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M/s. Idea Cellular Ltd. Versus Union of India And Others

2015 (4) TMI 286 - PUNJAB & HARYANA HIGH COURT

Claim of refund - Levy of VAT on activation of SIM cards - Authority of state to levy VAT - whether the State of Haryana has collected Value Added Tax on activation of SIM cards, without authority of law - unjust enrichment - Held that:- State of Haryana does not deny that in Bharat Sanchar Nigam Limited (2006 (3) TMI 1 - Supreme court), the Supreme Court has held that activation of SIM cards is a service and not a sale. The State of Haryana also does not deny that the collection of VAT on activ .....

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e levy and collection of tax is without authority of law, Article 226 of the Constitution of India would come to the aid of an aggrieved party, even where the assessment order has not been challenged by appeal or revision, to undo a collection of tax made without authority of law. As held by the Supreme Court [1996 (8) TMI 113 - SUPREME COURT OF INDIA], no State has the right to receive or retain taxes or monies realised from citizens without authority of law. To hold otherwise would, in our con .....

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MI 1 - Supreme court) had been held to be prospective. A perusal of the aforesaid judgment reveals that the declaration of law is not prospective and like all general declarations of law, would be deemed to apply from the inception of the statute. The judgment having clearly held that VAT cannot be collected on activation of SIM cards, the assessment orders levying and collecting VAT, are from their inception a nullity and, therefore, the levy and collection of VAT is without authority of law an .....

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do is to direct the State of Haryana to forward this amount to the Union of India. - State of Haryana shall transfer the amount of VAT collected from the petitioner to the Service Tax Department of the Union of India - Civil Writ Petition No. 28512 of 2013 - Dated:- 23-3-2015 - Rajive Bhalla And Amol Rattan Singh,JJ. For the Petitioner Mr. K.L.Goyal, Sr. Advocate, with Mr. Sandeep Goyal, Advocate For the Respondent : Mr. Sunish Bindlish, Advocate, for respondent nos.1, 4,5 and 6. Ms. Mamta Singa .....

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.10.2013 (Annexure P-9), dismissing the representation for refund of the amount of VAT illegally retained by the State of Haryana. Counsel for the petitioner submits that the petitioner provides cellular services and for the said purpose, activates SIM cards. The State of Haryana collected VAT from the petitioner, pursuant to assessment orders dated 22.02.2006, 26.03.2008 and 22.02.2006 (Annexures P-3A, P-3B and P-3C) on the premise that activation of SIM cards is a sale. The Supreme Court havin .....

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representation for refund. The representation was illegally dismissed, on 15.10.2013 (Annexure P-9) on entirely irrelevant considerations, namely, that the petitioner did not challenge its liability before the Assessing Authority, the petitioner did not file any appeal against the assessment orders and as the petitioner has charged value added tax from its customers, the amount cannot be refunded. Counsel for the petitioner further submits that the Supreme Court having held that activation of S .....

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e petitioner. In case, the State of Haryana does not refund this amount, the petitioner would be doubly taxed as the Service Tax Department of the Union of India, has raised a demand for deposit of service tax for the period for which the petitioner has deposited VAT. Counsel for the petitioner further submits that a declaration of law by the Supreme Court applies from the date of inception of a statute and therefore, does not confer any right upon the State of Haryana to charge, or retain VAT, .....

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on Control Board and others v. Kanoria Industrial Ltd. And another, (2001) 2 SCC 549 and a Division Bench judgment of this Court in Fizz Drinks P. Ltd. v. State of Haryana and others, (2001) 123 STC 183 , to support of these arguments. Counsel for the State of Haryana submits that the assessment orders have become final. The petitioner, therefore, cannot pray for issuance of a writ to quash the assessment orders and or direct refund of the amount voluntarily deposited by the petitioner. The peti .....

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of the VAT Act, which confers the power of refund does not apply to the present case and as the Haryana VAT Act does not contain any provision that allows the respondents to refund the amounts deposited by the petitioner, the writ petition may be dismissed. Counsel for the State of Haryana further submits that the judgment in Bharat Sanchar Nigam Limited (supra) clearly indicates a prospective overruling of the Supreme Court's opinion in the State of Uttar Pradesh v. Union of India (supra) .....

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larified that the gross total amount received by the operator, from the subscriber, for activation of SIM card, is exigible to service tax. The petitioner is obliged to deposit service tax and whether the assessee has paid VAT to the State of Haryana, for this period, is irrelevant. Counsel for the Union of India further submits that the amount paid by the petitioner to the Haryana VAT Department may not be construed as a final determination of the petitioner's liability towards service tax .....

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d exigible to VAT. The petitioner was, therefore, assessed to tax under the Haryana VAT Act, 2003 (hereinafter referred to as 'the Act'), by assessment orders dated 22.02.2006, 26.03.2008 and 22.02.2006 (Annexures P-3A, P-3B and P-3C) and deposited VAT. The question whether activation of SIM cards is a service or a sale came up for consideration before a larger Bench of the Supreme Court in Bharat Sanchar Nigam Limited and another (supra) and was answered by holding that activation of SI .....

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India. The State of Haryana, on the other hand, while not denying that it has no authority to levy VAT on the activation of SIM cards, contends that it has no statutory power, to refund this amount and as assessment orders Annexures P-3A, P-3B and P-3C have attained finality, a writ cannot be issued to set aside these orders or direct the State to refund this amount to the petitioner or remit it to the Union of India. The first question that requires an answer is whether the State of Haryana has .....

