Corporation Bank Vs.
M/S Saraswati Abharansala & ANR.  INSC 1977 (19 November 2008)
IN THE SUPREME COURT
OF INDIA CIVIL APPELALTE JURISDICTION CIVIL APPEAL NO._6708 OF 2008 (Arising
out of SLP (C) No. 380 of 2007) Corporation Bank .... Appellant Versus M/s.
Saraswati Abharansala and another .... Respondents
S.B. SINHA, J.
respondent is a dealer in bullion gold. It entered into transactions of
purchase of gold from the appellant herein during the period 6th April, 1999
and 10th December, 1999. The total transactions during the said period were for
a sum of Rs.423748518/-. Indisputably the rate of tax which was prevailing at
the relevant time was 1%. The amount of sales tax at the said rate was
collected from respondent No.1. The amount so collected, indisputably had been
deposited with the sales tax authorities.
or about 27th December, 1999 vide S.R.O. No.1075/99 the rate of sales tax was
reduced from 1% to 0.5% which was given a retrospective effect from 1st of
April, 1999. The said Notification reads thus :- "9 Any dealer Sale of
bullion and specie to registered dealer within the State.
shall be deemed to have come into force on first day of April, 1999"
It was given a
original SRO 1728/93 on the subject provided that "tax if any collected at
the higher rate, shall be paid over to Government and tax if any paid over to
Government shall not be refunded". Clause 9 of Schedule IV of SRO 1728/83
provided as under :- "9 Minerals and Metals Sale of bullion to Corporation
of India and registered dealers in Banks jewellery for manufacture of gold
jewellery within the State for export."
2 This entry in SRO
1728/93 stood amended by SRO 301/99 to read :- "9 Minerals and Metals Sale
of bullion to Corporation of India and registered dealers in Banks jewellery
for manufacture of gold jewellery within the State for export."
The said entry, as
stated above, was further amended by SRO 1075/99.
on or about 19th January, 2000, in view of the aforementioned Notification,
requested the Assistant Commissioner, Sales Tax, Special Circle I, Calicult to
refund the excess amount of sales tax collected from the respondent No.1
amounting to Rs.20,97,763.50. The Assistant Commissioner Sales Tax, however,
rejected the said prayer in terms of its letter dated 3rd March, 2000, which
reads as under :- "You may please see that the Government as per the above
mentioned SRO amended the original notification in SRO 1728/93. According to
the said original notification, tax if any collected at the higher rate shall
be paid over to the Government and tax if any paid over to the Govt. shall not
be refunded. So you may please inform your customer accordingly."
first respondent was communicated the same by the appellant in terms of its
letter dated 6th June, 2000 stating :- "While referring to your
representation on the subject matter, it has been informed by our higher ups
that as per the letter from the Asst.
Commercial Taxes, Calicut viz: 3301/1150/99-2000, it has been clarified that
according to the GO., SRO 1728/93 "Any tax collected at the higher rate
shall be paid over to the Govt. and tax, if any paid over to the Govt. shall
not be refunded.
Kindly note the same
for your information."
writ petition was filed by the first respondent against the appellant before
the High Court of Kerala questioning the validity of the said order.
"i) declare that
the petitioner is liable to pay sales-tax at =% for the transactions referred
to in Ext. P2 and that collection of any amount in excess thereof is illegal
and is liable to be refunded;
ii) issue a Writ of
Mandamus or any other appropriate writ, order or direction directing the
respondent to refund to the petitions an amount of Rs.20,97,261/- with interest
@ 21% per annum from the date of collection of the amounts shown in Ext. P2 till
the date of actual payment;
4 iii) issue a writ
of Certiorari or any other appropriate writ, order or direction quashing Ext.
said writ petition was dismissed by a learned Single Judge of the said Court by
his order dated 4th April, 2006 holding :- "There cannot be any dispute
that the petitioner is entitled to move the Commissioner. Whether the
petitioner had to pay any tax in excess of the due rates and if so what is the
fate of such excess payment is certainly a dispute. The petitioner has to move
the Commissioner for appropriate orders.
It will be open to
the petitioner to take all available contentions on the claim for refund before
the Commissioner. Accordingly, without expressing any opinion as to the merits
of the case, this writ petition is disposed of as follows:- In the event of the
petitioner moving the Commissioner (Commercial Taxes), government of Kerala,
Thiruvananthapuram within a period of two months from today, the Commissioner
shall consider the issue with notice to the petitioner and the first respondent
and take appropriate action in accordance with law in the matter within another
intra court appeal was filed by the first respondent and a Division Bench of
the High Court by reason of the impugned judgment dated 7th November, 2006
allowed the said writ appeal opining :
5 "When the
legislature or the government had given that relief with retrospective effect,
necessarily, that relief shall reach the concerned eligible citizen. The bank
had opportunity to file the return showing the real tax liability based on
Ex.P1 and claiming refund in terms of Section 33 and could pay over the amount
to the appellant, the customer of the first respondent. If that had been
claimed, necessarily, the assessing authority would have refunded it with 10%
interest as provided in Section 44(4)."
R. Mohan, learned Additional Solicitor General, appearing on behalf of the
appellant-bank at the outset submits that the writ petition for refund of tax
was not maintainable. It was contended that in any event it was not permissible
for the Division Bench of the High Court to direct the appellant to refund the
excess amount collected and granting liberty to it to file a claim application
thereafter with the sales tax authorities, which is per say unjust.
R. Sathish, learned counsel appearing on behalf of the respondent No.2/State of
Kerala would submit that despite amendment the original condition attached with
SR No.1728/93 i.e. the tax if any collected at the higher rate, shall be paid
over to Government and the tax, if any paid over to Government shall not be
refunded, having remained un-amended, the State is not liable to refund the
amount. It was urged that although the High Court has taken note of the said
condition laid down in SOR No. 1728/1993, but failed and/or neglected to
consider the same in its proper perspective.
