IDEAL TRADING COMPANY Vs. SALES TAX OFFICER

JUDGEMENT

(1.) PETITIONER, a dealer in coffee is challenging notification Ext. P1 to the extent it declines the benefit of refund to those who have paid sales tax though they are really not liable to pay tax. Coffee was taxable at the point of first purchase in the State up to 31/03/1998. However the Finance Bill, 1998 proposed to shift the point of levy of tax from first purchase to last purchase in the State. During the pendency of the Finance Bill petitioner and other dealers engaged in purchase of coffee did not remit tax at first purchase because under the provisions of the Bill levy of tax was shifted from first purchase to the last purchase point with effect from 01/04/1998. However ultimately when the Bill was passed, the proposal was dropped and consequently tax on coffee remained payable at the point of first purchase in the State. Government vide Ext. P1 notification granted exemption to purchasers of coffee who sold the same for export against Form 18A. PETITIONER's case is that when there was threat of penalty petitioner approached this Court and based on the judgment of this Court petitioner deposited tax on the first purchase of coffee. Based on exemption granted under Ext.P1 petitioner claimed refund of tax which is rejected for the reason that notification prohibits refund of paid tax.

(2.) AFTER hearing both sides, we are of the view that the question referred pertaining to the validity of that portion of notification which prohibits refund need not be decided because in the first place the petitioner's claim for exemption from tax is tenable under Section 5(3) of the CST Act and therefore petitioner can claim refund without relying on notification. Besides this payment of tax made by the petitioner cannot be treated as tax paid but only a deposit made pursuant to Court orders pending adjudication. Tax deposited being the tax on first purchase is not collected tax and therefore unjust enrichment does not arise if refund is granted to the petitioner. On these peculiar facts we are of the view that prohibition clause contained in Ext. P1 does not apply to the petitioner and the petitioner is entitled to refund of tax. Even though we decline to decide the question referred we allow the original petition directing the Assessing officer to grant refund of the amount deposited by the petitioner within a period of two months from the date of receipt of a copy of this judgment.