State of Kerala and others v. Murugan Agencies

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON & THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN** **THURSDAY, THE 13TH DAY OF OCTOBER 2016/21ST ASWINA, 1938** **RP.No. 783 of 2016 () IN WA.1844/2014 ---------------------------------------** **AGAINST THE ORDER/JUDGMENT IN WA 1844/2014 of HIGH COURT OF KERALA DATED 14.1.2016** **REVIEW PETITIONER(S)/RESPONDENTS IN THE W.A.: --------------------------------------------** ## **1. STATE OF KERALA** **REPRESENTED BY THE SECRETARY (TAXES), SECRETARIAT, THIRUVANANTHAPURAM- 695 001.** **2. THE DEPUTY COMMISSIONER,** **COMMERCIAL TAXES, ERNAKULAM, KOCHI- 682 015.** **3. THE SALES TAX OFFICER, OFFICE OF THE DEPUTY COMMISSIONER, ERNAKULAM, KOCHI- 682 015.** **BY ADV. GOVERNMENT PLEADER** **RESPONDENT(S)/APPELLANT IN THE W.A.:** **------------------------------------** **M/S MURUGAN AGENCIES DOOR NO. 59/1348-A GROUND FLOOR, ARANGATH ROAD,COCHIN- 682 018, REPRESENTED BY ITS PROPRIETOR MR. PRAKASH KUMAR CHOWDHARY.** **R1 BY ADV. SRI.M.GOPIKRISHNAN NAMBIAR R1 BY ADV. SRI.P.GOPINATH R1 BY ADV. SRI.P.BENNY THOMAS R1 BY ADV. SRI.K.JOHN MATHAI** **THIS REVIEW PETITION HAVING BEEN FINALLY HEARD ON 30.9.2016, THE COURT ON 13-10-2016 PASSED THE FOLLOWING:** ## **P.R.RAMACHANDRA MENON & ANU SIVARAMAN, JJ.** ## **----------------------------------------------R.P.No. 783 of 2016 in W.A.No. 1844 of 2014 ----------------------------------------------Dated this the 13[th] October, 2016** ## **O R D E R** ## **Anu Sivaraman, J.** Respondents in the writ appeal are the review petitioners. This review petition is preferred against the judgment dated 14.1.2016 in W.A.No. 1844 of 2014 on the plea that the refund of the amount ordered by this Court was in respect of amounts collected by the assessee from the end users of the product in question. It is contended that the original return filed by the assessee along with the revised return and the profit and loss account submitted by it would show that the liability of tax for the period from January, 1995 to May, 2001 had been passed on to the purchasers. It is further contended that the records produced by the assessee itself before the authorities would show that it had absolutely no source of income to pay luxury tax out of its own funds. On the basis of Annexures A1 and A2 revised returns and profit and loss account, it is contended that the assessee is not entitled to refund of the amount. It is further contended that this aspect of the matter had not been considered in its proper perspective by this Court in the judgment under review. 2 _**RP.783/16**_ 2. The assessee filed W.P(C).No.17385 of 2008 challenging Exhibits P13 and P15 orders produced therewith which refused to refund the amounts in lieu of Bank guarantee pending challenge to Section 4A of the Kerala Tax on Luxuries Act, 1976 (hereinafter referred to as 'the Act'). The assessee was a firm dealing in tobacco products. It had earlier preferred O.P.No.2190 of 1995 challenging Section 4A of the Act and its liability to pay tax on luxuries thereunder. By interim order dated 10.2.1995, this Court directed the firm to file returns as also to furnish bank guarantee for the amount of tax to the satisfaction of the assessing authority for each month. By judgment dated 4.8.2001, Section 4A of the Act was declared unconstitutional and was set aside. Though the asessee was enjoined by the interim order only to furnish bank guarantee, by Exhibits P1 to P5 communications, the commercial tax authorities had requested it to make payment of the luxury tax in cash in lieu of the bank guarantee. It was further held out that if the case is decided in favour of the assessee, it can claim refund of the tax remitted. On this assurance, the luxury tax due was paid by the assessee in cash for the period from January, 1995 to May, 2001. The judgments declaring Section 4A of the Act unconstitutional were taken up in writ appeal as well as before the Apex Court in SLP, but were decided in favour of the assessee. Thereafter, refund of tax was claimed by the assessee, which was 3 _**RP.783/16**_ rejected by the orders impugned in W.P(C).No.17385 of 2008, on the contention that the tax burden had been passed on to the customers and therefore, the assessee was not eligible for refund. W.P(C).No.17385 of 2008 was dismissed by the learned single Judge holding that in case of amounts already paid as tax under the impugned acts, even if the charging sections are set aside, the tax already paid would not be refunded, if such tax had been collected from the end customers. It was the case of the assessee that in the instant case, he had been enjoined to furnish only a bank guarantee and had paid the amount not as tax collected but in lieu of the bank guarantee on the request of the assessing officers and on the specific assurance that the amount so paid would be refunded in case of his success in the litigation. 