Karnataka High Court
M/S Arvind Lifestyle Brands Limited vs Under Secretary on 20 June, 2019
Author: S.Sujatha
Bench: S.Sujatha
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 20TH DAY OF JUNE, 2019
BEFORE:
THE HON'BLE MRS. JUSTICE S.SUJATHA
WRIT PETITION No.5468/2018 C/w.
WRIT PETITION No.5469/2018 (T - RES)
IN W.P.No.5468/2018
BETWEEN:
M/s. ARVIND LIFESTYLE BRANDS LIMITED
DU PARC TRINITY, 8TH FLOOR, 17
M.G.ROAD, BANGALORE-560001
[REP. BY Mr. SHIBU T.K.,
S/O T.K.KRISHNAN
SENIOR MANAGER
AGED ABOUT 46 YEARS]. ...PETITIONER
(BY SRI RAGHURAMAN.V, ADV.)
AND:
1. UNDER SECRETARY
TECHNOLOGY DEVELOPMENT BOARD
WING-A, GROUND FLOOR
VISHWAKARMA BHAWAN
NEW DELHI-110016.
2. THE JOINT SECRETARY
DEPRTMENT OF SCIENCE AND TECHNOLOGY
TECHNOLOGY BHAVAN
NEW MEHRAULI ROAD
NEW DELHI-110016.
3. UNION OF INDIA
MINISTRY OF SCIENCE AND TECHNOLOGY
REP. BY THE SECRETARY
NEW DELHI-110016.
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4. MINISTRY OF FINANCE
REP. BY SECRETARY
NORTH BLOCK
NEW DELHI-110001. ...RESPONDENTS
(BY SRI RAKESH KUMAR SINGH, ADV. FOR R-1;
SRI C.SHASHIKANTHA, ASG. FOR R-2 TO R-4.)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA, PRAYING TO DECLARE
THAT THE LETTER No.5 No.TDB/R & D CESS/ REFUND/2017-
18 DATED 07.11.2017 ISSUED BY THE FIRST RESPONDENT
ENCLOSED AS ANNEXURE-A IS ILLEGAL AND BAD IN LAW
BEING ARBITRARY AND UNREASONABLE AND VIOLATIVE OF
ARTICLES14/19/265/300A OF THE CONSTITUTION AND ETC.,
IN W.P.No.5469/2018
BETWEEN:
M/s. ARVIND FASHIONS LIMITED
DU PARC TRINITY, 8TH FLOOR
17, M.G.ROAD, BANGALORE-560001
[REP. BY Mr. SHIBU T.K.,
S/O T.K.KRISHNAN
SENIOR MANAGER
AGED ABOUT 46 YEARS]. ...PETITIONER
(BY SRI RAGHURAMAN.V, ADV.)
AND:
1. UNDER SECRETARY
TECHNOLOGY DEVELOPMENT BOARD
WING-A, GROUND FLOOR
VISHWAKARMA BHAWAN
NEW DELHI-110016.
2. THE JOINT SECRETARY
DEPRTMENT OF SCIENCE AND TECHNOLOGY
TECHNOLOGY BHAVAN
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NEW MEHRAULI ROAD
NEW DELHI-110016.
3. UNION OF INDIA
MINISTRY OF SCIENCE AND TECHNOLOGY
REP. BY THE SECRETARY
NEW DELHI-110016.
4. MINISTRY OF FINANCE
REP. BY SECRETARY
NORTH BLOCK
NEW DELHI-110001. ...RESPONDENTS
(BY SRI RAKESH KUMAR SINGH, ADV. FOR R-1;
SRI C.SHASHIKANTHA, ASG. FOR R-2 TO R-4.)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA, PRAYING TO DECLARE
THAT THE LETTER No.F No.TDB/R & D CESS/ REFUND/2017-
18 DATED 07.11.2017 ISSUED BY THE FIRST RESPONDENT
ENCLOSED AS ANNEXURE-A IS ILLEGAL AND BAD IN LAW
BEING ARBITRARY AND UNREASONABLE AND VIOLATIVE OF
ARTICLES14/19/265/300A OF THE CONSTITUTION; AND ETC.,
THESE PETITIONS COMING ON FOR PRELIMINARY
HEARING IN 'B' GROUP, THIS DAY, THE COURT MADE THE
FOLLOWING:-
ORDER
These petitions involving similar and akin issues, have been clubbed together and are taken up for disposal by this common order.
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2. The petitioner has assailed the letter dated 07.11.2017 issued by the respondent No.1 inter alia seeking a direction to respondent No.1 to refund the entire amounts paid as R and D Cess by the petitioners during April 2017 to June 2017.
3. The petitioners are engaged in the business of trading of branded readymade garments and its accessories. The petitioners have entered into agreements with the technology partners who are located outside India and accordingly, the petitioners imports technology from the technology partner for which they paid royalty on sales for the license brands after the end of every quarter on receipt of invoice from the vendor.
4. The Research and Development Cess Act, 1986 ['Act' for short] was enacted in the year 1986 which provided for the levy and collection of Cess on all payments made for the import of technology. As per the -5- provisions of Section 3 [1] of the Act, there shall be levied and collected a Cess at such rate not exceeding 5% on all payments made towards the import of technology, as the Central Government may specify, by notification in Official Gazette. Section 3 [2] of the Act provides that the Cess shall be payable to the Central Government by an Industrial Concern which imports technology on or before making any payments towards such import and shall be paid by the industrial concern to any specified agency.
5. The Finance Act, 2017 which was enacted by fourth respondent on 31.03.2017 and effective from 01.04.2017 repealed the Act vide Part VII of the Chapter VI with effect from 01.04.2017.