M.K. Sreegesh, learned counsel appearing on behalf of the first respondent,
however, would submit that the Notification should be construed keeping in view
the objective, it seeks to achieve as would appear from Notification dated 27th
was contended that the amendment had been brought into force with retrospective
effect. The condition laid down therein must be held to have been repealed.
the gold in bulk quantity was sold by the Bank within the State. Purchase was
required to be effected at least worth Rs.25 lakhs at a time. It was, however,
felt that the intermediary dealers, who normally buy gold from the banks and
primarily cater to the requirements of local goldsmith and jewellers, would not
be in a position to carry out their activity since they would not be eligible
for the reduced rate of 0.5% when they buy the material from banks or other
first sellers within the State. In the aforementioned situation, the Government
had taken a decision to make the said rate of tax applicable when the bullion
and specie are sold to any registered dealer within the Sate.
aforementioned objective on the part of the State would appear from the note
appended to SOR No. 1075/99 dated 27th December, 1999. It is true that the
original Notification SRO 1728/1993 contained a provision for not refunding the
amount of tax collected at a higher rate.
Notification, namely SOR No. 301/1999, however, reduced the rate provided the
sale is effected within the State for manufacture of ornaments. SRO 1728/1993,
as noticed hereinbefore, was further amended by SRO No. 1075/1999, in terms
whereof a legal fiction was created giving it a retrospective effect and
retroactive operation on or from 1st April, 1999.
rate of tax which was applicable on 1st April, 1999 by reason of the said legal
fiction was, therefore, 0.5 %. The effect of a legal fiction is well known. It
must be given full effect. It must be taken to its logical conclusion.
tax is leviable on sale of goods. It must be collected by the dealer as an
agent of the State at such rate as may be specified:
the State nor the agent is entitled to collect tax at a rate higher than
specified. The Kerala General Sales Tax Act, 1963 also contains a provision for
refund in Section 44 thereof which reads as under :- "Refund:- (1) When an
assessing authority finds at the time of final assessment, that the dealer has
paid in excess of what is due from him, it shall refund the excess to the dealer.
(2) When the
assessing authority receives an order from any appellate or revisional
authority to make refund of tax or penalty paid by a dealer it shall effect the
anything contained in sub- section (1) and (2), the assessing authority shall
have power to adjust the amount due to the refunded under sub-section (1) or
sub-section (2), towards the recovery of any amount due on the date of
adjustment, from the dealer.
(4) In case refund
under sub-section (1) or sub- section (2) or adjustment under sub-section (3)
is not made within ninety days of the date of final assessment, or as the case
may be, within ninety days of the date of receipt of the order in appeal or
revision or the date of expiry of the time for preferring appeal or revision,
the dealer shall be entitled to claim interest at the rate of ten percent per
annum on the amount due to him from the date of expiry of the said period upto
the date of payment or adjustment."
265 of the Constitution of India mandates that no tax shall be levied or
collected except by authority of law.
terms of the said provision, therefore, all acts relating to the imposition of
tax providing, inter alia, for the point at which the tax is to be collected,
the rate of tax as also its recovery must be carried out strictly in accordance
the substantive provision of a statute provides for refund, the State
ordinarily by a subordinate legislation could not have laid down that the tax
paid even by mistake would not be refunded. If a tax has been paid in excess of
the tax specified, save and except the cases involving the principle of `unjust
enrichment', excess tax realized must be refunded. The State, furthermore is
bound to act reasonably having regard to the equality clause contained in
Article 14 of the Constitution of India.
is not even a case where the doctrine of unjust enrichment has any application
as it is not the case of the respondent//State that the buyer has passed on the
excess amount of tax collected by it to the purchasers.
view of the admitted fact that tax had been collected and paid for the period
6th April, 1999 and 10th December, 1999 @ 1 % of the price which having been
reduced from 1st April, 1999 to 0.5 %, the State, in our opinion, is bound to
refund the excess amount deposited with it.
the Notification having been given a retrospective effect must be construed on
the touchstone of the purpose and object it sought to achieve. Principle of
purposive construction should be applied in a case of this nature to find out
the object of the Act. When a statute cannot be considered in such a manner
which would defeat its object, the legislature is presumed to be aware of the
consequences flowing there from. The statute should be considered in such a
manner so as to hold that it serves to seek a reasonable result. The statute
would not be considered in such a manner so as to encourage defaulters and
discourage those who abide by the law.
statute furthermore, it is trite, should be read in the manner so as to do
justice to the parties. If it is to be held, without there being any statutory
provision that those who have deposited the amount in time would be put to a
disadvantageous position and those who were defaulters would 11 be better placed,
the same would give rise to an absurdity. Construction of the statute which
leads to confusion must be avoided.
the condition of non refund of the excess amount must be held to have been
repealed by necessary implication as the rate of tax so applied to the
transaction of sale of gold bullion was with retrospective effect.
all the facts are admitted and the State had refused to refund the excess
amount of tax realized from the appellant, in our opinion, the writ petition
are, therefore, of the opinion that the interest of justice would be served if
instead of the appellant refunding the amount to the first respondent and later
claiming refund from the authorities, if the State of Kerala is directed to
refund the amount of tax collected with interest at the rate of 10% per annum
to the first respondent at an early date, and not later than four months from
the date of communication of this order. It is ordered accordingly. If,
however, the amount is not paid within the aforementioned period, the
outstanding amount shall carry interest @ 15 % per annum.
appeal is allowed with the aforementioned observations and direction. In the
facts and circumstances of the case, however, there shall be no order as to
( S.B. SINHA )