Hon. Dr. Satish Chandra,J.
(Delivered by Hon.Tarun Agarwala,J.) The petitioner is a registered dealer engaged in the business of job works of fixing PVC flooring in various government departments, semi government departments and corporations. According to the petitioner, contracts were executed, and on the basis of the job works done by him, bills were presented and payments were made after deduction of tax at source (T.D.S.). According to the petitioner, for the assessment year 1987-88 to 1998-99, the petitioner was not exigible to payment of trade tax and, accordingly, applied for refund during the assessment proceedings. It has been stated that the stand of the petitioner was accepted in the assessment proceedings and the petitioner was not found to be exigible to sales tax (now trade tax) for the job works done by him. The assessing authority in the assessment order directed the office to verify the T.D.S. certificate and, if the same was found to be correct, the amount deducted was directed to be paid to the petitioner.
According to the petitioner, certain amount was refunded in certain assessment years either in full or in part but balance amount, as per the T.D.S. Certificates, remained unpaid for one reason or the other. The petitioner, accordingly, made various applications to the Assessing Officer praying for the refund of the T.D.S. amount. Separate orders were passed by the Assessing Officer on the applications of the petitioner directing the office to refund the amount after due verification. In spite of these orders, the office of the Assessing Officer failed to refund the amount. Accordingly, an application dated 13.09.2005 was filed praying for refund of the T.D.S. amount along with interest. According to the petitioner, between the period 1987-88 to 1998-99, a total amount of Rs. 4,62,368.00 was deducted as tax at source, out of which an amount of Rs. 1,92,969.74 was refunded and the balance amount of Rs. 2,88,081.00 remained unpaid. The petitioner, accordingly, prayed that the said amount along with interest should be refunded.
It transpires that this request of refunding the amount along with interest infuriated the department and, instead of refunding the balance amount, the respondents, as a counter blast, issued a notice dated 06.02.2006 alleging that the petitioner was not entitled for any refund of the T.D.S. amount as prima facie it was found to be a case of unjust enrichment. The department directed the petitioner to file copies of the agreement with regard to the job works for the purpose of finding out as to whether tax was realised by the petitioner from the contractee or not. The petitioner submitted a reply indicating that it was not a case of unjust enrichment and the petitioner, in the course of execution of job works, had also purchased certain materials from the local market, which was tax paid and had not realised such tax from the contractee. On the other hand, the T.D.S. was deducted by the contractee as per the mandatory provision of Section 8-D of the U.P. Trade Tax Act, 1948 (hereinafter referred as the Act). In spite of this reply, the respondents issued further notices dated 18.03.2006, 03.05.2006 and 02.06.2006 against which the petitioner submitted the same reply as given earlier. Eventually, the respondents passed the order dated 11.08.2006 under Section 29-A (2) of the Act disallowing the petitioner's claim for refund of the T.D.S. amount on the ground of unjust enrichment. The authority held that the burden of proof was upon the petitioner to show that the goods purchased were tax paid and that the burden was upon the assessee to show that no tax was realised from the contractee. The claim for refund was rejected by the Assessing Officer by relying upon the decision of the Constitution Bench of the Supreme Court in the case of Mafat Lal Industries Ltd. Vs. Union of India and others 1998 (111) STC 467. The petitioner, being aggrieved, by the said order has filed the present writ petition.
In the counter affidavit, the stand of the respondents is the same, namely, that it was a case of unjust enrichment and such tax collected by the petitioner cannot be refunded. The respondent however, admitted that during the assessment proceedings, the stand of the petitioner was accepted and since the goods supplied under the agreement was not liable to tax, the petitioner was found not liable to pay the tax for the period 1987-88 to 1998-99. The learned Standing Counsel submitted that since the goods supplied by the petitioner was not liable for tax, there was no reason for the alleged deduction of tax at source and, consequently, the burden was upon the petitioner to show that no tax was realised from the contractee. Since the burden had not been discharged, the principle evolved in the case of Mafat Lal Industries (Supra) with regard to unjust enrichment would squarely apply.
