(Per : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Petitioners have made following substantial prayers in this petition :
“(A) This Hon'ble Court may be pleased to issue appropriate writs, orders and/or directions against the respondent No.2
(i) Declaring his recovery of the amount of Rs.1,65,29,862/- is apparently illegal, ultra vires and violative of Articles 14, 19(1)(g), 265 and 300A of the Constitution of India; and
(ii) Quashing and setting aside his order of penalty dated 22/06/1999 at Annexure A/7.
(B) Respondent No.1 quashing and setting aside the notice Annexure A/8 dated 30/08/2001 proposing to revise the order Annexure A/3 on account of Annexure A/8 being apparently illegal, ultra vires and without jurisdiction and hence violative of Articles 14, 19(1)(g), 265 and 300A of the Constitution of India.”
2. At the outset, learned counsel Shri Soparkar for the petitioners stated that the petitioners do not press the reliefs claimed in para 18(A) of the petition. We have, therefore, confined our inquiry with respect to the sole surviving prayer made in para 18(B) of the petition. Such prayer is made in following factual background.
3. Petitioner No.1 is a company registered under the Companies Act and is engaged in production of pharmaceuticals drugs. Petitioner No.1 and six other Companies framed an amalgamation scheme. Under such scheme, five different companies, namely, Cadila Laboratories Limited, Cadila Chemicals Limited, Cadila Antibiotics Limited, Cadila Exports Limited and Cadila Veterinary Private Limited amalgamated with two Companies, namely, Cadila Healthcare Private Limited (the present petitioner) and Cadila Pharmaceuticals Limited. We may hasten to add that even under such amalgamation scheme, Cadila Laboratories Limited did not merge completely with the above-mentioned two transferee companies. We may record that unlike routine amalgamations, this scheme did not involve amalgamation of a single transferor company into a single transferee company, but five different companies (one of them partially) merged in different proportions and with respect to different products into two transferee companies. The scheme provided that 1st June 1995 would be the date from which the scheme for amalgamation will be effective also referred to as the appointed date. Such scheme was presented before the Gujarat High Court in different Company Petitions filed by various concerned companies. Learned Company Judge of the Gujarat High Court by his order dated 2nd May 1997 sanctioned the said scheme as presented before him. Significantly, the order was silent on the effective date of such amalgamation.
4. Petitioner No.1 and other companies involved in such amalgamation proceedings were subjected to local sales tax under the Gujarat Sales Tax Act, 1969 ('the Act' for short). Such companies and in particular, petitioner No.1 was filing regular returns before the authorities under the Act. Upon amalgamation scheme being sanctioned by the High Court, the petitioners and other related companies involved in such amalgamation approached the Assessing Officer under the Act and requested that all assessment proceedings be consolidated. For such purpose, the Deputy Sales Tax Commissioner addressed a letter dated 12.10.98 to the Assistant Sales Tax Commissioner and informed him that upon amalgamation of such companies, their assessment have to be made as per the order passed by the Gujarat High Court. He should, therefore, examine the order of the High Court in detail and thereafter carry out the assessment proceedings and complete assessments of such companies.
5. The Assistant Commissioner of Sales Tax thereupon proceeded to carry out the assessment and passed order dated 15.1.1999. In such order, he noted that during the time when the amalgamation scheme was pending before the High Court for sanction, such Companies had made sales inter-se. Considering such sales exigible to tax, such taxes were also collected. By virtue of the High Court's order sanctioning the scheme, such companies merged in Cadila Healthcare Limited, that is, petitioner No.1 herein. The sales made during the interregnum have been reduced from the total turnover on account of such developments. He noted the contention of the petitioners that sales made during the period from the effective date of the amalgamation scheme and the scheme being sanctioned by the High Court should be treated as branch transfers. Such sales would not fall within the definition of 'sale' under the Act. On such transactions, no tax can be collected nor any penalty can be levied. The Assessing Officer accepted the contention of the petitioners and framed assessment by the order dated 15.1.1999.
