CASE LAWS
2017-TIOL-266-HC-RAJ-IT
KALINDEE RAIL NIRMAN ENGINEERS LTD Vs CIT : RAJSATHAN HIGH COURT (Dated: January 24, 2017)
Income tax - Section 254(1)
Keywords - excess payment of tax - recovery without authority of law - refund
The assessee had preferred present appeal challenging the order, whereby the ITAT had ignored the provision contained u/s 254(1) of Income Tax Act by non granting of relief to the assessee and affirming the order of the CIT(A). The assessee had also challenged the action of ITAT in overlooking the legal and Constitutional provision that no amount of tax could be recovered without any authority of law and, therefore, the Union could not have been permitted to retain the excess amount of tax paid by the assessee.
On appeal, the HC held that,
Whether after completion of scrutiny, if an assessee is entitled for other benefits which he has not claimed, the same deserves to be refunded to him if it is found that assessee is entitled for refund - YES: HC
Whether the Government / Revenue Department can recover the excess amount of tax than the sum what was due to them - NO: HC
++ it is seen that in the case of Seshammal (R.) Vs. Income-tax Officer, the Madras High Court has held that "....the fact that the petitioner had paid the monies to the Government under the mistaken notion that the association of persons would be liable for tax even when the assessment was not required to be made as an association of persons; that the amount though paid was not actually required to be paid and that the State has not refunded those amounts by taking advantage of the mistake committed by the payer is not in dispute. The Act is not intended to benefit the State by enabling it to collect or retain monies not payable to it under the Act. What is required to be collected from the assessees under the Act is only the tax and other amounts properly payable under the Act. Section 237 of the Act provides that if monies have been paid in excess of the amount for which the payer is "properly chargeable under the Act for that assessment year" such person is entitled to get the refund of the excess amount. The entire amount paid by the assessee was in excess of the amount which was actually chargeable. The assessee was, therefore, entitled to have refund of the excess amount....";
++ similarly in the case of Commissioner of Income-Tax (Central), Madras Vs. Indian Express (Madurai) Pvt. Ltd., the Madras High Court has held that: "....The primary purpose of the stature is to levy and collect the income-tax. This is based on the cardinal principle, which has been incorporated as a veritable constitutional provision, that no tax can be levied or collected save under authority of law. The task of an appellate authority under the taxing statute, especially a nondepartmental authority like the Tribunal, is to address its mind to the factual and legal basis of an assessment for the purpose of properly adjusting the taxpayer's liability to make it accord with the legal provisions governing his assessment. Since the be-all and end-all of the statutory provisions, especially those relating to the administration and management of income-tax, is to ascertain the tax-payers' liability correctly, to the last pie, if it were possible, the various provisions relating to appeal, second appeal, reference and the like can hardly be equated to a lis or dispute as arises between the two parties in a civil litigation....";
++ taking into consideration the view taken by various High Courts, it is clear that the contention raised by the assessee that on acceptance of the scrutiny, if he is entitled for other benefits which he has not claimed, the same be refunded to him i.e. after the proceeding if it is found that assessee is entitled for refund, the same should be refunded as the State cannot recover the tax more than what is due to it.
Assessee's appeal allowed
2017-TIOL-265-HC-MUM-CT
GRAPHITE INDIA LTD Vs STATE OF MAHARASHTRA: BOMBAY HIGH COURT (Dated: January 24, 2017)
Central Sales tax - Sections 9(2) & 36(3)(b) - Bombay Sales tax - Sections 41(1) and Rules 31AA & 31B
Keywords - DEPB licence - discrimination - entitlement certificate - eligibile industrial unit -
The assessee is engaged in the business of manufacture and sale of Graphite Electrodes. During the subject year, the State Industrial and Investment Corporation of Maharashtra Limited granted an Eligibility Certificate under the Package Scheme of Incentives, valid for a period from 1st April, 2002 to 31st March, 2007 with sales tax incentive for Rs.990.90 Crores for manufacture of Electrodes. Pursuant to this certificate, the Dy CST issued an Entitlement Certificate effective from the above dates. The eligible industrial unit had to exercise an option to claim exemption from payment of sales tax or deferral of tax collected which was required to be paid after 10 years. The assessees opted for deferral and claimed deferral of total tax payable as per the returns filed from 1st April, 2002 onwards. For the period from 1st April, 2003 to 31st March, 2004, the first assessee was assessed by the Dy CST, wherein it was claimed that in addition to the sale of Electrodes manufactured by them, the assessee had sold DEPB licenses granted to them as and by way of incentives for the export of Electrodes. The Dy CST however did not allow deferral in respect of the tax on DEPB. In addition, he charged interest u/s 36(3)(b) and issued a notice of demand for Rs. 38,61,622/-. He also passed an assessment order under CST for the same period and rejected the claim for deferral of CST in respect of inter-State sales of DEPB to the tune of Rs. 2,84,08,414/- and charged interest u/s 9(2) r/w/s 36(3)(b) of the Act. That is how he issued a notice of demand for Rs. 20,14,134/-.
