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2015 (4) TMI 426

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..... from any material on record as to what led the authorities to provide such an Explanation. While adding Explanation given in [2008 (11) TMI 387 - SUPREME COURT OF INDIA] the Government had kept in mind the principle of unjust enrichment. Presumably because of this reason, the High Court also referred to the judgment in the case of Indian Oil Corporation (1992 (10) TMI 252 - PUNJAB AND HARYANA). However, on such a presumption alone, there cannot be any justification for adding the Explanation of the nature mentioned above. In order to determine as to whether a particular dealer is in fact entitled to refund or not, the Government can go into the issue of unjust enrichment while considering his application for refund. That would depend on the facts of each case. It cannot be presumed that the burden was positively passed on to the buyers by these dealers and, therefore, they are not entitled to refund. - impugned Explanations in the Notifications dated 4.5.1999 and 5.7.1999 are unconstitutional - Decided in favour of assessee. - Civil Appeal No. 8192 of 2003 - - - Dated:- 17-3-2015 - A. K. Sikri And Rohinton Fali Nariman,JJ. For the Petitioner : Mr. Niraj Sharma F .....

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..... rate, which was now reduced to 1% vide the aforesaid Notification, they became entitled to get the refund of the excess amount paid, but were still deprived of that refund because of the aforesaid Explanation. 4) Naturally, being aggrieved by the said Explanation, the appellants challenged the validity of the Explanation by filing writ petiion in the High Court of Madhya Pradesh. The challenge was led primarily on two counts: (i) in the first instance, it was pleaded that this Explanation was arbitrary and discriminatory being violative of Article 14 of the Constitution inasmuch as the classification which has carved out because of the said explanation had the effect of treating the appellants and others who had paid tax at a higher rate, differently from those who had not paid the tax at all and were defaulted. It was argued that such a classification was not based on any intelligible differentia and had no nexus with any objective sought to be achieved. A number of judgments in support of this contention were cited in the High Court. (ii) The second argument raised was that it amounted to exaction of tax at a higher rate, namely, at the rate of 2.5%, 2% and 10% for coal, gypsu .....

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..... ow been allowed to pay the tax at the rate of 1% for the relevant period. The consequence is that it carves out two categories of tax payers who are made to pay the tax at different rates, even though they are identically situated. There is no basis for creating these two classes and there is no rationale behind it which would have any causal connection with the objective sought to be achieved. It would be pertinent to mention that on repeated query made by this Court to the learned counsel for the respondents, he could not explain or show from any material on record as to what led the authorities to provide such an Explanation. Therefore, it becomes apparent that there is no objective behind such an Explanation appended to the Notification dated 4.5.1999 which is sought to be achieved, except that the Government, after collecting the tax from those who had paid at a higher rate, did not intend to refund the same. This can hardly be countenanced, more so when it results in discrimination between the two groups, though identically situated. 8) The law on the scope and meaning of Article 14 of the Constitution has now been well articulated. We may gainfully refer to the case of D. .....

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..... ation. It is equally well settled by the decisions of this Court that Article 14 condemns discrimination not only by a substantive law but also by a law of procedure. (emphasis supplied) 9) In Re.: Special Courts Bill, 1978 (1979) 1 SCC 380, this Court undertook a survey of plethora of decisions touching upon the 'Equality' doctrine enshrined in Article 14 of the Constitution and culled out certain principles. In principle No.3, the Court highlighted that though classification was permissible and it was not for the Courts to insist on delusive exactness or apply doctrinaire tests for determining the validity of classification in any given case, but, at the same time, classification would be treated as justified only if it is not palpably arbitrary. It was also emphasized that the underlined purpose in Article 14 of the Constitution was to treat all persons similarly circumstanced alike, both in privileges conferred and liabilities imposed. Following was the emphatic message given by the Court: (4)...It only means that all persons similarly circumstanced shall be treated alike both in privileges conferred and liabilities imposed. Equal laws would have to be applie .....

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..... ore, if they had paid the tax at a higher rate, they were entitled to the refund of excess amount of tax paid. No reasons are coming forth in the counter affidavit filed by the State either in the High Court or in this Court or in any other form as to why there was a necessity of adding such an Explanation for not refunding the excess amount paid by the dealer in excess of 1% which was the entry tax legally payable for this period. Once we consider the matter from this angle, it also becomes clear that as the entry tax payable was at the rate of 1% only, asking any person to pay at a higher rate would be clearly violative of Article 265 of the Constitution. 13) Article 265 of the Constitution has to be read along with Article 14 in the given context. This co-relation between the two provisions is beautifully brought out in Kunnathat Thathunni Moopil Nair v. State of Kerala Anr. (1961) 3 SCR 77 as under: 10. The most important question that rarises 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 atack against the constitutionality of the Act. It is, therefore, necessary .....

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..... 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 in 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 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. 14) At this stage, we would like to refer to another judgment of this Court which is quite proximate to the situation at hand, namely, Corporation Bank v. Saraswati Abharansala Anr. (2009) 1 SCC 540 That was case where rate of Sales Tax was reduced from 1% to 0.5% vide SRO No. 1075/99 dated 27.12.1999 .....

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