6. It is this order that the Deputy Sales Tax Commissioner sought to take in revision in exercise of powers under section 67 of the Act. For such purpose, he issued a notice dated 30th August 2001. In the notice, he indicated that the amalgamation scheme was sanctioned by the High Court on 16.8.97. The assessment proceedings for the year 1995-96 were consolidated in case of all companies and assessment was made considering the transfers made during the interregnum as 'branch transfers' which is not acceptable. He further indicated that it is necessary to decide the tax liability examining the transactions of transfers of all companies made internally totaling to Rs.14,88,05,000/-. He,therefore, gave an opportunity to the petitioners to raise their objections by remaining present on 27th September 2001.
7. In response to such notice, the petitioners raised detailed objections under a communication dated 2.7.2001.
8. Despite such objections, since the revisional authority did not drop the proceedings, the petitioners have approached this Court challenging the very initiation of the revision proceedings. As noted above, prayer 18(A) pertained to several other aspects which the petitioners have not pressed before us. We have, therefore, confined our scrutiny to the validity of the notice issued by the Deputy Commissioner taking the assessment framed by the Assessing Officer in revision.
9. Learned counsel Shri Soparkar for the petitioner contended that by virtue of the order dated 2.5.97 passed by the learned Company Judge, the scheme of amalgamation of various companies into petitioner No.1 and another company came to be
the parties had envisaged 1st June 1995 as effective date. On 1st June 1995, therefore, the transferor companies lost their existence. Legally such companies thereafter did not survive. If such a proposition is accepted, any sale by such entity to the petitioner- transferee cannot be treated as sale from one entity to another. He contended that transactions must be legally treated as branch transfers and no more. On this premise, he contended that no tax under the Act could be levied on such transactions.
In this respect, the counsel placed heavy reliance on a decision of the Bombay High Court in the case of National Organic Chemical Industries Ltd. v. State of Maharashtra, 118 Company Cases 556.
10. Counsel further submitted that there was no question of unjust enrichment in the present case as on and from 1st June 1995, both the group of companies, transferor and transferee companies had distributed the products and both had started proceeding on a footing that the transactions inter-se would be recorded as branch transfer. Such transactions, therefore, did not attract any additional sale tax on the goods sold by the petitioners thereafter. He further submitted that in large number of cases of the products manufactured by the petitioners, they are governed by the price regulatory regime DPCO and in that view of the matter also, there would be no question of unjust enrichment.
11. Counsel submitted that in any case, such question would not arise in the present case, since the Deputy Commissioner is yet to finalize the liability of sales tax if at all and this Court, therefore, should not go into the question of unjust enrichment only as a matter of principle.
12. On the other hand, learned Assistant Government Pleader Ms.Mithili Mehta opposed the petition. Relying heavily on the affidavit in reply dated 6th December 2001 filed by one Bhavesh Chandrakant Shukla, Sales Tax Officer, she contended that the transactions entered into between various transferors and petitioner No.1 transferee company under the scheme of amalgamation cannot be regarded as branch transfer till the date the scheme was sanctioned by the High Court. She submitted that the petitioners having passed on the burden of such taxes would be unjustly enriched if such amount is allowed to be retained by the petitioners.
13. Counsel further submitted that there was a complex web of transfers from one company to another with a clear intention of evasion of tax through such modality of transfers followed by amalgamation of companies. She submitted that such tax evasion should not be permitted. From the affidavit, she pointed out that the modus operandi adopted by the petitioners came to the light of the Sales Tax Authorities during search and seizure operations in case of Cadila Healthcare Limited.
14. Counsel relied on the decision of the Apex Court in the case of Mcdowell and Company Ltd v. Commercial Tax Officer, (1985) 3 SCC 230 to contend that such dubious tax planning should not be permitted.
15. Before proceeding to examine the rival contentions, we may notice certain statutory provisions contained in the Act. The term 'sale' is defined in section 2(28) of the Act. Relevant portion thereof reads as under:
“(28)”Sale” means a sale of goods made within the State for cash or deferred payment or other valuable consideration and includes -
(a) any supply by a society or club or an association to its members on payment of a price or of fees or subscription,
(b) transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration,
(c) transfer of property in goods (whether as goods or in some other form) involved in execution of a works contract,
(d) delivery of goods on hire purchase or any system of payment by installments,
(e) supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.