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., a tax shall be valid only if it is relatable to statutory power emanating from a statute. The collection of VAT on the sale of SIM cards, not being relatable to any statutory provision, must be held to be without authority of law and as a consequence non-est. We have crossed the first hurdle, namely, that the State of Haryana has no statutory authority to levy VAT on the activation of SIM cards, with ease and now proceed to answer the second question, namely, whether the Haryana Value Added T .....

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, may a writ be issued to direct the State to refund the tax and or to quash assessment orders, or is this court devoid of power to adopt such a course? As a general rule, a high prerogative writ, shall not issue where a statute prescribes a complete procedure for redressal of grievances. But this general rule must admit to certain exceptions, particularly where the collection of tax is without authority of law. A court, in such a situation, must rise above these inherent impediments and ensure .....

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977 (hereinafter referred to as 'the 1977 Act'). The respondents raised a protest that since sugar industries and distilleries are not industries covered by Entry 15 of Schedule I of the Act, they are not liable to file any return or make payment of water cess. The State Government rejected their objections. The respondents paid the cess but some of them filed writ petitions challenging the levy of the cess, which were dismissed. Thereafter, the Supreme Court in Saraswati Sugar Mills v. .....

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that the respondents are not entitled to refund, as the amounts paid have already been deposited with the Government of India. After considering the rival submissions, a writ was issued , directing the Board to refund the sums realised from the respondents, subject to verification of the amount stated to have been paid by them. The U.P. Pollution Control Board filed a special leave petition. After considering whether a writ can be issued to direct refund of a tax/cess collected without authorit .....

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ed. The aggrieved party has the right of going to the civil court for claiming the amount and it is open to the State to raise all possible defences to the claim, defences which cannot, in most cases be appropriately raised and considered in the exercise of writ jurisdiction. This judgment cannot be read as laying down the law that no writ petition at all can be entertained where claim is made for only refund of money consequent upon declaration of law that levy and collection of tax / cess as u .....

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enrichment was made out and the amount of cess was paid under protest; the writ petitions were filed within a reasonable time from the date of the declaration that the law under which tax/cess was collected was unconstitutional. There is no good reason to deny a relief of refund to the citizens in such cases on the principles of public interest and equity in the light of the cases cited above. However, it must not be understood that in all cases where collection of cess, levy or tax is held to .....

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to a relevant paragraph from the said judgment, which reads as follows:- 6.The only question that falls for consideration here is whether in an application under Article 226 of the Constitution the Court should have directed refund. It is the case of the appellant that it was after the judgment in the case of Loong Soong Tea Estate the cause of action arose. That judgment was passed in July 1973. It appears thus that the High Court was in error in coming to the conclusion that it was possible fo .....

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aimant approaches a High Court seeking relief of obtaining refund only and those where refund is sought as a consequential relief after striking down of the order of assessment etc. Normally speaking in a society governed by rule of law taxes should be paid by citizens as soon as they are due in accordance with law. Equally, as a corollary of the said statement of law it follows that taxes collected without the authority of law as in this case from a citizen should be refunded because no State h .....

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hat is something that this Court cannot accept. The respondent-State was obliged by this Courts order to refund to the writ petitioners, including the appellants, the amounts collected from them in the form of the levy that was held to be illegal. If there was good reason in law for rejecting the refund claim, it should have been stated. Not to have responded to the appellants refund claim for 11 years and then to have turned it down without reason is to have acted disrespectfully to this Court. .....

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even where the assessment order has not been challenged by appeal or revision, to undo a collection of tax made without authority of law. As held by the Supreme Court, no State has the right to receive or retain taxes or monies realised from citizens without authority of law. To hold otherwise would, in our considered opinion, perpetuate an un-constitutional levy, an unconstitutional collection of a tax, and an unconstitutional retention of monies. At this stage, we would also refer to a Divisio .....

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0 deserves to be rejected in view of the law laid down by the Supreme Court in U.P. Pollution Control Board v. Kanoria Industrial Ltd. (2001)2 JT SC 103. One of the questions considered in that case was whether the declaration of law made by the Supreme court in a later decision can be made basis for reopening the orders which have become final. While answering the question in the affirmative, their Lordships of the Supreme court observed as under:- Another reason to defeat the claim for refund .....

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nge, this Court has explained the legal position in Shenoy and Co. v. Commercial Tax Officer, Circle II, Bangalore (1985) 60 STC 70 (SC); (1985) 2 SCC 512 that when the Supreme Court declares a law and holds either a particular levy as valid or invalid it is idle to contend that the law laid down by this Court in that judgment would bind only those parties who are before the Court and not others in respect of whom appeal had not been filed. To do so is to ignore the binding nature of a judgment .....

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y with the decisions of the Supreme Court will be absolutely necessary. Viewed from that angle, we find this contention to be futile and deserves to be rejected. Our opinion as to the exercise of power under Article 226 of the Constitution of India having been fortified by judgments of the Supreme Court in U.P. Pollution Control Board and others, Saraswati Sugar Mills, Solonah Tea Co. Ltd., Shree Baidyanath Ayurved (P) Ltd. and by a Division Bench judgment in Fizz Dinks P. Ltd. v. State of Harya .....

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ards the fact that the levy, the collection and retention of VAT by the State of Haryana, is without authority of law. The levy and collection of tax, pursuant to assessment orders dated 22.2.2006, 26.3.2008 and 22.2.2006 (Annexures P-3A, P-3B and P- 3C) not being relatable to a statutory power emanating from a Statute and, therefore, violative of Article 264 of the Constitution of India and a nullity. The mere fact that orders have been passed levying and collecting tax would not confer legitim .....

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