3. In appeal at the instance of the assessee, the specific issue raised was whether in the facts and circumstances of the case, the assessee could be seen to have passed on the burden of tax to the purchasers of the products. By interim order dated 12.1.2015, the contention of the Revenue regarding the collection of tax by the assessee from end customers was noticed and the contention of the assessee that no amount was collected as luxury tax for the transaction in question was recorded. The learned Special Government Pleader for Commercial Taxes was directed to get instructions in this _**RP.783/16**_ 4 regard. Thereafter, a counter affidavit was filed on 24.2.2015 specifically contending, with reference to the returns, revised returns and the profit and loss accounts of the assessee for the year 1994-1995, that the assesseee had collected luxury tax on the products in question and that his returns and profit and loss accounts would not show that he had any other source of funds to pay the luxury tax due. It was further contended that the price of the products in question being shown to be inclusive of all taxes, the assessee was not entitled to refund. Thereafter, going by interim order dated 19.11.2015, the further contention of the learned Special Government Pleader that the actual collection of luxury tax by the appellant from the end user would be immaterial, since the fact that the liability to collect tax was statutory was also recorded. 4. Thereafter, the matter was heard at length with reference to the judgments of the Apex Court with regard to refund of tax collected and paid where the charging section was struck down as unconstitutional. The specific contention of the Revenue that the price of the commodity is inclusive of all taxes and that the assessee did not have the means to pay the tax without collecting it from the end user had been taken note of by this Court. However, interpreting the relevant findings of the Apex Court in _**Somaiya Organics (India) Ltd. v. State of U.P**_ [(2001) 5 SCC 519] and _**Godfrey Philip India**_ 5 _**RP.783/16**_ _**Limited v. U.P**_ [(2005)2 SCC 515], this Court came to the conclusion that even in a case where the taxing provision had only been prospectively overruled by the Apex Court in exercise of its plenary jurisdiction, bank guarantee furnished under interim orders would be liable to be discharged. The appellant was enjoined only to furnish bank guarantee in terms of the interim orders in the writ petition which challenged Section 4A of the Act. The specific contentions were referred to and this Court came to the conclusion that the question of unjust enrichment does not arise in the instant case and that the State and its officers were bound by the assurance as contained in Exhibits P1 to P5 which would render the assessee eligible for refund of luxury tax paid by it. That judgment had been subjected to SLP.No.13072 of 2016 before the Supreme Court which came to be dismissed _in limine_ by order dated 13.5.2016. 5. We heard Sri.K.K.Raveendranath, learned Additional Advocate General appearing for the Revenue and Sri.P.Gopinath Menon, learned counsel for the 1[st] respondent/assessee. 6. It is argued by the learned Additional Advocate General that the question of collection of tax by the assessee and of the resultant unjust enrichment to the assessee which is occasioned by the order of refund had not been considered in its proper perspective by this Court in the judgment under review. It is further contended that 6 _**RP.783/16**_ where tax is collected by a dealer from the consumer in respect of a taxing statute, the dealer holds such amount as a trustee and is liable to make over the payment to the Revenue even in a case where the provision under which the liability to pay tax arises is found to be unconstitutional and inoperative. The amount of tax which has been collected from the public cannot be retained by the dealer. In such circumstances, amount of tax collected from users has to enure to the State which is entitled to hold it, since it forms part of the public revenue. It is further contended that Annexures A1 and A2 revised return and profit and loss account furnished by the assessee for the year 1994-95 would show that the difference between the amount shown as total income from sale of cigarattes in the revised return and profit and loss account would be exactly equal to the amount which was payable by the assessee as luxury tax due for the period in question. In the above circumstances, it is contended that this would clearly show that the said amount had been collected by the assessee as luxury tax for the period in question. It is further contended that this aspect was clearly pointed out in the counter affidavit filed by the Revenue in the writ appeal and therefore the finding of this Court that the assessee would be eligible for refund of tax is an error apparent on the face of the record which render the judgment liable to be reviewed. 7 _**RP.783/16**_ 7. Relying on the decision of the Supreme Court in _**Kunhayammed v. State of Kerala**_ [AIR 2000 SC 2587], it is contended that where an SLP is dismissed by the Supreme Court at the threshold, there would be no merger and the judgment of the High Court would still be available for review. It is further contended that this Court, being a court of plenary jurisdiction, is liable to correct mistakes which have occurred in its records, even if such mistake is on account of an error which occurred in the adjudication proceedings on any account. The learned Additional Advocate General relies on the decision of the Apex Court reported in _**Board of Control for Cricket, India v. Netaji Cricket Club**_ [AIR 2005 SC 592] in support of the contention. It is further contended that the High Court, being a Court of Record as envisaged in Article 215 of the Constitution of India, the power of review is inherent and the High Court has not only the power but the duty to correct any apparent error in its orders (see _**M.M.Thomas v. State of Kerala**_ [AIR 2000 SC 540]. 