In the light of the aforesaid, the Court has heard Sri Praveen Kumar, the learned counsel for the petitioner and Sri C.B.Tripathi, the learned counsel for the respondents.
The principle of unjust enrichment as evolved by Supreme Court in the case of Mafat Lal Industries's (Supra) is a just and salutary doctrine, namely, that no person can seek to collect the tax or duty from both ends. In other words, no person can collect the duty from the purchaser at one end and collect the same from the State on the ground that it had been collected from him contrary to law. In that light, the doctrine of unjust enrichment was evolved contending that the power of the Court was not meant for unjustly enriching a person. In this regard the Supreme Court held that in a case where any claim for refund, whether on the ground of mis-interpretation or mis-application of the statute and/or the rules thereunder or on the ground of unconstitutionality, could succeed only if the petitioner alleged and established that he had not passed on the burden of duty or tax to another person and only in that situation his claim would be allowed.
In the case of State of Maharashtra and others Vs. Swanstone Multiplex Cinema Private Limited {2009 (8) SCC 235} the petitioner availed the exemption in the matter of payment of entertainment duty. The petitioner claimed refund of the duty realised from him. The Supreme Court invoked the doctrine of unjust enrichment and did not allow the duty collected by the said petitioner to be refunded as it found that the burden of exemption of tax was passed on to the consumer.
In STO Vs. Ajit Mills Ltd. {1977 (4) SCC 98} the Supreme Court held that no person shall collect any sum by way of sales tax, which is not exigible according to law, and that a person so collecting the tax was not only liable to pay a penalty not exceeding rupees two thousand but in addition thereto, any sum collected by the person by way of tax in contravention of provision of law was also liable to be forfeited to the State Government. In the light of this principle, the Supreme Court in the case of Mafat Lal Industries (Supra) resorted to the doctrine of unjust enrichment by observing the following:
"108 (iii) A claim for refund, whether made under the provisions of the Act as contemplated in Proposition (i) above or in a suit or writ petition in the situations contemplated by Proposition (ii) above, can succeed only if the plaintiff-petitioner alleges and establishes that he has not passed on the burden of duty to another person/other persons. His refund claim shall be allowed/decreed only when he establishes that he has not passed on the burden of the duty or to the extent he has not so passed on, as the case may be. Whether the claim for restitution is treated as a constitutional imperative or as a statutory requirement, it is neither an absolute right nor an unconditional obligation but is subject to the above requirement, as explained in the body of the judgment. Whether the burden of the duty has been passed on, the claimant cannot say that he has suffered any real loss or prejudice. The real loss or prejudice is suffered in such a case by the person who has ultimately borne the burden and it is only that person who can legitimately claim its refund. But where such person does not come forward or where it is not possible to refund the amount to him for one or the other reason, it is just and appropriate that that amount is retained by the State i.e. by the people. There is no immorality or impropriety involved in such a proposition.
The doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same from the State on the ground that it has been collected from him contrary to law. The power of the court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched."
In the light of the aforesaid, it was urged by the learned counsel for the respondents that the claim of refund could not be entertained if the burden had been passed on the consumer and that a person claiming refund cannot be allowed on the principle of unjust enrichment.
