Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELALTE JURISDICTION
CIVIL APPEAL NO._6708 OF 2008
(Arising out of SLP (C) No. 380 of 2007)
Corporation Bank …. Appellant
Versus
M/s. Saraswati Abharansala and another …. Respondents
J U D G M E N T
S.B. SINHA, J.
1. Leave granted.
2. First respondent is a dealer in bullion gold. It entered into
transactions of purchase of gold from the appellant herein during the period
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6 April, 1999 and 10 December, 1999. The total transactions during the
said period were for a sum of Rs.423748518/-. Indisputably the rate of tax
which was prevailing at the relevant time was 1%. The amount of sales tax
at the said rate was collected from respondent No.1. The amount so
collected, indisputably had been deposited with the sales tax authorities.
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3. On or about 27 December, 1999 vide S.R.O. No.1075/99 the rate of
sales tax was reduced from 1% to 0.5% which was given a retrospective
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effect from 1 of April, 1999. The said Notification reads thus :-
“9 Any dealer Sale of bullion and specie
to registered dealer within
the State.
This notification shall be deemed to have come into force on
first day of April, 1999”
It was given a retrospective effect.
4. The original SRO 1728/93 on the subject provided that “tax if any
collected at the higher rate, shall be paid over to Government and tax if any
paid over to Government shall not be refunded”. Clause 9 of Schedule IV
of SRO 1728/83 provided as under :-
“9 Minerals and Metals
Corporation of India and
Banks
Sale of bullion to
registered dealers in
jewellery for
manufacture of gold
jewellery within the
State for export.”
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This entry in SRO 1728/93 stood amended by SRO 301/99 to read :-
“9 Minerals and Metals
Corporation of India and
Banks
Sale of bullion to
registered dealers in
jewellery for
manufacture of gold
jewellery within the
State for export.”
The said entry, as stated above, was further amended by SRO
1075/99.
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5. Appellant on or about 19 January, 2000, in view of the
aforementioned Notification, requested the Assistant Commissioner, Sales
Tax, Special Circle I, Calicult to refund the excess amount of sales tax
collected from the respondent No.1 amounting to Rs.20,97,763.50. The
Assistant Commissioner Sales Tax, however, rejected the said prayer in
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terms of its letter dated 3 March, 2000, which reads as under :-
“You may please see that the Government as per
the above mentioned SRO amended the original
notification in SRO 1728/93. According to the
said original notification, tax if any collected at
the higher rate shall be paid over to the
Government and tax if any paid over to the Govt.
shall not be refunded. So you may please inform
your customer accordingly.”
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6. The first respondent was communicated the same by the appellant in
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terms of its letter dated 6 June, 2000 stating :-
“While referring to your representation on the
subject matter, it has been informed by our
higherups that as per the letter from the Asst.
Commissioner of Commercial Taxes, Calicut viz:
3301/1150/99-2000, it has been clarified that
according to the GO., SRO 1728/93 “Any tax
collected at the higher rate shall be paid over to
the Govt. and tax, if any paid over to the Govt.
shall not be refunded.
Kindly note the same for your information.”
7. A writ petition was filed by the first respondent against the appellant
before the High Court of Kerala questioning the validity of the said order.
“i) declare that the petitioner is liable to pay
sales-tax at ½% for the transactions referred
to in Ext. P2 and that collection of any
amount in excess thereof is illegal and is
liable to be refunded;
ii) issue a Writ of Mandamus or any other
appropriate writ, order or direction directing
the respondent to refund to the petitions an
amount of Rs.20,97,261/- with interest @
21% per annum from the date of collection
of the amounts shown in Ext. P2 till the date
of actual payment;
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iii) issue a writ of Certiorari or any other
appropriate writ, order or direction quashing
Ext. P3;”
8. The said writ petition was dismissed by a learned Single Judge of the
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said Court by his order dated 4 April, 2006 holding :-
“There cannot be any dispute that the petitioner is
entitled to move the Commissioner. Whether the
petitioner had to pay any tax in excess of the due
rates and if so what is the fate of such excess
payment is certainly a dispute. The petitioner has
to move the Commissioner for appropriate orders.
