M/S. Jay Vee Rice
& General Mills Vs. State of Haryana & Ors.  INSC 771 (23
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 8236 OF 2010 [Arising
out of SLP (C) No. 28086 of 2009] M/s. Jay Vee Rice & General Mills ....
Appellant Versus State of Haryana & Ors. .... Respondents WITH CIVIL APPEAL
NO. 8237 OF 2010 [Arising out of SLP (C) No. 20713 of 2009] WITH CIVIL APPEAL
NO. 8238 OF 2010 [Arising out of SLP (C) No. 27721 of 2009] WITH CIVIL APPEAL
NO. 8239 OF 2010 [Arising out of SLP (C) No. 35590 of 2009] WITH CIVIL APPEAL
NO. 8240 OF 2010 [Arising out of SLP (C) No. 36258 of 2009] WITH CIVIL APPEAL
NO. 8241 OF 2010 [Arising out of SLP (C) No. 36259 of 2009] WITH CIVIL APPEAL
NO. 8242 OF 2010 [Arising out of SLP (C) No. 36260 of 2009] WITH CIVIL APPEAL
NO. 8243 OF 2010 [Arising out of SLP (C) No. 28779 of 2009] WITH CIVIL APPEAL
NO. 8244 OF 2010 [Arising out of SLP (C) No. 26482 of 2009] WITH CIVIL APPEAL
NO. 8245 OF 2010 [Arising out of SLP (C) No. 28781 of 2009] WITH CIVIL APPEAL
NO. 8246 OF 2010 [Arising out of SLP (C) No. 28782 of 2009] WITH CIVIL APPEAL
NO. 8246 OF 2010 [Arising out of SLP (C) No. 27208 of 2009]
all these appeals raised similar issues and all of them were taken up together
for final hearing, they are being disposed of by this common judgment and
questions which fall for consideration in these appeals are mainly two-fold.
The first issue that arises for our consideration is whether in light of the
facts and circumstances of the present case and upon true and correct
interpretation of construction of Note (i) to Schedule III under Clause 2(i) of
the Haryana Rice Procurement Levy Order, 1985 (hereinafter referred to as
"Levy Order"), the appellants/dealers had collected purchase tax on
paddy from the government or its agencies along with procurement price of levy
fixed under the said Levy Order and if so, what would be the effect of such
is a second issue which arises for our consideration, i.e., as to whether the
State is empowered to recover certain amounts as purchase tax in light of the
scheme envisaged under the Haryana General Sales Tax Act, 1973 (hereinafter
referred to as "the Act") and also keeping in view that no sales tax
was paid, as payment of the same was specifically excluded.
appellants-companies are engaged in the business of purchase of paddy and
manufacture of rice there from.
The assessees are
registered under the Haryana General Sales Tax Act, 1973 (hereinafter referred
to as "the Act") and also under the Haryana Value Added Tax Act,
2003. The assessees were granted exemption from the payment of sales tax under
Rule 28A of the Haryana Sales Tax Rules, 1975 (hereinafter referred to as
"the Rules") for a period of seven years with effect from 3.10.1995
to 2.10.2002 under Exemption Certificate, which has been attached with the
appeals. By virtue of this Exemption Certificate issued under the Haryana Sales
Tax Rules, 1975, the appellants were exempted from payment of sales tax.
by virtue of Note (i) of the Haryana Government Notification dated 17.10.1996,
which was incorporated vide an amendment to clause 2(i) of Schedule III of the
Rules, the appellants while supplying rice to District Food and Supplies
Controller (hereinafter referred to as "DFSC") collected purchase tax
among other things by way of price received from the DFSC. The aforesaid Note
(i) by virtue of which such tax was collected reads as follows:- "Note
(i): The above prices of rice are for net rate of naked grains inclusive of purchase
tax (emphasis added) and mandi charges of paddy and depreciation of gunny bags
used for packing paddy but exclusive of cost of gunny bags and taxes, if any,
after ex-mill stage of rice."
although the appellants were exempted from the payment of sales tax, but since
they had collected purchase tax on paddy from the DFSC as part of the price
received from the DFSC, the respondents took up a plea that they are required
to pay purchase tax so collected as tax or as the amount as tax collected and
the amount which since collected was required to be deposited in the government
contention of the appellants on the other hand, however, was that the
appellants were granted exemption from the payment of both sales as also
purchase tax which would be amply clear from a harmonious reading of Section
13-B of the Act and also Rule 28A, sub-Rule 2(k) of the Rules.