(f) supply by way of or as part of any service or in any other manner whatsoever, of goods being food or any other article for human consumption or any drink (whether or not intoxicating) where such supply or service is for cash, deferred payment or other valuable consideration, but does not include a mortgage, hypothecation, charge or pledge and the words 'sell', 'buy' and 'purchase' with all their grammatical variations and cognate expressions shall be construed accordingly. ”
Section 3 of the Act pertains to incidence of tax and provides, inter alia, that every dealer whose turnover either of all sales or of all purchases made during the year immediately preceding the year within which the specified day falls or the year commencing on the first day of the year within which the specified day falls has exceeded the limit specified in sub-section (4) shall until such liability ceases be liable to pay tax under the Act on his turnover of sales and on his turnover of purchases, made on or after the specified day.
16. Section 40 of the Act pertains to declarations and returns which every registered dealer has to furnish. Section 41 pertains to assessment of taxes. Sub-section (1) thereof provides that the amount of tax due from a registered dealer shall be assessed separately for each year during which he is liable to pay tax or on an application by any such dealer for such period exceeding one year during which he is so liable. Section 65 of the Act pertains to appeal provisions. Section 66 specifies order which are not-appealable. Section 67 pertains to revision and is of considerable importance to us. Section 67 reads as under:
“67. Revision:
(1) Subject to the provisions of section 66 and to any rules which may be made in this behalf:-
(a) the Commissioner of his own motion within three years or on application made to him within one year from the date of any order passed by any officer appointed under section 27 to assist him may call for and examine the record of any such order and pass such order thereon as he thinks just and proper within twelve months from the date of service of notice for revision;
(b) the Tribunal, on application made to it against an order of the Commissioner (not being an order passed under sub-section (2) of section 65 in second appeal or under clause (a) in revision on an application) within four months from the date of the communication of the Order may call for and examine the record of any such order, and pass such order thereon as it thinks just and proper.
(2) Where an appeal lies under section 65 and no appeal has been filed, no proceedings in revision under this section shall be entertained upon application.
Provided that the proceeding in revision may be entertained upon an application where the applicant satisfies the Commissioner that he had sufficient cause for not preferring an appeal against the order in respect of which an application for revision is made.
(3) No order shall be passed under this section which adversely affects any person, unless such person has been given reasonable opportunity of being heard.
(4) Where the Commissioner or the Tribunal rejects any application for revision under this section, the Commissioner or, as the case may be, the Tribunal shall record the reasons for such rejection.”
17. From the statutory provisions contained in section 67 of the Act, it can be seen that under clause (a) of sub-section (1) thereof subject to the provisions contained in section 66, the Commissioner on his own motion within three years or on an application made to him within one year from the date of the order passed by any officer may call for and examine the record of any such order and pass such order thereon as he thinks just and proper within twelve months from the date of service of notice for revision. Sub-section (3) of section 67, however, provides that no such order shall be passed which adversely affects any person unless such person is given reasonable opportunity of being heard.
18. From the above provisions, it can be gathered that the Commissioner has the power to take an order passed by any officer under the Act either on a motion being made to him or even suo motu. In case of a revision petition being presented before him, such powers could be exercised within one year from the date of the order questioned. Suo motu powers, however, could be exercised within three years from the date of the order. His powers flow from clause (a) of sub-section (1) which empowers him to call for and examine the record of any such order and pass such order thereon as he thinks fit just and proper. The powers of revision of the Commissioner are thus very wide. He can within three years from the date of the order being taken under revision (or one year in case of a motion being made to him) exercise such powers suo motu and pass such order as he thinks just and proper. In addition to this time limit, there are only two procedural limitations to such exercise of powers. Firstly, the revisional order must be passed within twelve months from the date of service of notice of revision and secondly, no such order could be passed without hearing the person who is likely to be adversely affected by such order.