8. Sri.P.Gopinath Menon, learned counsel for the assessee would submit that in the facts and circumstances of the instant case this review itself is not maintainable, since an SLP was taken before the Apex Court against the judgment under review on exactly identical grounds and the same had been dismissed by the Apex Court. Though it is conceded that there is no merger of the judgment of this Court in a 8 _**RP.783/16**_ case where the SLP is dismissed at the threshold, it is contended that in this case, where the specific facts were pleaded and argued in the writ appeal as well as before the Apex Court in an SLP, this review petition would not be maintainable without the leave of the Apex Court to seek review before this Court. The learned counsel placed reliance on the decision of the Apex Court in _**Kamlesh Verma v. Mayawati and others**_ [(2013)8 SCC 320] to contend that review of an earlier order is not a rehearing and cannot be done unless the Court is satisfied that a material error, manifest on the face of the order, undermines its soundness or results in miscarriage of justice. It is further contended that the Supreme Court has held that “ _an error which is not self-evident and has to be detected by a process of reasoning can hardly be said to be an error apparent on the face of the record justifying the Court to exercise its power of review. A review is by no means an appeal in disguise whereby an erroneous decision is reheard and corrected, but lies only for patent error”._ 9. It is contended that the specific point urged before this Court in the writ appeal was with regard to the entitlement of the assessee for refund of the amounts paid by it on the ground that the said amount had been collected by the assessee from the end users. The new material now sought to be produced before this Court was also available in respect of separate assessment years before this Court 9 _**RP.783/16**_ while it decided the appeal. The contention is that the assessee had earlier filed original returns showing the amount of total income from sales as borne out by its profit and loss accounts as its sales turnover. The luxury tax due at 5% of the said sales turnover was also shown in the said returns. However, later, he had submitted revised return deducting the amount of luxury tax paid from the total sales turnover and had reported the revised turnover at Rs.23,50,43,485.28. This is alleged by the Revenue to show that the actual amount paid by the assessee as luxury tax was actually part of his sales turnover and therefore, was clearly collected from the end customer as part of sale price. 10. Learned counsel for the assessee would contend that the sales turnover being a fixed amount as per the profit and loss account, the revised return by deducting the amount of tax paid from the total sales was only intended to avoid the liability of paying tax on the tax component as well and therefore the said document has absolutely no relevance. It is further contended that the returns and the revised returns for the period 1994-1995 were already on record before the Division Bench which heard the appeal as Exhibit R1(b) series as also before the Supreme Court in the SLP and therefore, nothing could turn on Annexures A1 to A3 produced with the review petition. It is stated that no miscarriage of justice or error apparent on the face of the 10 _**RP.783/16**_ record is made out from these documents and that the review petition is therefore liable to be dismissed. 11. We have considered the arguments advanced on either side at considerable length. We are of the view that the contentions now urged with respect to collection of tax by the assessee had been raised before the Division Bench in the writ appeal as well. It is trite law that a review is maintainable only to correct an error apparent on the face of the record. A review Court is not expected to conduct a re-hearing of the matter or to reappreciate the evidence. In cases where such exercise was undertaken, the Apex Court has set aside orders passed in review (see the decision of the Apex Court in _**Meera Bhanja v. Nirmala Kumari Choudhury**_ [AIR 1995 SC 455]. This proposition is reiterated in _**Kamlesh Verma's case (supra)**_ . 12. The returns and revised returns in respect of different spells had been produced along with the counter affidavit filed in the writ appeal. It had been specifically contended on the basis of the documents so produced that the assessee had collected tax from the end customers. However, in spite of such material being on record, the Division Bench had held that the assessee could not be found to have passed on the burden of luxury tax to the end users. The contention that the assessee had been enjoined only to furnish bank guarantee and such bank guarantee would have been discharged in view of the 11 _**RP.783/16**_ binding decision of the Apex Court had been accepted by the Bench hearing the writ appeal. 13. In the above view of the matter and in view of the dismissal of the Special Leave to Appeal filed by the Revenue against the judgment under review, we are of the opinion that what is attempted in the review petition at this stage is a rehearing on the entire matter, since the collection of tax by the assessee and its eligibility for refund of the amount on the basis of Exhibits P1 to P5 documents was specifically considered and answered by the Division Bench in the judgment under review. In view of the decisions of the Apex Court with regard to the power of review and its scope, we are not persuaded to hold that the judgment under review suffers from any error apparent on the face of the record which would render it subject to review. In the above circumstances, the review petition fails and is accordingly dismissed. **P.R.RAMACHANDRA MENON JUDGE** **ANU SIVARAMAN JUDGE** _vgs_