The assessees contended that they have similarly situated industrial units, and since they had opted for deferral, they could not be excluded from exemption. A mere amendment would not mean that it was applicable only to dealers holding Eligibility Certificates and opting for exemption. Their exclusion is arbitrary and discriminatory. Though these submissions were rejected by the Tribunal and the Appeals of assessee were dismissed, the Tribunal at the instance of the present assessees referred for opinion of this Court the issue of discrimination as projected in the Petition.
On appeal, the HC held that,
Whether different Rules incorporated under a statute, wherein one provides for quantum and the other provides for stipulations of exemption, can be compared to claim discriminatory effect of one over another - NO: HC
Whether it is open to a writ court to pass mandamus directing the government to modify exemption notifications, on basis of pleas of the beneficiaries who are not literally entitled to the same - NO: HC
Whether Rule 31B of Bombay Sales tax Rules, 1959 can be compared to its Rule 31AA, and hence can be said as discriminatory and violative to Article 14 of the Constitution of India - NO: HC
++ the assesses do not dispute that they are holding eligibility and entitlement certificate under the 1993 package scheme of incentives under deferral mode. The Notification is issued firstly on the satisfaction of the Government that circumstances exist which render it necessary to take immediate action to amend the BST Rules, 1959. The Rules styled as BST Rules, 2004 amend BST Rules, 1959. Then, there is another Notification of that date and which seeks to amend the Government Notification, which is issued in exercise of the powers conferred by Section 41(1) of BST Act. The insertion is that with effect from 1st April, 1997, the inserted words shall be taken to have been appearing in the Explanation-V. Thus, the Explanation-V would emerge on the statute book after the Explanation-IV and with effect from 1st April, 1997. Thus, the assessees understood this to mean that the Notification refers to Entry- 3 of Group-E to which Explanation-V has been added with retrospective effect. Therefore, for the purpose of Entries-2 and 3 the words "goods manufactured" and "finished products" shall be deemed to include credit of DEPB which is earned by the dealer by exporting the goods manufactured in the eligible unit, whether mentioned or not in the Eligibility Certificate granted to the dealer and on the sale of which no tax has been levied. Thus, the argument was that the deferral of the sales tax and which is the mode chosen by the assessees is left out and even if the units like assessee choosing deferral mode, sold the DEPB, that would not be covered by the Notification;
++ the Government of Maharashtra has declared various package scheme of incentives from time to time with the aim of dispersal of industries and for promoting industrial activities in the backward units of the State. Under the package scheme of incentives various benefits are available to the eligible units. One of the benefit being exemption from sales tax for certain period or deferment of payment of tax collected for a specified period. To give effect to the sales tax benefit under package scheme, the reference to this scheme stands incorporated in the sales tax legislation. The package scheme of incentives are therefore defined in the BST Rules, 1959. To give effect to the exemption mode under the package scheme, the Notifications were issued u/s 41 of BST Act and they were amended from time to time. Since the Entries were limited to the extent of financial ceilings incorporated in the scheme, Rule 31AA prescribes the method of computation of the cumulative quantum of benefits enjoyed by the eligible units over a specified period. It is, therefore, clear that a separate regime was provided for those who have opted or chosen the deferral mode of incentives. For that purpose, there is not only a ceiling provided but what has been incorporated, is Rule 31B;
++ perusal of both Rules, namely, 31AA which provides for calculation of the cumulative quantum of benefits and Rule 31B, which provides for conditions for permission to defer payment of total amount of tax as per the return for a specified period being incentives to certain eligible industrial units and falling in Chapter-V-A of the BST Rules, 1959, are not comparable. Rule 31B is specific and clear in terms. Once the underlying difference as pointed out cannot be lost sight of, then, the argument based on discrimination has no merit. It may be that there is a credit of DEPB. That is an incentive provided under the Foreign Trade Policy to an exporter. It may be a transferable benefit and treated as intangible goods liable to tax under the Sales Tax Act. That is capable of being transferred by both, namely, the holders and beneficiaries of package scheme of incentives under exemption and deferral mode. However, insofar as the amendment now incorporated by the Notification is concerned, that is restricted in its application to the beneficiaries of exemption mode. There is no compulsion that any such amendments have to be incorporated in Rule 31B. That is a distinct condition and restricted in its application to the unit holders choosing a deferral mode. If Rule 31B is not touched and has not been amended, that does not mean that the assessee can seek a writ of mandamus directing the State to either amend it or modify it in tune with their submissions. That is not a writ which this Court can issue. The Court in this case cannot even issue a declaration as prayed as an alternate relief once it finds that the fundamental and underlying difference between the two schemes and the two modes is the factor and which has weighed with the State. That is the real basis and which distinguishes the case of assessees from those units under the exemption mode. Once this difference is noted, then, we do not see any reason to interfere with the impugned Notifications.
Assessee's petition dismissed
2017-TIOL-353-CESTAT-MUM + Story
FRANKE FABER INDIA LTD Vs CCE: MUMBAI CESTAT (Dated: January 20, 2017)
CX - CENVAT - Common input services - Rule 2(e) of CCR, 2004 - Notfn. 3/2011-CE(NT) - Trading activity was incorporated in the definition of exempted services only from 1/4/2011, therefore, prior to that date rule 6 of CCR, 2004 is inapplicable - recovery of CENVAT credit attributed to trading activity is not sustainable : CESTAT [para 5]
Appeal allowed