19. Bearing in mind such revisional powers of the Commissioner, we may examine the challenge of the petitioners. In this respect, it is not in dispute that petitioner No.1 was one of the companies which was a transferee company in the scheme of amalgamation. Under the scheme of amalgamation, five different companies agreed to be amalgamated into two different companies in different proportions and product-wise division was made into petitioner No.1 and another transferee company. Such scheme envisaged its appointed date as 1st June 1995. The said scheme was duly sanctioned by the Gujarat High Court by an order dated 2nd May 1997. We have perused the order of the High Court. Such order does not specify any effective date of amalgamation of the scheme. That being the position, as per the well settled legal proposition, the order of the High Court sanctioning the scheme would relate back to the date mentioned in the scheme for amalgamation of the companies. In this respect, we may make a reference to a decision of the Apex Court in the case of Marshall Sons & Co. (India) Ltd. v. Income-tax Officer, AIR 1997 SC 1763. In the said decision, the Apex Court observed that every scheme of amalgamation has to necessarily provide a date of effect from which the amalgamation shall take place. While sanctioning the scheme, it is open to the Court to modify the said date and prescribe such date of amalgamation as it thinks appropriate in the facts and circumstances of the case. If the Court so specifies a date, there is little doubt that such date would be the date of amalgamation, but where the Court does not prescribe any specific date but merely sanctions the scheme, it should follow that that the date of amalgamation is the date specified in the scheme as the transfer date. The Court dispelled the apprehension of the counsel for the Revenue that such a proposition would give rise to several complications. The Apex Court held and observed as under:
“14. Every scheme of amalgamation has to necessarily provide a date with effect from which the amalgamation/transfer shall take place. The scheme concerned herein does so provide viz. January 1, 1982. It is true that while sanctioning the scheme it is open to the Court to modify the said date and prescribe such date of amalgamation/transfer as it thinks appropriate in this facts and circumstances of the case. If the Court so specifies a date, there is little doubt that such date would be the date of amalgamation/date of transfer. But where the Court does not prescribe any specific date but merely sanctions the scheme presented to it - as has happened in this case - it should follow that the date of amalgamation/date of transfer is the date specified in the scheme as "the transfer date". It cannot be otherwise. It must be remembered that before applying to the Court under Section 391(1) a scheme has to be framed and such scheme has to contain a date of amalgamation/transfer. The proceedings before the Court may take sometime; indeed, they are bound to take some time because several steps provided by Sections 391 to 394-A and the relevant Rules have to be followed and complied with. During the period the proceedings are pending before the Court, both the amalgamating units, i.e., the Transferor Company and the Transferee Company may carry on business, as has happened in this case but normally provision is made for this aspect also in the scheme of amalgamation. In the scheme before us, clause 6(b) does expressly provide that with effect from the transfer date, the Transferor Company (Subsidiary Company) shall be deemed to have carried on the business for and on behalf of the Transferee Company (Holding Company) with all attendant consequences. It is equally relevant to notice that the Courts have not only sanctioned the scheme in this case but have also not specified any other date as the date of transfer/amalgamation. In such a situation, it would not be reasonable to say that the scheme of amalgamation takes effect on and from the date of the order sanctioning the scheme. We are, therefore, of the opinion that the notices issued by the Income-tax Officer (impugned in the writ petition) were not warranted in law. The business carried on by the Transferor Company (Subsidiary Company) should be deemed to have been carried on for and on behalf of the Transferee Company. This is the necessary and the logical consequence of the Court sanctioning the scheme of amalgamation as presented to it. The order of the Court, sanctioning the scheme, the filing of the certified copies of the orders of the Court before the Registrar of Companies, the allotment of shares etc. may have all taken place subsequent to the date of amalgamation/transfer, yet the date of amalgamation in the circumstances of this case would be January 1, 1982 . This is also the ratio of the decision of the Privy Council in Raghubar Dayal, v. Bank of Upper India Ltd., AIR 1919 PC 9.
