UTTAM AGENCIES Vs. GOVT OF NCT OF DELHI

JUDGEMENT

(1.) Tea was liable for sales tax as pan of Kiryana goods from 1936 onwards. Vide notification dated 28/11/2000, Kiryana goods which had remained unspecified till then, were specified by introducing Entry No. 16 in the Second Schedule. So after 28/11/2000, Kiryana goods stood specified and tea did not form part of 'Kiryana goods'. By implication tea came out of Kiryana goods. By another notification of the same date kiryana goods were made liable foi sales tax at first point. Since tea was not part of Entry No. 16 of the Second Schedule, by implication tea was not liable for sales tax at first point and was liable for sales tax at last point. However, the petitioner who was distributor of Tata Tea Limited, continued collecting sales tax from the dealers at first point under the impression that tea continued to be taxable at first point as there was no separate entry for Tea. Petitioner filed sales tax returns for years 2000-2001,2001-2002 and the Department accepted the returns of sales tax in respect of sale ot tea, at first point and passed assessment orders in respect of turn over of the petitioner. The entire tax collected by the petitioner from dealers was deposited with the Department. Even after 28/11/2000, when tea had become taxable at last point, it seems that the Department as well as the petitioners were under the impression that tea continued to be taxed at first point. In order to remove this confusion a circular dated 12/11/2002, was issued under orders of Commissioner of Sales Tax clarifying that tea was taxable at last point. After issuance of this circular the Assessing Authorities issued notices to the dealers (not to the petitioner) asking dealers to pay tax on the sale of tea by them as tea was taxable at last point. Since dealers had already paid tax at first point, therefore, petitioner and the dealers all made representation to the Revenue Authority that tea should be continued to be considered as taxable at first point and the dealers should not be reassessed. As a result of this, on 1/5/2003, a specific entry was notified in respect of tea making the same taxable at first point. After this petitioners and dealers made representation to the Department that either assessments be not reopened for interreganum or adjustment of tax deposited by the petitioner should be given to the dealers who had been reassessed for the period between 28/11/2000 to 1/5/2003, when there was confusion about tea being taxable at first point or last point. This request of the petitioner was declined, hence, this writ petition.

(2.) It is argued by the petitioner that doctrine of unjust enrichment was applicable to the State equally and since the respondents have collected tax at first point and had also passed assessment orders in respect of dealers asking them to deposit tax on the sale of tea at last point, the tax collected from the dealer which has been deposited by the petitioner with the department should be refunded so that the petitioner can give back this to the dealers for payment to the Department or in the alternate an adjustment of the tax deposited by the petitioner collected from the dealers be given to the dealers. The petitioner furnished details of tax collected from different dealers to the Department, but the Department refused to give adjustment. Department of Revenue contended that the petitioner who had collected tax from the dealers considering that tea was taxable at first point, was liable to deposit the tax with the department. It was also contended that there was no such rule that a sale can be taxed only at one point, a sale can be subjected to sales tax at multiple points or at each point of sale, therefore, there was no question of unjust enrichment. It was also submitted that there was no question of misunderstanding of the notification by which tea, by implication, was taken out from Kiryana goods. After the notification, the petitioner started paying sales tax @ 8% treating tea as a part of general goods. As the petitioner had understood the notification properly that is why petitioner started paying sales tax @ 8% and, therefore, there was no confusion about tea having gone out of Kriyana goods and becoming liable to be taxed at last point. Since the tax had been collected by the petitioner, even if wrongly, the petitioner was liable to deposit the same with the Department. He stated that circular dated 12/11/2002 was only clarificatory in nature and did not change the law. The law was changed by notification itself.

(3.) The petitioner has relied upon Commissioner of Sales Tax, UP v.Auraiya Chamber of Commerce, [1986] 62 STC 327 (S.C.). In this case the question of refund of tax paid under provision of law, which was subsequently held ultra vires, was before Supreme Court. Hon'ble Supreme Court held that since tax was collected without authority of law and State had no right to collect tax in question, tax was refundable to the respondent from whom the tax was collected. In P. Rama Rao & Sons and Ors. v. State of Orissa, (1990) 77 STC 303 Court held that although there was no confusion about 'white cement' being taxable at first point or at last point, the rate of tax was also different on 'white cement' and 'common cement', the petitioners had paid tax to their sellers being of the view that 'white cement' was same thing as 'cement' and tax was payable at first point of sale. Similarly assessments were completed by the Department in respect of the sale of 'white cement' considering that 'white cement' was not a different commodity from the 'cement'. Subsequently, when the Department woke up, proceedings were initiated against the dealers for payment of sales tax at last point. Petitioners claimed adjustment of the amount of tax paid by them at first point. The Court held that the principle of unjust enrichment was applicable to the State equally and petitioners were liable to be given adjustment of tax already collected. The Court ordered the adjustment of tax paid under a mistaken belief to be made against the tax legally due. In Kasiand Sethu v. Deputy Commercial Tax Officer, (DG-CTO) Kumbakonam and Anr., (2002) 131 STC 73, Madras High Court also held that the tax paid by mistake was liable to be adjusted or refunded. In this case the motor vehicles were earlier liable to sales tax, however, they were subsequently made liable to entry tax. Petitioner who was already having nine vehicles, contacted the Department and sought clarifications. Department told him that since he had already paid sales tax he need not pay entry tax. Petitioner filed return with the Department which was accepted by the Department. However, later on petitioner was served with a notice to pay entry tax besides penalty. The Court held that the tax already paid under mistake was liable to be adjusted and since there was no mala fide on the part of the petitioner, no penalty was liable to be levied.