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M/s Murugan Agencies Versus State of Kerala, The Deputy Commissioner Of Commercial Taxes, The Sales Tax Officer

2016 (4) TMI 134 - KERALA HIGH COURT

Entitlement for refund claim - Amount paid as luxury tax in lieu of bank guarantee as directed by this court - Appellant was requested to pay the tax in cash on specific understanding that such amounts would be refunded, if the appellant was successful in the litigation - Held that:- the question of unjust enrichment does not arise, since the appellant was enjoined only to furnish bank guarantee and therefore would not be liable to have the same encashed. It is only because the appellant had pai .....

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d Anu Sivaraman, JJ. For the Appellant : Sri M Gopikrishnan Nambiar, Adv, Sri P Gopinath, Sri P Benny Thomas, Sri K John Mathai, Adv For the Respondent : Dr Sebastian Chempappilly, Spl Govt. Pleader JUDGMENT Anu Sivaraman, J. This appeal is preferred by the unsuccessful writ petitioner/assessee against the judgment of the learned single Judge dismissing W.P(C).No.17385 of 2008. The writ petition was filed challenging Exhibits P13 and P15 orders issued by the Commercial Tax Officer refusing refun .....

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t, 1976 is concerned, the petitioner was directed to furnish bank guarantee to the satisfaction of the assessing authority on or before 15th of every month in relation to the tax payable for the preceding month. Thereafter, by judgment dated 4.8.1977, the writ petition was allowed following the judgment in O.P.No.5478 of 1994. By the said judgment, Section 4A of the Act, 1976 and the schedule thereto as amended by the Finance Bill, 1994 were declared unconstitutional, invalid and inoperative and .....

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held out that "if the case is decided in your favour, you can claim refund of the tax remitted". It is submitted that the appellant had made payments in lieu of the bank guarantee believing the specific written undertaking by the authorities that the amounts would be refunded in case it succeeds in the writ petition. According to the appellant, a total amount of ₹ 11,24,92,135/- was paid by the appellant for the period from January, 1995 to May, 2001 as cash payment in lieu of t .....

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It was the specific case of the appellant that the amounts collected by the respondents in lieu of the bank guarantee as ordered by the Court, were in the nature of a loan advanced by the appellant and it was on the basis of the specific undertaking that such amounts would be refunded in case of his success in the pending litigation that such amounts happened to be paid. However, the Commercial Tax Officer, by Exhibit P13, relying on the decision of the Supreme Court in Godfrey's case (supra .....

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have collected any amount towards luxury tax from consumers/customers after obtaining interim orders, they are liable to pay the said amounts to the respective State Governments. 3. The appellant preferred Exhibit P14 reply pointing out that the finding regarding non refund of the duty already collected was entered in the Somaiya Organics' case (supra) only in view of the fact that the Supreme Court had exercised its jurisdiction under Article 142 of the Constitution of India to strike down .....

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etailed counter affidavit admitting that an amount of ₹ 11,24,92,135/- had been paid by the appellant towards luxury tax during the period from 1995 to 2001. However, it is stated that the Honourable Supreme Court in Godfrey's case (supra) had, relying on an earlier decision in Somaiya Organics' case (supra), held that while striking down the impugned Acts, it is not appropriate to allow any refund of tax already paid under the impugned Acts. It was further held that bank guarantee .....

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the consumer and therefore no prejudice was caused to the appellant by the refusal to refund the said amount. The learned single Judge accepted the said contention raised by the Revenue and held that the appellant was not entitled to refund of tax already paid. Aggrieved, the appellant has come up in this appeal. 5. Heard Sri.P.Gopinath Menon, learned counsel for appellant and Sri.Sebastian Champappilly, Special Government Pleader appearing for the Commercial Taxes Department. 6. The learned co .....

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arned single Judge had directed the appellant to file monthly returns and to furnish bank guarantee to the tune of his tax liability. The authorities had however requested the appellant to pay the amounts due as tax in cash in lieu of the bank guarantee which was to be furnished by the appellant. The respondents had specifically undertaken that the amounts so paid in cash would be refunded in case the appellant was successful in the litigation. The litigation ultimately ended in the quashing of .....

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es and would also amount to a confiscatory act on their part which is not supported by any due process of law. It is also urged by the learned counsel that the appellant had furnished all available materials before the respondents to prove that they had made no collection of luxury tax from their customers and that the amount paid by them in lieu of the bank guarantee was made out of their own fault and therefore the appellant is eligible for refund. 7. Per contra, it is contended by the learned .....

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er contended that no reliable material was produced by the appellant before the authorities to prove that the appellant had not collected luxury tax from their customers. The appellant who was the dealer under the Act was statutorily enjoined to collect such tax from their customers or end consumers as the case may be. Since the tax on luxuries was included in the MRP, the appellant had evidently collected the same for the period in question and therefore, the appellant was only remitting the ta .....

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etitioner. The petitioner shall comply with the provisions of the Kerala Tax on Luxuries Act, 1976 regarding filing the return. But, so far as the payment of tax contemplated by Section 5(3) is concerned, the petitioner shall furnish bank guarantee to the satisfaction of the assessing authority on or before the 15th of every month in relation to the tax payable for the preceding month. If default is committed in complying with any of these conditions, the State will be entitled to recover whatev .....

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he judgment referred to by the learned single Judge and the Commercial Tax Officer to deny the benefit of refund to the appellant. The relevant findings in the judgment of the Apex Court in Somaiya Organics' case (supra) are as follows: "35. Furthermore in view of the enunciation of the law by this Court in Oswal Agro Mills Ltd. case a bank guarantee which is furnished cannot be regarded as payment of excise levy which the Government is entitled to retain. The furnishing of a bank guara .....

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. Furnishing of bank guarantee cannot tantamount to making of payment as it was to avoid making payment of the vend fee that bank guarantees were issued. The respondents, in other words, are not entitled to encash the bank guarantees and realise vend fee in respect of the period prior to 25-10-1989. xx xx xx 39. Lastly, while relying on Mafatlal Industries Ltd. v. Union of India Shri Dwivedi submitted that the appellants had realised the amount of vend fee payable by taking that figure into acco .....

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nd Synthetics case that no refund be given. This is in line with the principle of unjust enrichment. But that principle cannot be extended to give a right to the State to recover or realise vend fee after the statute has been struck down and it has been categorically stated that "the respondent States are restrained from enforcing the said levy any further ... ". The contention of the respondents in the teeth of the aforesaid direction cannot, therefore, be accepted. This is apart from .....

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d need be made by the Revenue. However, in the said judgment itself it has been specifically stated that furnishing of bank guarantee does not amount to payment of tax and is only a guarantee for future payment. Payment of tax not having been made, no bank guarantee provided in terms of the interim order could be encashed was the finding of the Apex Court. 10. In Godfrey's case (supra) also this finding of the Apex Court had been adverted to hold that no refund of tax already paid need be ma .....

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duced only a certificate of the Chartered Accountant to prove that the amount claimed as refund had not been passed on to its customers by the petitioner is illegal and is agaisnt the decision of this Court reported in Cadbury India Ltd. v. Union of India [(2015 (315) E.L.T 488 (Ker.)]. 11. In any view of the matter, the appellant contends that since the appellant was only enabled by the provisions to collect tax from the customers, there was no mandate to do so and the appellant had, as a matte .....

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