15. Counsel for the Revenue contended that if the aforesaid view is adopted then several complications will ensue in case the Court refuses to sanction the scheme of amalgamation. We do not see any basis for this apprehension. Firstly, an assessment can always be made and is supposed to be made on the Transferee Company taking into account the income of both the Transferor and Transferee Company. Secondly, and probably the more advisable course from the point of view of the Revenue would be to make one assessment on the Transferee Company taking into account the income of both of Transferor or Transferee Companies and also to make separate protective assessments on both the Transferor and Transferee Companies separately. There may be a certain practical difficulty in adopting this course inasmuch as separate balance-sheets may not be available for the Transferor and Transferee Companies. But that may not be an insuperable problem inasmuch as assessment can always be made, on the available material, even without a balance-sheet. In certain cases, best- judgment assessment may also be resorted to. Be that as it may, we need not pursue this line of enquiry because it does not arise for consideration in these cases directly.”
If this be the position, short question that arises is whether any transfers made by the transferor companies to the transferee companies can be treated as 'sale' within the meaning of the term as defined under the Act.
20. As already noted, the term 'sale' has been defined under section 2(23)of the Act. Upon the High Court sanctioning the scheme for amalgamation, the effective date of amalgamation would be the date mentioned in the scheme, namely, 1st June 1995. Such legal fall out must be given its full implication for all purposes including for the purposes of the Act. If, therefore, in eye of law from 1st June 1995, the transferor companies did not exist, and by virtue of the order of the High Court sanctioning the scheme relating back to the date envisaged in the scheme, ceased to have any legal existence, any transfer from the transferor to the transferee companies must be treated as branch transfer. This was also the view expressed by the Bombay High Court in the case of National Organic Chemicals Industries Ltd. (supra). In the said case, this precisely was the issue presented before the High Court. A Division Bench of the High Court ruled that the Company loses its corporate personality from the date declared by the competent authority under the Companies Act. In case of amalgamation of a company, the High Court being the competent authority, when the High Court sanctions the scheme for amalgamation and declares the effective date from which such amalgamation would operate, from such date, the corporate personality of the company gets destroyed. On such principle, the Bombay High Court ruled that no sales tax was payable on the transfer by the transferor company to the transferee company during the period when the scheme for amalgamation was framed till the same was sanctioned by the High Court. We may notice that the statutory provisions arising for consideration in the Bombay High Court contained in the Maharashtra Sales Tax Act in all material purposes are similar to the provisions arising in the Gujarat Sales Tax Act.
21. We may also notice that in the Gujarat Value Added Tax Act, 2003, the Legislature has made a specific provision to deal with such a situation. In section 52 of the said Act, it is provided as under :
“52. Amalgamation of companies:
(1) When two or more companies are amalgamated by the order of court or of the Central Government and the order is to take effect from a date earlier to the date of the order and any two or more of such companies have sold or purchased any goods to or from each other during the period commencing on the date from which the order is to take effect and ending on the date of the order then such transactions of sale and purchase shall be included in the turnover of sale or purchase of the respective companies and shall be assessed to tax accordingly.
(2) Notwithstanding anything contained in the said order, for all the purposes of this Act, the said two or more companies shall be treated as distinct companies for all the periods upto the date of the said order and the registration certificates of the said companies shall be cancelled, where necessary, with effect from the date of the said order.
Explanation – Words and expressions used in this section but not defined shall have the respective meanings assigned to them in the Companies Act, 1956.”
It is, perhaps, not possible to argue that in view of section 52 of the Gujarat Value Added Tax Act, 2003, in a situation as in the present case, the transfers could be treated as branch transfers and therefore not exigible to tax. Perhaps, to counter a situation as in the present case and other incidents of transfers of companies and to avoid pilferage of tax, the Legislature consciously provided such a provision in the Gujarat Value Added Tax Act, 2003. Admittedly, no such provision is made in the Act. In absence of any such statutory provision, the respondent would have no authority to collect tax on such transactions. Insofar as the legal contentions of the parties are concerned, the above is our view.
