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Vikram Cement & Another Versus State of Madhya Pradesh & Others

2015 (4) TMI 426 - SUPREME COURT

Denial of refund claim - Reduction of entry tax - presumption for unjust enrichment - Denial on the premise of explanation added to Notification No. A-3-80-98-ST-V (49) dated 4.5.1999 to deny the refund to tax paid at higer rate - Held that:- The Explanation attached to Notification dated 4.5.1999, or for that mater the Notification dated 5.7.1999, which states that the amount shall not be refunded in any case on the basis that dealer had filed the tax at a higher rate, results in invidious disc .....

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rned 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.

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 presumpt .....

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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 For the Respondent : Mr. C. D. Singh JUDGMENT A. K. Sikri, J. The bare minimum facts which are required to be mentioned to decide this appeal are recapitulated, in brief, here in below: 2) The appellant Nos. 1 and 2 are the units of Grasim Industries .....

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owing rates: COAL - 2.5% GYPSUM - 2% BAUXITE - 10% In the year 1999, respondent No.1 - State issued Notification No. A-3-80-98-ST-V (49) dated 4.5.1999. By this Notification it reduced the rate of entry tax, namely, coal, gypsum and bauxite by making the entry tax payable at the rate of 1% only. This Notification remained in force for a limited period, that is from 1.5.1997 to 30.09.1997. The rate of entry tax prior to 1.5.1997 and after 30.09.1997 remained the same, namely, 2.5%, 2% and 10% for .....

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higher rate. As the Notification was issued only in May 1999 and it realted to the past period, i.e. 1.5.1997 to 30.09.1997 and the entry tax is payable at the point of entry of the goods into the State, as and when the appellants were bringing the aforesaid raw material into the State of Madhya Pradesh, they had been paying the entry tax. During the period 1.5.1997 to 30.09.1997, they had paid the entry tax at the rate which was prevalent at that time, though reduced to 1% vide the Notification .....

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allenge 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 int .....

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was in the teeth of Article 265 of the Constitution and per se illegal. 5) The High Court, though took note of the aforesaid arguments, did not deal with these arguments in the manner in which these submissions were made and dismissed the writ petition vide impugned judgment dated 11.9.2002 only on the ground that identical issue had been considered by its own Division Bench earlier in the case of Century Textiles and Industries Ltd. v. State of Madhya Pradesh & Ors. Writ Petition No. 2917 o .....

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re us the same arguments which were advanced before the High Court with the plea that the High Court did not even consider those arguments appropriately. He submitted that it was a clear case of discrimination qua the appellants who had faithfully paid the tax and, therefore, the provisions of Article 14 of the Constitution will squarely attract in the facts of the present case. The learned counsel for the State, on the other hand, referred to the reasoning given by the High Court in the impugne .....

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higher rate, results in invidious discrimination towards those who have paid the tax at a higher rate, like the appellants, when compared with that category of the persons who were defaulters and have now 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 .....

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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.S. Nakara & Ors. v. Union of India (1983) 1 SCC 305, wherein this Court observed as under: 10. T .....

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reach of the great equalising principle enunciated in this Article? There can be no doubt that it is a founding faith of the Constitution. It is indeed the pillar on which rests securely the foundation of our democratic republic. And, therefore, it must not be subjected to a narrow, pedantic or lexicographic approach. No attempt should be made to truncate its all embracing scope and meaning for, to do so would be to violate its activist magnitude. Equality is a dynamic concept with many aspects .....

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for the purpose of legislation. In order, however, to pass the test of permissible classification, two conditions must be fulfilled, viz. (i) that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from those that are left out of the group; and (ii) that that differentia must have a rational relation to the objects sought to be achieved by the statute in question [See Shri Ram Krishna Dalmia v. Shri Justice S.R. Tendo .....

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l 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 .....

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same situation, and there should be no discrimination between one person and another if as regards the subject matter of the legislation their position is substantially the same. (emphasis supplied) Another principle which was restated was that the classification must not be arbitrary but must be rational, that is to say, it must not only be based on some qualities or characteristics which are to be found in all persons grouped together and not in others who are left out, but those qualities an .....

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o arbitrariness. In fact, equality and arbitrariness are sworn enemies; one belongs to the rule of law in a republic while the other, to the whim and caprice of an absolute monarch. Where an act is arbitrary it is implicit in it that it is unequal both according to political logic and constitutional law and is, therefore, violative of Article 14, and if it affects any matter relating to public employment, it is also violative of Article 14. Article 14 and 16 strike at arbitrariness in State acti .....

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ny person bringing raw materials, viz. coal, gypsum and bauxite, within the State of Madhya Pradesh was liable to pay the entry tax only at the rate of 1%. Once this aspect is kept in mind, the legal effect thereof has to be that all the persons including the appellants, who had already paid the tax, were supposed to pay the tax at the rate of 1% only. Therefore, 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 .....

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e 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 .....

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the legislative competence of the Legislature imposing a tax and authorising the collection thereof and, secondly, the tax must be subject to the conditions laid sown in Art. 13 of the Constitution. One of such conditions envisaged by Art. 13(2) is that the Legislature shall not make any law which takes away or abridges the equality clause in Art.14, which enjoins the State not to deny to any person equality before the law or the equal protection of the laws of the country. It cannot be disputed .....

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ot mean that if property of the same character has to be taxed, the taxation must be by the same standard, so that the burden of taxation, may fall equally on all persons holding that kind and extent of property. If the taxation, generally speaking, imposes a similar burden on everyone with reference to that particular kind and extent of property, on the same basis of taxation, the law shall not be open to attack on the ground of inequality, even though the result of the taxation may be that the .....

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ional 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 e .....

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k 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, which was given retrospective effect from 1.4.1999. The respondent in that case, who had paid the sales tax @ 1% for the period 6.4.1999 to 10.12.1999, claimed refund of the excess tax paid, i.e. over and above 0.5%. This request was rejected by the Assistant Commissioner, Sales Tax. The assessee filed the writ petition challenging the or .....

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on which mandates that no tax shall be levied or collected, except by authority of law. Following passages from the said judgment are worth a quote: 20. Article 265 of the Constitution of India mandates that no tax shall be levied or collected except by authority of law. 21. In terms of the said provision, therefore, all acts relating to the imposition of tax providing, inter alia, for the point at which the tax is to be collected, the rate of tax as also its recovery must be carried out strictl .....

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