Before proceeding, we consider it appropriate to peruse the provisions of Sections 8-D, 29 and 29-A of the Act. For facility the said provisions are extracted hereunder:
"Section 8-D - Tax deduction from the amount payable to Works Contractor (1) Notwithstanding anything contained in sub-section (2) of Section 8-A, every person responsible for making payment to any dealer (hereinafter in this section referred to as the contractor) for discharge of any liability on account of valuable consideration payable for the transfer of property in goods (whether as goods or in any other form) in pursuance, of a works contract, not being a building contract of such class or value as may be notified by the State Government in public interest in this behalf, shall, at the time of making such payment to the contractor, either in cash or in any other manner, deduct an amount equal to four per centum of such sum towards part or, as the case may be, full satisfaction of the tax payable under this Act on account of such works contract:
Provided that the Assessing Authority may, if satisfied, that it is expedient in the public interest so to do and for reasons to be recorded in writing order that in any case or class of cases no such deduction shall be made or, as the case may be, such deduction shall be made at lesser rate:
Provided further that where any deduction has been made by a contractor from the payments made to his sub-contractor in accordance with sub-section (2), the amount of such payments shall be deducted from the amount on which deduction is to be made under this sub-section:
Provided also that where the goods referred in this sub-section are covered by Sections 3,4 or 5 of the Central Sales Tax Act, 1956, no amount shall be deducted under this subsection in respect of such goods.] (2) Any contractor responsible for making any payment or discharge of any liability to any subcontractor, in pursuance of a contract with the sub-contractor, for the transfer of property in goods, whether as goods or in some other form, involved in the execution, whether wholly or in part, of the work undertaken by the contractor, shall, at the time of such payment or discharge, in cash or by cheque or draft or by any other mode, deduct an amount equal to four percent of such payment or discharge, purporting to be a part of full amount of the tax payable under this Act on such transfer from the bills or invoices raised by the sub contractor as payable by the contractor:
Provided that no deduction under this sub-section shall be made on the amount on which deduction has already been made under sub-section (1).
(3) The amount deducted under sub-section (1) or sub-section (2) shall be deposited into the Government Treasury by the person making such deduction before the expiry of the month following that in which deduction is made.
(4) The person making such deductions under sub-section (1) or sub-section (2) shall, at the time of payment or discharge furnish to the person, from whose bills or invoice such deduction is made, a certificate in such form and manner and within such period as may be prescribed.] [(4-A) The person responsible for making the payment to the contractor or sub-contractor shall submit such return of such payments at such intervals, within such period, in such form and verified in such manner, as may be prescribed, but the assessing authority may in its discretion for reasons to be recorded, extend the date for the submission of the return by such person.] (5) Any deduction made in accordance with the provisions of this section and credited into the Government Treasury shall be treated as a payment of tax on behalf of the person from whose bills or invoices the deduction has been made, and credit shall be given to him for the amount so deducted on the production of the certificate, referred to in sub-section (4), in the assessment made for the relevant assessment year.
(6) If any such person, as is referred to in sub-section (1) or subsection (2), fails to make the deduction or, after deducting, fails to deposit the amount so deducted, as required by subsection (3), the Assessing Authority may, after giving to such person an opportunity of being heard, by order in writing, direct that such person shall pay, by way of penalty, a sum not exceeding twice the amount deductible under this section but not so deducted and, if deducted, not so deposited into the Government Treasury.
(7) Without prejudice to the provisions of sub-section (6), if any such person fails to make the deduction or, after deducting, fails to deposit the amount so deducted, he shall be liable to pay simple interest at the rate of eighteen percent per annum on the amount deductible under this section but not so deducted and, if deducted, not so deposited, from the date on which such amount was deductible to the date on which such amount is actually deposited.
(8) Where the amount has not been deposited after deduction, such amount together with interest referred to in sub-section (7) shall be a charge upon all the assets of the person concerned.
(9) Payment by way of deduction in accordance with sub-section (1) or sub-section (2) shall be without prejudice to any other mode of recovery of tax due under this Act from the contractor or sub-contractor, as the case may be.
Explanation.--For the purposes of this section, 'Assessing Authority' means the officer having jurisdiction over the place where the place of business or residence of the person is located.
Section 29 - Refund (1) The assessing authority shall, in the manner prescribed, refund to a dealer any amount of tax, fees or other dues paid in excess of the amount due from him under this Act:
Provided that the amount found to be refundable shall first be adjusted towards the tax or any other amount outstanding against the dealer under this Act or under the Central Sales Tax Act, 1956 (Act 74 of 1956), and only the balance, if any, shall be refunded.