22. How would such a proposition of law apply in the present case is yet to be specified. We may recall that the petitioners have approached at a stage when the Deputy Commissioner has merely issued a notice for taking the assessment order in suo motu revision. The petitioners' fundamental opposition to such initiation of proceedings was that being branch transfers, no tax was exigible and the Assessing Officer, therefore, committed no error. This contention, however, shall have to be examined in light of various factors. Firstly, this is not a case where one company merges into another company and thus there is a clear case of single transferor company merging into single transferee company. This is a complex case where five companies joined together to create a scheme for amalgamation into two companies. Secondly, even these five companies did not totally merge. One of them merged partially and retained its independent entity. Further, the merger was divided into two separate companies, including petitioner No.1 herein. Which are the exact transactions that took place between these seven corporate bodies from 1st June 1995 till 2nd May 1997 are obviously not on record before us. Such complex transactions naturally cannot be made subject matter of our scrutiny in a writ petition at a stage when the Deputy Commissioner has yet to make up his mind on various factual and legal issues which may arise during the course of the revision proceedings. In that view of the matter, despite our clear view on the legal contentions raised before us, we are not inclined to terminate the revision proceedings summarily. We would certainly leave it open to the Deputy Commissioner to examine all factual aspects and come to a final conclusion, of course, bearing in mind the legal opinion which we have expressed.
23. There is yet another aspect which needs to be addressed before closing. Counsel for the respondent, we may recall, vehemently contended that granting of any relief to the petitioners would amount to unjust enrichment. She submitted that sales tax being a indirect tax and the petitioners having collected the same from the consumers cannot be allowed to retain the same. On the other hand, learned counsel Shri Soparkar opposed such proposition submitting that in majority of cases, there was virtually no question of collecting such taxes since such transactions were made only between the transferor and transferee companies inter-se.
24. Two issues need to be addressed in this respect. Firstly, should we examine this question of unjust enrichment at all and secondly, if we permit ourselves to do so, would such a principle apply.
25. With respect to the first issue, learned counsel Shri Soparkar with all persuasive power at his command suggested that the Court should consider the relief claimed by the petitioners and decide whether the same should be granted or not without opening the arena which does not arise in this litigation.
26. With respect to such contention, with great respect, we are unable to concur. Firstly, the situation is somewhat peculiar. At the time when the transactions took place, the merger scheme was not yet sanctioned by the High Court. Merger of the companies therefore had not yet been effected. Transactions of sale and purchase between the two companies thus were subject to sales tax regime. The assessee also accordingly filed returns of tax so paid/collected. By virtue of subsequent order of the High Court sanctioning the amalgamation scheme and operation of law, such merger related back to the effective date envisaged in the merger scheme. Thus by virtue of such deeming fiction all transactions which took place between the date of the merger scheme and the date of the High Court sanctioning the merger, became those in the nature of branch transfers.
27. Secondly, the petitioner has approached this Court invoking writ jurisdiction under Article 226 of the Constitution. Writ jurisdiction, as is well known is very wide and powers of a writ court, undoubtedly, are vast. Nevertheless, the writ jurisdiction is essentially one of equity jurisdiction. When the Court is examining a legal challenge presented before it, while deciding whether a particular writ prayed for by the petitioner should or should not be granted, the Court cannot and should not close its eyes to all facts which arise from the record. It would be incorrect to suggest that while examining the prayers of a petitioner, writ Court should look into the prayers alone and even if equity so demands, refuse to examine other elements relatable to such prayers.
16.07.2012
28. Writ jurisdiction under Article 226 of the Constitution has a wide amplitude. It empowers the High Courts to issue writs of various natures. Such powers are thus extraordinary in nature. The writ jurisdiction traces its origin to prerogative writs issued by the Crown in England. These writs are therefore, referred as prerogative writs and even now retain its discretionary character. The Court will not always issue a writ simply because it is lawful to do so. Therefore, even if a petitioner establishes infringement of some legal right, the Court may still refuse to issue a writ on the grounds such as suppression or delay and laches and the like. Of course, such discretion is to be exercised judicially on the basis of well laid down principles and should not be confused with the whim or fancy of the Court. When therefore a petitioner invokes writ jurisdiction and urges the High Court to issue an appropriate writ, his legal rights and infringement thereof are not the only considerations before the Court.
29. Principle of unjust enrichment was statutorily introduced in the Central Excise Act 1944 under section 11B pertaining to claim for refund of duty. Such provision was inserted by Amending Act 25 of 1978 with effect from 17.11.1980. Sub-section (1) of section 11B of the Central Excise Act provides for a machinery for the assessee to claim refund of excise duty. Sub-section (2) and subsection (3) of section 11B which statutorily provide for non-refund of duties which refund would amount to unjust enrichment, read as under:
“11-B Claim for refund of duty:
....