Section 13-B of the
Act reads as follows:- "Power to Exempt Certain Class of Industries-The
State Government may, if satisfied that it is necessary or expedient so to do
in the interest of industrial development of the State, exempt such class of
industries from payment of sales tax, for such period and subject to such
conditions as may be prescribed."
Rule 28-A (2k) reads
as follows:- Sub-rule 2(k) - "exemption certificate means a certificate
granted in form S.T.-73 by the Deputy Excise and Taxation Commissioner of the
district to the eligible industrial unit holding eligibility certificate which
entitles the unit to avail of exemption from the payment of sales or purchase
tax or both, as the case may be."
is the case of the appellants that since there was a difference between the
original Section 13-B of the Act as inserted on 08.09.1988, and Rule 28A(2k) of
the Rules, Section 13-B was subsequently amended by deleting the word
"sales" and consequently the new Section reads as under:- "Power
to Exempt Certain Class of Industries-The State Government may, if satisfied
that it is necessary or expedient so to do in the interest of industrial
development of the State, exempt such class of industries from payment of tax,
for such period and subject to such conditions as may be prescribed."
on the said amendment, the learned counsel appearing for the appellants submitted
that by use of the word "tax" instead of the words "sales
tax", the legislature intended to declare that the exemption was available
on both sales as well as purchase tax.
is interesting to note that while the Act and the Rules were so amended, due to
a legislative omission, the statutory Forms ST-72 and ST-73 relating to grant
of exemption remained unchanged. Eligibility in Form ST-72 was granted to the
appellants for a period of 9 years and upto a total benefit of 41.95 lakhs.
for the years 1996-97 was completed by the assessing authority. While doing so,
no purchase tax was levied but in the assessment order, it was held that since
payment of the rice received from the government was inclusive of purchase tax
which was received by the assessees but was not deposited, the same should be
deposited by the assessees.
aggrieved by the aforesaid order of assessment, a first appeal was filed which
was dismissed, holding that the amount sought to be recovered by the department
has not been levied as purchase tax, but the said amount is being recovered
since the assessees had received a price of rice inclusive of purchase tax.
further appeal filed by the assessees, the Haryana Tax Tribunal dismissed the
appeals holding that since the exemption certificate was only for sales tax and
the same was not amended, the liability to pay purchase tax would arise and
would continue. While holding that the appellants should restitute the amount
which they had received from the DFSC as purchase tax, the Tribunal also made
an observation and sent to the Government, a request to provide relief to them
in the exercise of its sovereign power. The said request was however, not
acceded to by the Government.
aggrieved by the aforesaid order, the appellants filed writ petitions in the
High Court, which were dismissed under the impugned judgment and order out of
which the present appeals arise.
aforesaid facts would clearly indicate that the Assessing Officer as also the
First Appellate Authority did not decide the liability of the appellant to pay
the purchase tax, but had held that since the payment of the price of rice
received from the government was inclusive of purchase tax, the same was
required to be deposited with the government exchequer. Therefore, since the
amount had not been deposited by the appellants, they could be recovered by the
assessing authorities. The Tribunal, however, held that since the exemption
certificate was only for sales tax and the same was not amended, the liability
to pay purchase tax would continue. The High Court, moreover, held that the
appellants were liable to pay purchase tax as there was no exemption granted to
the appellants from payment of purchase tax at any point of time.
have already referred to the aforesaid note appended to the Notification dated
17.10.1996. The aforesaid note leaves no room for doubt that the assessees,
while supplying rice to DFSC, collected purchase tax amongst other things by
way of the procurement price.
they had collected the purchase tax, they were required to deposit the same in
the government exchequer and there could be no justification for them to retain
the purchase tax and appropriate the same to their own use.
Retention of such
purchase tax collected by the appellant amounts to unjust enrichment which is
not permissible in view of the law laid down by the Constitution Bench of this
Court in the case of Mafatlal Industries Ltd. and Others 536.
This Court in the
said case held as under:- "254..............The Excise Officer cannot tax
more than what is permitted by the statute. If the levy is in excess of the
statute, then its retention by the State is unauthorised by law. What is being
retained is not in enforcement of the charging section but something else. Such
illegally collected tax is not the property of the State and is not within the
disposing power of the State.............."
Sahakari Khand Udyog Mandal Ltd. v. CCE & Customs, reported at (2005) 3 SCC
738, this Court (at page 748) elaborated upon the aspect of unjust enrichment
simply, "unjust enrichment" means retention of a benefit by a person
that is unjust or inequitable. "Unjust enrichment" occurs when a
person retains money or benefits which in justice, equity and good conscience,
belong to someone else.