It will be open to the petitioner to take all
available contentions on the claim for refund
before the Commissioner. Accordingly, without
expressing any opinion as to the merits of the case,
this writ petition is disposed of as follows:-
In the event of the petitioner moving the
Commissioner (Commercial Taxes), government
of Kerala, Thiruvananthapuram within a period of
two months from today, the Commissioner shall
consider the issue with notice to the petitioner and
the first respondent and take appropriate action in
accordance with law in the matter within another
four months.”
9. An intra court appeal was filed by the first respondent and a Division
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Bench of the High Court by reason of the impugned judgment dated 7
November, 2006 allowed the said writ appeal opining :
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“When the legislature or the government had
given that relief with retrospective effect,
necessarily, that relief shall reach the concerned
eligible citizen. The bank had opportunity to file
the return showing the real tax liability based on
Ex.P1 and claiming refund in terms of Section 33
and could pay over the amount to the appellant,
the customer of the first respondent. If that had
been claimed, necessarily, the assessing authority
would have refunded it with 10% interest as
provided in Section 44(4).”
10. Mr. R. Mohan, learned Additional Solicitor General, appearing on
behalf of the appellant-bank at the outset submits that the writ petition for
refund of tax was not maintainable. It was contended that in any event it
was not permissible for the Division Bench of the High Court to direct the
appellant to refund the excess amount collected and granting liberty to it to
file a claim application thereafter with the sales tax authorities, which is per
say unjust.
11. Mr. R. Sathish, learned counsel appearing on behalf of the respondent
No.2/State of Kerala would submit that despite amendment the original
condition attached with SR No.1728/93 i.e. the tax if any collected at the
higher rate, shall be paid over to Government and the tax, if any paid over to
Government shall not be refunded, having remained un-amended, the State
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is not liable to refund the amount. It was urged that although the High
Court has taken note of the said condition laid down in SOR No.
1728/1993, but failed and/or neglected to consider the same in its proper
perspective.
12. Mr. M.K. Sreegesh, learned counsel appearing on behalf of the first
respondent, however, would submit that the Notification should be
construed keeping in view the objective, it seeks to achieve as would appear
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from Notification dated 27 December, 1999.
13. It was contended that the amendment had been brought into force
with retrospective effect. The condition laid down therein must be held to
have been repealed.
14. Indisputably the gold in bulk quantity was sold by the Bank within
the State. Purchase was required to be effected at least worth Rs.25 lakhs at
a time. It was, however, felt that the intermediary dealers, who normally
buy gold from the banks and primarily cater to the requirements of local
goldsmith and jewellers, would not be in a position to carry out their
activity since they would not be eligible for the reduced rate of 0.5% when
they buy the material from banks or other first sellers within the State. In
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the aforementioned situation, the Government had taken a decision to make
the said rate of tax applicable when the bullion and specie are sold to any
registered dealer within the Sate.
15. The aforementioned objective on the part of the State would appear
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from the note appended to SOR No. 1075/99 dated 27 December, 1999. It
is true that the original Notification SRO 1728/1993 contained a provision
for not refunding the amount of tax collected at a higher rate.
16. Subsequent Notification, namely SOR No. 301/1999, however,
reduced the rate provided the sale is effected within the State for
manufacture of ornaments. SRO 1728/1993, as noticed hereinbefore, was
further amended by SRO No. 1075/1999, in terms whereof a legal fiction
was created giving it a retrospective effect and retroactive operation on or
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from 1 April, 1999.
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17. The rate of tax which was applicable on 1 April, 1999 by reason of
the said legal fiction was, therefore, 0.5 %. The effect of a legal fiction is
well known. It must be given full effect. It must be taken to its logical
conclusion.
