Vikrant Tyres Ltd. (Now J.K.Tyre and Industries Ltd.) v. Assistant Commissioner (Assessment) Commercial Taxes, Special Circle I, Ernakulam and Government of Kerala

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR** **THURSDAY, THE 18TH DAY OF DECEMBER 2014/27TH AGRAHAYANA, 1936** ## **WP(C).No. 35866 of 2010 (G)** **----------------------------** ## **PETITIONER(S):** **--------------------------** **VIKRANT TYRES LTD. (NOW J.K.TYRE AND INDUSTRIES LTD.) MARY MATHA SHOPPING COMPLEX, PALARIVATTOM, KOCHI.** **BY ADVS.SRI.M.PATHROSE MATTHAI (SR.) SMT.MARIAM MATHAI SRI.SAJI VARGHESE** ## **RESPONDENT(S):** **----------------------------** **1. THE ASSISTANT COMMISSIONER (ASSESSMENT) COMMERCIAL TAXES, SPECIAL CIRCLE I, THEVARA P.O., ERNAKULAM-682 015.** **2. GOVERNMNET OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, TAXES (B), DEPARTMENT, THIRUVANANTHAPURAM. 695 001** **R1 & 2 BY GOVERNMENT PLEADER SMT.LILLY.K.T.** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 18-12-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ## **W.P.(C).NO.35866/2010** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXT.P1: COPY OF THE NOTIFICATION NO.SRO 770/2002 DATED 28TH SEPTEMBER 2002 ISSUED BY THE 2ND RESPONDENT.** **EXT.P2: COPY OF THE ORDER OF ASSESSMENT DATED 14.7.2010 PASSED BY THE 1ST RESPONDENT.** ## **RESPONDENTS EXHIBITS: NIL.** **//TRUE COPY//** **P.A. TO JUDGE** ## **A.K.JAYASANKARAN NAMBIAR, J.** **.............................................................** W.P.(C).No.35866 of 2010 **.............................................................** Dated this the 18[th] day of December, 2014 ## **J U D G M E N T** The petitioner is a registered dealer under the Kerala General Sales Tax Act (hereinafter referred to as 'the KGST Act') engaged in the sale of tyres, tubes, flaps etc.,. In connection with his business activities, he purchases rubber within the State. Under the KGST Act, rubber is taxable at the point of last purchase in the State. Accordingly, the petitioner during the assessment year 2001-2002, while purchasing rubber from local dealers within the State for the purposes of export out side the State for the manufacture of tyres, had discharged the tax liability on the purchase turnover of rubber at the rate of 11% which was the prevailing rate of tax during the relevant period. By S.R.O.No.770/2002 dated 28.09.2002, produced as Ext.P1 in the writ petition, the State Government reduced the rate of tax on rubber purchased between 01.11.2001 and 15.11.2001 and used for export to other States, from 11% to 6%. The said Notification, however, contained a specific Clause which stated that:- “tax, if any, collected at the higher rate, shall be 2 W.P.(C).No.35866 of 2010 paid over to the Government and tax, if any, already paid shall not be refunded.” The petitioner, taking note of Ext.P1 Notification, claimed a refund of tax that was paid in excess during the period covered by the Notification since, even before the said Notification was published on 28.09.2002, he had effected payment of tax at the higher rate of 11%, in respect of purchases effected between 01.11.2001 and 15.11.2001. The refund claim of the petitioner was considered by the 1[st] respondent assessing authority along with the assessment proceedings for the said year. In Ext.P2 order dated 14.07.2010, the 1[st] respondent while passing an order of assessment for the assessment year 2001-2002, rejected the claim of the petitioner for refund despite finding, pursuant to a verification of the said aspect, that the dealer had not collected any purchase tax during the period from 01.11.2001 to 15.11.2001, solely on account of the express provision in the Notification that tax, if any, already paid would not be refunded. In the writ petition, Ext.P2 order, to the extent it denies the petitioner the benefit of refund of excess tax paid, is impugned, inter alia, on the ground that the provision in the Notification which mandates that tax, if any already paid, will not be refunded is ultra vires the provisions of the KGST Act, and in particular Section 44 thereof, and further that it offends the law 3 W.P.(C).No.35866 of 2010 ## laid down by the Supreme court in the case of **Corporation Bank v. Saraswathi Abharanasala and Another [(2009) 19 VST 84 (SC)].