(2) If, on receipt of any such application, the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise is satisfied that the whole or any part of the duty of excise and interest, if any, paid on such duty paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund:
Provided that the amount of duty of excise and interest, if any, paid on such duty as determined by the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise under the foregoing provisions of this sub-section shall, instead of being credited to the Fund, be paid to the applicant if such amount is relatable to -
(a) rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;
(b) unspent advance deposits lying in balance in the applicant's current account maintained with the Commissioner of Central Excise.
(c) refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under this Act;
(d) the duty of excise and interest, if any, paid on such duty paid by the manufacturer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person.
(e) the duty of excise and interest, if any, paid on such duty, borne by the buyer, if he had not passed on the incidence of such duty and interest if any paid on such duty to any other person.
(f) the duty of excise and interest, if any, paid on such duty borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify;
Provided further that no notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government, the incidence of duty and interest, if any, paid on such duty has not been passed on by the persons concerned to nay other person.
(3) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal of any Court in any other provision of this Act or the rules made thereunder or any other law for the time being in force, no refund shall be made except as provided in sub-section (2).”
Long before the said statutory provisions were made, Indian Courts have been recognizing the principle that in case of indirect taxes, the assessee during the period when the dispute regarding the payability or otherwise of a particular tax may have passed on the burden to the ultimate consumer. In such a situation, even while holding and declaring that levy was illegal or that the tax so collected was at a higher rate than legally permissible, the Courts have been refusing to grant refund to the assessee if it is found that such burden of tax was passed on to the consumer.
30. In the case of U.B.S.E.B. v. City Board, Mussoorie, (1985) 2 SCC 16, the Apex Court in the context of electricity duty, refused to grant relief to the Electricity Board for the period prior to filing of the writ petition observing that “we are of the view that in cases of this nature where there is little or no possibility of refunding the excess amount collected from the ultimate consumer to him and the granting of the relief to the petitioner would result in his unjust enrichment, the Court should not ordinarily direct any refund in exercise of its discretion under Article 226 of the Constitution”.
31. In the case of I.T.C. Ltd. v. State of Karnataka, 1985 (Supp) SCC 476, the Apex Court in the context of levy of market fees by the APMC applied the principle of unjust enrichment.
32. In the case of Entry Tax Officer v. Chandanmal Champalal & Co., (1994) 4 SCC 463, the Apex Court once again applied the principle of unjust enrichment in the context of entry tax on goods in the State of Karnataka. The Apex Court refused to grant direction for refund of tax already collected on the premise that the burden thereof would have been passed on to the consumer. The Apex Court made the following observations :
“6. While we cannot deny the force and substance in the submissions urged by Shri Narasimha Murthy, we do not find it possible to give effect to it in the light of the decisions referred to by Shri Salve. It is true that Burmah Shell', Hiralal Thakorlal and Parekh Automobiles were concerned with State enactments which empowered the municipalities to levy the impost, all the same a close reading of the said decisions does indicate that theyhave read the words 'sale therein' occurring in Entry 52 of List 11 as meaning 'a sale of goods within a local area for consumption or use therein' - though as a matter of fact, in a given case, the goods may be taken out and consumed there. The decisions clearly say that where the goods are sold within a local area for the purpose of being taken out of that local area and are actually taken out, no levy is permissible under Entry 52. It is not possible to distinguish the said decisions on the grounds suggested by Shri Murthy. There is yet another reason. Octroi or any impost in the nature of that impost has always been looked upon with certain amount of disfavour. Acceptance of the State's contention in this case would ultimately result in driving up the price of these goods to the consumer. It would become another sales tax in effect. In the circumstances, we are inclined to - indeed we have no option but to affirm the decision of the Karnataka High Court on the meaning of the words 'sale therein' in Section 3 of the Karnataka Act. At the same time, we find it not possible to agree with the Karnataka High Court insofar as it directed refund of the amount, which may be found to have been paid in excess of the legal liability, to the respondents. Any such direction would amount to unjust enrichment of the respondents who are merely dealers and have passed on the burden to the purchasers/consumers. The dealers themselves have not suffered any loss. They merely passed on the liability. In such cases, this Court has been refusing to refund the tax See State of M.P. v. Vyankatla and Amar Nath Om Prakash v. State Of Punjab.