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18. Sales tax is leviable on sale of goods. It must be collected by the
dealer as an agent of the State at such rate as may be specified:
19. Neither the State nor the agent is entitled to collect tax at a rate higher
than specified. The Kerala General Sales Tax Act, 1963 also contains a
provision for refund in Section 44 thereof which reads as under :-
“Refund:- (1) When an assessing authority finds at
the time of final assessment, that the dealer has
paid in excess of what is due from him, it shall
refund the excess to the dealer.
(2) When the assessing authority receives an
order from any appellate or revisional authority to
make refund of tax or penalty paid by a dealer it
shall effect the refund.
(3) Notwithstanding anything contained in sub-
section (1) and (2), the assessing authority shall
have power to adjust the amount due to the
refunded under sub-section (1) or sub-section (2),
towards the recovery of any amount due on the
date of adjustment, from the dealer.
(4) In case refund under sub-section (1) or sub-
section (2) or adjustment under sub-section (3) is
not made within ninety days of the date of final
assessment, or as the case may be, within ninety
days of the date of receipt of the order in appeal or
revision or the date of expiry of the time for
preferring appeal or revision, the dealer shall be
entitled to claim interest at the rate of ten percent
per annum on the amount due to him from the date
of expiry of the said period upto the date of
payment or adjustment.”
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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 strictly in
accordance with law.
22. If the substantive provision of a statute provides for refund, the State
ordinarily by a subordinate legislation could not have laid down that the tax
paid even by mistake would not be refunded. If a tax has been paid in
excess of the tax specified, save and except the cases involving the principle
of ‘unjust enrichment’, excess tax realized must be refunded. The State,
furthermore is bound to act reasonably having regard to the equality clause
contained in Article 14 of the Constitution of India.
23. It is not even a case where the doctrine of unjust enrichment has any
application as it is not the case of the respondent//State that the buyer has
passed on the excess amount of tax collected by it to the purchasers.
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24. In view of the admitted fact that tax had been collected and paid for
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the period 6 April, 1999 and 10 December, 1999 @ 1 % of the price
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which having been reduced from 1 April, 1999 to 0.5 %, the State, in our
opinion, is bound to refund the excess amount deposited with it.
25. Furthermore the Notification having been given a retrospective effect
must be construed on the touchstone of the purpose and object it sought to
achieve. Principle of purposive construction should be applied in a case of
this nature to find out the object of the Act. When a statute cannot be
considered in such a manner which would defeat its object, the legislature is
presumed to be aware of the consequences flowing therefrom. The statute
should be considered in such a manner so as to hold that it serves to seek a
reasonable result. The statute would not be considered in such a manner so
as to encourage defaulters and discourage those who abide by the law.
26. The statute furthermore, it is trite, should be read in the manner so as
to do justice to the parties. If it is to be held, without there being any
statutory provision that those who have deposited the amount in time would
be put to a disadvantageous position and those who were defaulters would
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be better placed, the same would give rise to an absurdity. Construction of
the statute which leads to confusion must be avoided.
27. Thus the condition of non refund of the excess amount must be held
to have been repealed by necessary implication as the rate of tax so applied
to the transaction of sale of gold bullion was with retrospective effect.
28. As all the facts are admitted and the State had refused to refund the
excess amount of tax realized from the appellant, in our opinion, the writ
petition was maintainable.
29. We are, therefore, of the opinion that the interest of justice would be
served if instead of the appellant refunding the amount to the first
respondent and later claiming refund from the authorities, if the State of
Kerala is directed to refund the amount of tax collected with interest at the
rate of 10% per annum to the first respondent at an early date, and not later
than four months from the date of communication of this order. It is ordered
accordingly. If, however, the amount is not paid within the aforementioned
period, the outstanding amount shall carry interest @ 15 % per annum.
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30. The appeal is allowed with the aforementioned observations and
direction. In the facts and circumstances of the case, however, there shall be
no order as to costs.
……………………….J.
( S.B. SINHA )
………………………..J.
( CYRIAC JOSEPH )
New Delhi
November 19, 2008
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