** 2. A counter affidavit has been filed on behalf of the 1[st] respondent wherein Ext.P2 assessment order is sought to be justified on the basis of the reasons contained therein. In another counter affidavit filed by the 2[nd] respondent it is stated that the petitioner would be entitled to the benefit of Ext.P1 Notification subject to the express conditions therein and, hence, insofar as he had already paid the higher tax, he could not claim a refund of the same. Reference is also made to the judgment dated 09.04.2012 of a Division Bench of this Court in **State of Kerala v. M/s.Kurian** **Abraham (P).Ltd. [STRV 138 to 142/2010]** wherein this Court held that it would be incumbent upon a person claiming refund to establish that, by obtaining the refund, he would not be unjustly enriched. 3. I have heard Sri.Pathros Matthai, the learned Senior counsel for the petitioner and Smt.K.T.Lilly, the learned Government Pleader appearing on behalf of the respondents. 4 W.P.(C).No.35866 of 2010 4. On a consideration of the facts and circumstances of the case as also the submissions made across the Bar, I am of the view that the present writ petition, in its challenge against Ext.P2 order of assessment to the extent it denies the petitioner the refund of tax paid by him in excess in respect of the purchases effected between 01.11.2001 and 15.11.2001, must necessarily succeed. It is not in dispute that during the aforesaid period, the petitioner had paid tax at the higher rate of 11% on the purchases of rubber effected by him from local dealers. There is also no dispute of the fact that the rubber so purchased by the petitioner during the said period was used for export to other States. The only reason cited by the Assessing Officer to deny the claim of refund to the petitioner is the express condition in the Notification that states that tax, if any, already paid shall not be refunded. In my view, the said provision in the Notification, is to be read in a manner that would not bring about an unconstitutional result. When so read, especially in the light of the decision of the Supreme Court in the case of **Corporation Bank v. Saraswathi Abharanasala and Another** **[(2009) 19 VST 84(SC)],** the said provision in the Notification would have to be read as applicable only in respect of those cases where the person claiming refund would be unjustly enriched by the grant of refund of the tax paid by him. If the particular Clause 5 W.P.(C).No.35866 of 2010 in the Notification is made applicable even in respect of those cases where, admittedly, the dealer who paid higher tax has not passed on the said tax to any third person, then, the denial of refund to such persons would result in an unjust enrichment to the State Government, which was not entitled to the excess amount of tax paid by the dealer under the KGST Act. In the instant case, a perusal of Ext.P2 assessment order would clearly indicate that it was the specific contention of the petitioner before the assessing authority that he had not collected the tax that was levied at the last point of purchase in the State at the rate of 11%, and this aspect was verified by the 1[st] respondent Assessing Officer who found that the dealer had not collected any purchase tax during the period in question. While the 1[st] respondent then proceeded to deny the refund to the petitioner on a literal interpretation of the clause in the Notification which mandated that the tax, if any, already paid would not be refunded, in view of the opinion expressed above, I am of the view that the 1[st] respondent erred in denying the refund to the petitioner. It was not open to the 1[st] respondent to deny the petitioner the benefit of refund of tax period already paid by him at the higher rate, in a situation where he had established before the 1[st] respondent that he had not collected the tax so paid by him in excess from his customers. 6 W.P.(C).No.35866 of 2010 Resultantly, I quash Ext.P2 order, to the extent it denies the petitioner the benefit of refund of the tax paid in excess for the purchases effected during the period from 01.11.2002 to 15.11.2002. The respondent shall take immediate steps to quantify the amount of refund that is due to the petitioner on this account, and pay the same to the petitioner within a period of three months from the date of receipt of a copy of this judgment. ## **A.K.JAYASANKARAN NAMBIAR JUDGE** mns W.P.(C).No.35866 of 2010 7