7. An identical question was considered by a Division Bench of this Court comprising J.S. Verma and A.S.Anand,JJ. in Indian Oil Corpn. v. Municipal Corpn., Jullundhar with respect to entry tax itself. After holding that the levy of duty was not justified in law, the Bench dealt with the question of refund in para 23 in the following words:(SCC p. 344) "23. Before parting with the appeal, we would however, like to take note of the submission made on behalf of the Municipal Corporation with regard to the question of refund of the octroi duty, already deposited by the appellant. The question of refund, in our opinion, does not arise. The IOC has collected the octroi duty from its dealers and agents, who have in turn passed on the burden to the consumer. Thus, having collected the octroi duty, there is no equity in favour of the IOC to claim a refund of the same. Learned counsel for the appellant also conceded that the question of refund, in the facts and circumstances of the case, does not arise and we, therefore, hold that the appellant shall not be entitled to any refund of the octroi duty already deposited by the appellant with the Municipal Corporation."
8. We are in respectful agreement with the above principle. In this case also, it is not brought to our notice that the respondents have alleged and/or established that they have not passed on the duty to the purchasers/consumers. The normal presumption is that they have done so. If they say otherwise, it is for them to allege and establish the same. In the absence of any such allegation and proof, the direction of refund is not called for.”
33. In the case of State of Rajasthan v. Novelty Store, (1998)9 SCC 570, the Apex Court reversed the decision of the High Court only on the ground that the respondent therein after paying octroi had passed on the burden to the consumers and collected from the customers on the cloth purchased and sold by them. The Apex Court held that therefore order of refund would be unjust enrichment to them.
34. Such question indirectly came up for consideration once again before the Apex Court in the case of Mafatlal Industries Ltd. v. Union of India, (1997) 5 SCC 536. In the context of Central Excise and Customs duties, the Apex Court in the majority decision held that in all situations refund can only be allowed where the manufacturer assessee has not passed on the burden of tax to the third parties viz. consumers. There would be a presumption of passing on the burden on the consumers and it would be the burden on the manufacturer to rebut the presumption by establishing to the contrary.
35. From the above, it can be seen that even in absence of statutory provisions, in case of indirect taxes, Indian Courts have been applying the principle of unjust enrichment on the premise that collection of tax though may have been declared unlawful, if in the meantime, the assessee had passed on the burden thereof to the consumer, refund of such tax to the assessee would amount to unjust enrichment and such refund, therefore, should not be granted.
36. In the present case, from the available material on record, it is neither possible nor our desire to ascertain as to what extent the burden of tax deposited by the petitioner with the Government authorities was passed on to the third party. Learned counsel for the petitioners strenuously urged that in majority of the cases, transactions were in such a nature that the taxes were paid/collected by the transferor and the transferee companies and no third party transactions were involved. We are not inclined to go into such an issue. This is so because we propose to permit the Commissioner to hear the revision application on merits. Secondly, full records are not before us. Thirdly, in such complex situation, we would not like to examine the issue at the first instance which can be better done by the Commissioner in the process of hearing revision application.
37. In the result, subject to the declaration made above, namely, that the order of the High Court sanctioning the amalgamation scheme would relate back to the effective date as envisaged in the scheme and that therefore, the merger should be effective from 1st June 1985, we permit the Deputy Commissioner to proceed further with the pending revision application in accordance with law. While doing so, question of refund/adjustment of tax, burden of which is passed on to the third party would also be examined. To the extent it is found that the such burden was passed on by the petitioners to the third party, principle of unjust enrichment will apply. However, we clarify that if the transaction was purely between the transferor and transferee companies with no further repercussions, such a transaction would not come within the principle of unjust enrichment.
38. With the above directions and clarifications, the petition is disposed of. Rule is partly made absolute. Interim relief is vacated.
(Akil Kureshi, J.) (vjn) (Harsha Devani,J.)