(2) If the amount found to be refundable in accordance with sub-section (1) is not refunded as aforesaid within three months from the date of order of refund passed by the Assessing Authority or, as the case may be, from the date of receipt by him of the order of refund, if such order is passed by any other competent authority or Court, the dealer shall be entitled to simple interest on such amount at the rate of twelve percent per annum from the date of such order or, as the case may be, the date of receipt of such order of refund by the Assessing Authority to the date of the refund:
Provided that for calculation of interest in respect of any period after the 26th day of May,1975, the sub-section shall have effect as if for the words six months the words three months were substituted and for the words six percent the words twelve percent were substituted.
(3) Notwithstanding any judgment, decree or order of any Court or authority, no refund shall be allowed of any tax or fee due under this Act on the turnover of sales or purchases or both, as the case may be, admitted by the dealer in the returns filed by him or at any stage in any proceedings under this Act.
[(4) Notwithstanding anything contained in sub-sections (1), (2) and (3), where the tax has been paid by a dealer on purchase of certain goods and the value of goods manufactured out of such goods in inclusive of such tax and the State Government remits the tax liability on such purchases retrospectively, the dealer shall not be entitled to refund of tax paid on purchases of such goods unless he proves to the satisfaction of the Assessing Authority that he has not passed on the liability of such tax to any party as a result of any sale or otherwise.] ExplanationI. --The date of refund shall be deemed to be the date on which intimation regarding preparation of the refund voucher is sent to the dealer in manner prescribed.
Explanation II.--The expression 'refund' includes any adjustment under the proviso to sub-section (1).
Section 29-A - Procedure for disbursement of amount wrongly realised by dealer as tax (1) Where any amount is realised from any person by any dealer, purporting to do so by way of realisation of tax on the sale or purchase of any goods, in contravention of the provisions of sub-section (2) of Section 8-A, such dealer shall deposit the entire amount so realised in such manner and within such period, as may be prescribed.
(2) Any amount deposited by any dealer under sub-section (1) shall, to the extent it is not due as tax, be held by the State Government in trust for the person from whom it was realised by the dealer, or for his legal representatives, and the deposit shall discharge such dealer of the liability in respect thereof to the extent of the deposit.
(3) Where any amount is deposited by any dealer under sub-section (1), such amount or any part thereof shall, on a claim being made in that behalf be refunded, in the manner prescribed, to the person from whom such dealer had actually realised such amount or part, or to his legal representatives, and to no other person:
Provided that no such claim shall be entertained after the expiry of three years from the date of the order of assessment or one year from any date of the final order on appeal, revision or reference, if any, in respect thereof, whichever is later.
Explanation.--The expression "final order on appeal, revision or reference," includes an order passed by the Supreme Court under Article 32, Article 132, Article 133, Article 136 or Article 137 or by the High Court under Article 226 or Article 227 of the Constitution."
The provisions of Section 8-D of the Act makes it apparently clear that is mandatory and the contractee is duty bound to deduct an amount equal to four percent towards tax payable under the Act on account of works contract. The tax which is deducted is on account of the works contract and not for supply of the goods. Sub-clause (5) of Section 8-D of the Act clearly indicates that any deduction made in accordance with the provisions of this Section and credited into the Government Treasury shall be treated as a payment of tax on behalf of the person from whose bills or invoices the deduction has been made, and credit shall be given to him for the amount so deducted on the production of the certificate, referred to in sub-section (4), in the assessment made for the relevant assessment year.
In the light of the aforesaid, in the instant case, the admitted position is, that the contractee was duty bound to deduct the tax for the job works done by the petitioner under Section 8-D of the Act. The contractee issued T.D.S. certificate in favour of the petitioner. The said certificate was evidence that the payment of tax was deducted at source on the bills presented by the petitioner and credit was required to be given at the time when an assessment order was made. The Court finds that in the instant case, the petitioner presented the T.D.S. certificate before the Assessing Officer, who accepted the books of account as well as the T.D.S. certificate and found that the petitioner was not exigible to sales tax for the job work carried out by him and consequently, was eligible for refund of the tax that was deducted at source. The Assessing Officer, accordingly, directed the office to verify the T.D.S. certificate and if the same was found to be correct the deducted amount was to be paid to the petitioner.
