the actual orders approving the scheme of amalgamation came to be passed much later, i.e., on September 19, 1996 by the High Court of Andhra Pradesh insofar as the subsidiary company is concerned and on October 3, 1996 insofar as the holding company is concerned by the High Court of Punjab and Haryana. As a matter of fact, appropriate intimations to the Registrars of the Companies concerned were made obviously later to October 3, 1996 the details of which may not be necessary for the purpose of the present case. The relevant facts which resulted in the litigation in these batch of cases as narrated by the assessee in his affidavit in W.P. No. 1031 of 2006 are as follows: The transferor company M/s. Jindal Ferro Alloys Limited prior to its dissolution effected inter-State sales of high carbon ferro chrome amounting to Rs. 39,56,89,503 during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed exemption on a turnover of Rs. 31,80,19,916 representing sales effected by M/s. Jindal Ferro Alloys Limited to M/s. Jindal Strips Limited, Hissar. The second respondent by his proceedings dated August 13, 2001 revised the said order and subjected the transactions to tax. The petitioner, thereupon, filed appeal before the Sales Tax Appellate Tribunal, Hyderabad. The Sales Tax Appellate Tribunal in T. A. No. 1458 of 2001 dated October 1, 2002 had set aside the revision and allowed the appeal. The first respondent by his proceedings dated August 20, 2005 passed consequential orders giving effect to the orders of the Sales Tax Appellate Tribunal, Hyderabad, which resulted in an excess payment of tax of Rs. 3,11,48,014. The petitioner thereupon claimed refund of the said tax by its petition dated October 7, 2005. The first respondent sought permission from the second respondent for refund of the said amount. The second respondent by the impugned proceedings dated October 22, 2005 ordered withholding of the refund of Rs. 3,11,48,014 under section 33C. Aggrieved by the orders dated October 1, 2002 of the Sales Tax Appellate Tribunal in T. A. No. 1458 of 2001, the State preferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner by his proceedings dated October 22, 2005, ordered withholding of the refund under section 33C. Hence the writ petition. The main issue that is required to be examined in these cases is the issue raised in T.R.C., i.e., whether the decision of the Tribunal in coming to the conclusion that after the merger of the two companies referred to above, with effect from April 1, 1995, there could not have been a sale of any goods between the abovementioned two companies (during the assessment years 1995-96 and 1996-97), is sustainable in law. The Tribunal came to such a conclusion relying on a decision of the Supreme Court reported in Marshall Sons and Co. (India) Ltd. v. Incometax Officer [1997] 223 ITR 809; [1997] 2 SCC 302; AIR 1997 SC 1763 dealing with a case where the liability under the Income-tax Act of a subsidiary company, which came to be amalgamated with the holding company. The Supreme Court in that case held as follows: Every scheme of amalgamation has to necessarily provide a date with effect from which the amalgamation/transfer shall take place. . . . It is true that while sanctioning the scheme, it is open to the court to modify the said date and pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctual relationship subsists. But by the sanction of law a fiction is created that once an amalgamation in accordance with law takes place the rights and obligations of the transferor stand modified, as if, all such rights and obligations acquired or incurred against third parties were rights and obligations of the transferee. Taking into consideration the various possibilities and the possible effect of amalgamation on the rights or obligations of any one of those bodies getting amalgamated, the High Court approving the scheme of amalgamation is authorised by law either to approve the amalgamation with effect from such date as agreed upon by the parties or fix such other date from which the amalgamation takes effect. It is in this background the Supreme Court held in the case cited supra that where the High Court does not fix any specific date as the effective date of the amalgamation, it is the date agreed upon by the parties that would be the effective date of the amalgamation. As a logical corollary fictionally with effect from the date agreed between the parties, one corporate entity ceases to exist and gets amalgamated with another corporate body. It is the settled po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of a similar agreement between the companies before us, the principle laid down in the abovementioned decision of the Supreme Court cannot be invoked in the present case. We reject the submissions of the learned counsel for the petitioners for two reasons. It was neither the submission of the petitioners before the Tribunal nor such a ground is raised in the grounds of revision before us. Even, otherwise, the submission is required to be rejected for the reason as we have already noticed that the legal effect of a merger from a specified date agreed upon by the parties or fixed by the court is to obliterate the distinction between the two corporate bodies and treat them as one entity. All consequential legal effects must necessarily follow unless otherwise specified by the Legislature. If the law did not recognise such legal consequences, the parties by an agreement cannot decide so because it is one of the settled principles of law that altering the rights and obligations with an anterior date (retrospectively) is only possible by an act of sovereign, but not by an agreement of non-sovereign bodies. When retrospective alteration of the rights and obligations of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing authority that the tax has not been collected from the purchaser. In substance, section 33BB says that refund of tax which is found by a judicial authority to have been illegally collected is not an automatic consequence of such judicial finding. The Legislature mandated that the dealer who paid the tax is required to establish to the satisfaction of the assessing authority that he did not pass on such tax liability to the purchaser of goods before he can successfully claim a refund. Though such restriction is imposed by the State Legislature in the context of the refund of taxes purportedly collected under the authority of the APGST Act, the arliament under section 9(2) of the CST Act declared that the provisions of the sales tax law of the concerned State shall apply in the context of the Central sales tax also. Section 9(2) of the CST Act reads as follows: 9. Levy and collection of tax and penalties. (1) . . . (2) Subject to the other provisions of this Act and the Rules made thereunder, the authorities for the time being empowered to assess, reassess, collect and enforce payment of any tax under the general sales tax law of the appropriate State, shall, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund of tax of the petitioner. The legislative mandate under section 33BB in this regard is that such a refund is not automatic on the finding recorded by a judicial body that tax was illegally collected from the assessee, but the assessee is required to establish that he had not already passed on the liability to some other person (purchaser). In substance, the provision is based on a well-established legal principle in the realm of indirect taxes that an assessee shall not unduly enrich himself by taking advantage of an illegality committed by the offices of the State. [See Mafatlal Industries Ltd. v. Union of India [1998] 111 STC 467 (SC); [1997] 5 SCC 536]. Therefore we are of the opinion that the petitioner is not entitled for any mandamus as prayed for in the writ petitions for a refund of tax already collected from him. However, it is open to the petitioner to make an appropriate application for refund of the tax which no doubt was collected from him without any authority of law and prove to the satisfaction of the assessing authority that the petitioner had not already passed on the tax burden to the purchaser. The respondents shall consider such an application as and wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Deputy Commissioner superior authority. Hence, we do not find any legal flaw with the decision that the decision to withhold the refund of tax originates from the Deputy Commissioner even without a proposal from the assessing authority. Though the issue is academic in the instant case, in view of the conclusions already reached by us, we thought it fit to examine the issue as such questions are likely to arise repeatedly. Accepting the submission of the learned counsel for the petitioner, on a strict interpretation of section 33C, in our view, would not promote any public good . Rule of law, no doubt, is a great principle, but the purpose of the rule of law is to promote public good . The profound caution made by an eminent scholar Joseph Raz is worthwhile recalling in this context. [See [1977] 93 LQR 195]. Since the rule of law is just one of the virtues the law should possess, it is to be expected that it possesses no more than prima facie force. It has always to be balanced against competing claims of other values. Hence Hayek's arguments to the extent that they show no more than that some other goals inevitably conflict with the rule of law are not the sort of ..... 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