32. The doctrine of
"unjust enrichment", therefore, is that no person can be allowed to
enrich inequitably at the expense of another. A right of recovery under the
doctrine of "unjust enrichment" arises where retention of a benefit
is considered contrary to justice or against equity....
.......34. In the
leading case of Fibrosa v. Fairbairn, Lord Wright stated the principle thus:
(All ER p.135 H)
"[A]ny civilised system of law is bound to provide remedies for cases of
what has been called unjust enrichment or unjust benefit, that is, to prevent a
man from retaining the money of, or some benefit derived from, another which it
is against conscience that he should keep. Such remedies in English law are
generically different from remedies in contract or in tort, and are now
recognised to fall within a third category of the common law which has been
called quasi- contract or restitution."
The above principle
has been accepted in India.
This Court in several
cases has applied the doctrine of unjust enrichment."
Orient Paper Mills Ltd. v. State of Orissa & Ors., reported at AIR 1961 SC
1438, this Court did not grant refund to a dealer since he had already passed
on the burden to the purchaser. It was observed that it was open to the
legislature to make a provision that an amount of illegal tax paid by the
persons could be claimed only by them and not by the dealer and such
restriction on the right of the dealer to obtain refund could lawfully be
imposed in the interests of general public.
law laid down in Orient Paper Mills Ltd. (supra) was quoted with approval by
this Court in Mafatlal Industries Ltd. (supra), and the relevant portion of the
said judgment has been quoted hereinabove.
reference may also be made to a decision of the Constitution Bench in Godfrey
Phillips India Ltd. & Anr. v. State of U.P & Ors. reported at (2005) 2
SCC 515. In that case, the constitutional validity of the Uttar Pradesh Tax on
Luxuries Act, 1995 as also other State Acts was challenged inter alia on the
ground of legislative competence of the State Legislatures. The Court allowed
the petition and held that the State Legislatures were not competent to impose
luxury tax on tobacco and tobacco products and the Acts were declared ultra
vires and unconstitutional. In the intervening period, however, tax was
collected by the appellants from consumers and also paid to the State
Governments. In certain cases, interim relief was obtained by the appellants
from this Court against recovery of tax and as alleged by the State
Governments, the appellants continued to charge tax from consumers/customers.
The Court held:
It was stated on
behalf of the State Governments that after obtaining interim orders from this
Court against recovery of luxury tax, the appellants continued to charge such
tax from consumers/customers. It is alleged that they did not pay such tax to
respective State Governments. It was, therefore, submitted that if the
appellants are allowed to retain the amounts collected by them towards luxury
tax from consumers, it would amount to `unjust enrichment' by them.
In our opinion, the
submission is well founded and deserves to be upheld. If the appellants have
collected any amount towards luxury tax from consumers/customers after
obtaining interim orders from this Court, they will pay the said amounts to the
respective State Governments."
learned counsel appearing for the appellants would not dispute the position
that the payment made to them by DFSC also included the element of purchase
That being the
position and they having collected the purchase tax on paddy from the buyer,
the same has to go to the government exchequer. If however, such tax was found
to be legally not payable after its collection from the purchaser, it either
has to go back to the purchaser from whom it was collected or has to be
surrendered to the State exchequer and a dealer cannot retain it as otherwise
the same will amount to unjust enrichment which is legally impermissible.
the present case, since the aforesaid purchase tax was collected by the
appellants, the same is now required to be paid back to the State exchequer in
terms of the orders.
we have held that the appellants are now required to pay back the purchase tax
element which was collected by them to the respondents, all the appeals could
be disposed of on the aforesaid ground alone. We have seen from the decision in
Godfrey Phillips India Ltd. (supra) that even when the legality of a tax has
been challenged successfully, there can be no question of the said tax being retained
by the dealer/manufacturer, notwithstanding its illegality. In the present
instance, it is beyond doubt and clear from the appellants' own admission that
the procurement price included the element of purchase tax.
That there may be an
issue relating to the levy of purchase tax does not in any way, affect the
conclusion that the appellants, who have been unjustly enriched, must deposit
the purchase tax element with the State.
in the facts and circumstances of the present case, we are not required to go
into the other issue as to whether or not there could have been levy of
purchase tax on the purchase of paddy in case of exempted units. We keep that
question open to be decided in an appropriate case.
present appeals are dismissed.
[Dr. Mukundakam Sharma]
...........J. [Anil R. Dave]