In the light of the aforesaid, Section 29 of the Act comes into play, which is with regard to refund of any amount of tax, fees or other dues payable to the dealer. Sub-clause (2) of Section 29 of the Act provides that the amount should be refunded within three months from the date of order of refund passed by the Assessing Officer failing which the dealer would be entitled to simple interest at such rate as prescribed. Sub-clause (4) of Section 29 of the Act postulates that a dealer would not be entitled for refund of tax paid on purchases of such goods unless the dealer proves the Assessing Officer that he had not passed on the liability of such tax to any party as a result of any sale or otherwise. This provision was inserted by U.P. Act No. 11 of 2003 with effect from 17.12.2003 to enforce the doctrine of unjust enrichment.
Section 29(4) of the Act, according to us, is not applicable in the instant case inasmuch as this provision is prospective which came into force with effect from 18.12.2002 by U.P. Act No. 11 of 2003 whereas, the refund of the amount claimed is for the period 1987-88 to 1998-99.
The impugned order has been passed under Section 29-A (2) of the Act. The Assessing Officer has totally misused this provision in passing the impugned order. Sub-clause (1) of Section 29-A comes into picture when an amount has wrongly been realised by a dealer as tax. In the instant case, admittedly no amount was realised by the petitioner from any person by way of realisation of tax on the sale or production of any goods. On the other hand, an amount has been deducted towards tax for the job works done by the petitioner under Section 8-D of the Act in which during the assessment proceeding the Assessing Officer found that there was no tax liability upon the assessee.
The contention of the learned Standing Counsel that the burden was upon the petitioner to show that he had not passed on the burden of tax to another person is patently erroneous. The concept of unjust enrichment, as evolved by the Supreme Court in Mafatlal Industries (Supra) is not at all applicable in the present circumstances of the case. It is not a case where the petitioner seeks to collect the tax from the purchaser from one end and also collect the same from the State. It is a case where an amount purported towards tax was deducted by a deductee which has been found by the Assessing Officer in the assessment proceeding as not payable by the assessee. Once this finding has been given in assessment proceeding and the petitioner has been held not liable to pay any tax, the question of placing the burden again upon the petitioner, at the time of verification is, wholly misplaced and beyond jurisdiction. Such exercise of placing the burden was permissible only during assessment proceeding and not thereafter. In this regard the court finds that the T.D.S. certificate was accepted by the Assessing Officer during the assessment proceedings. The books of account was accepted and the petitioner was found that he was not exigible to sales tax for the business which he was carrying as job works. The Assessing Officer after verifying the books of account passed the assessment order and directed the office to verify the T.D.S. certificates and that if the said T.D.S. certificate was found to be correct, the amount deducted at source was to be refunded to the petitioner. The effect of the assessment order was to verify the T.D.S. amount. The verification that was required to be done by the Assessing Officer was whether the deductee had deposited the money in the Government Treasury and if the amount was deposited, the refund was to be given by the petitioner. This was the only limited area of verification that was required to be done as per Rule 90 of the U.P. Trade Tax Rules, 1948. Consequently, the exercise done by the respondents could not have been gone and was without jurisdiction. The impugned orders cannot be sustained and is quashed. The writ petition is allowed.
A writ of mandamus is issued directing the respondents to refund the amount along with interest as per the rate specified under Section 29(2) of the Act. The Assessing Officer will verify as to whether the amount shown in the T.D.S. certificate has been deposited in the Government's account by the deductee. Upon such verification the respondents will refund the amount along with interest. This exercise shall be carried out within three months from the date of production of a certified copy of this order.
Dated: 27th May, 2014 MAA/-