6. It is the contention of the petitioners that they being oblivious of the repealing of the Act with effect from 01.04.2017, remitted Cess amount against the related import of technology. Thereafter realizing the -6- inadvertent payment of Cess filed an application claiming the refund of the amount paid towards the Cess. The respondent No.1 has rejected the claim of the petitioners on the ground that there is no provision in the Act for refund of Cess paid inadvertently on account of repealment of the Act. Hence, these petitions.
7. Learned counsel Sri.V.Raghuraman, appearing for the petitioners would submit that the impugned communication/order of the first respondent rejecting the application of refund is ex facie erroneous, arbitrary and illegal. There being no factual disputes pertaining to refund claim of R & D Cess, the action of the respondent No.1 in rejecting the claim is unjustifiable and violative of Article 14, 19, 265 and 300A of the Constitution of India. Learned counsel in support of his contentions, placed reliance on the following judgments;
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1. Hind Agro Industries Limited V/s.
Commissioner of Customs1.
2. HMM Ltd., V/s. Administrator, Bangalore City Corporation2.
3. Joshi Technologies International V/s. Union of India3.
8. Learned counsel appearing for the respondent No.1 supporting the impugned letter/order contended that, it is an undisputed fact that the petitioners have wrongly made the payment towards R & D Cess though the same has been abolished with effect from 01.04.2017. In view of the repeal of the Act, respondent No.1 has no power to process the refund with effect from 01.04.2017. The Cess amount wrongly paid by the petitioners has now become the part of the public account of India whose disbursement is not in the hands of the respondent No.1 in terms of Article 266 1 2008 [221] E.L.T. 336 [DEL.] 2 1997 [91] E.L.T. 27 [S.C.] 3 2016 [339] E.L.T. 21 [GUJ,] -8- of the Constitution. In such a situation, the respondent No.1 cannot be made liable to order refund nor it can refund directly. At the outset, the respondent No.1 has no statutory delegation to process the application or claim of the petitioners and hence, the writ petitions are misconceived and deserves to be dismissed.
9. Respondent Nos.2 to 4 have filed counter affidavits and the relevant paragraphs are quoted hereunder:
"2. That, the respondent Nos.2, 3 & 4
state that since the present writ petition raises issues with respect to refund of Cess amount claimed by Petitioner, who has also admitted that the Research and Development Cess Act, 1986 had been repealed w.e.f., 01.04.2017 vide Finance Act, 2017 which was enacted by the respondent No.4, and that the petitioner inadvertently has paid amounts on different dates post repeal i.e., 01.04.2017, for sake of assistance to this Hon'ble Court brings to the notice the procedure of levy of Cess and receipt of or accepting the Cess payments to Government of India prior to repeal of Cess Act w.e.f., 01.04.2017 was as follows:
Xxxxx -9-
3. That the Technology Development Board was set up under the Technology Development Board Act, 1995 [Hereinafter TDB Act] as a statutory body under the Department of Science & Technology [respondent No.3]. Section 9 of the Act provides that there shall be constituted a fund to be called Fund for Technology Development and Application. Section 10 of the TDB Act provides for transfer of all monies collected under the R&D Cess Act, 1996 to be transferred to the Board.
4. That the Fund for Technology Development and Application could not be established till now and hence no monies collected under R&D Cess Act, 1986 were ever transferred to the Technology Development Board. The monies remained and still remain in the Consolidated Fund of India. Further, after Repeal of the R&D Cess Act w.e.f., 01 April 2017, the question of transfer of any amount to the Technology Development Board does not arise.
5. That in view of the aforesaid, the respondent No.1 is right in saying that they are not liable to refund any amount to the petitioner.
6. That the R&D Cess paid by the petitioner lies in the Consolidated fund of India, which is managed by the Controller General of Accounts, Ministry of Finance, i.e., the respondent No.4. However, there is no legal provision under the Ministry of Finance
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i.e., respondent No.4 to refund R&D Cess paid by the petitioner."
10. Learned ASG appearing for the respondent Nos.2 to 4 reiterated the submissions made in the counter affidavits, above mentioned.
11. Heard the learned counsel for the respective parties and perused the material on record.
12. The sole point that arises for consideration of this Court is:
Whether the respondents can retain the R & D Cess which has been collected without authority under the provisions of Research and Development Cess Act, 1986 as the said Act itself has been repealed w.e.f., 1st April 2017 and hence the rejection of refund claim of R & D Cess is violative of statutory provisions as also Article 265/300A of the Constitution?
13. The Hon'ble Apex Court in the case of HMM Limited supra, has observed thus:
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"12. ....... Realisation of tax or money without the authority of law is bad under Article 265 of the Constitution. Octroi cannot be levied or collected in respect of goods which are not used or consumed or sold within the municipal limits. So these amounts become collection without the authority of law. The respondent is a statutory authority in the present case. It has no right to retain the amount, so far and so much. These are refundable within the period of limitation. There is no question of limitation. There is no dispute as to the amount. There is no scope of any possible dispute on the plea of undue enrichment of the petitioners. We are, therefore, of the opinion that the Division Bench was in error in the view it took. Where there is no question of undue enrichment, in respect of money collected or retained, refund, to which a citizen is entitled, must be made in a situation like this."
14. In the case of Joshi Technologies International supra, the Hon'ble High Court of Gujarat has observed that:
"15.3 Though the above decision has been rendered in the context of the Income Tax Act, 1961, two principles can be culled out therefrom insofar as the present case is concerned. Firstly, retention of any amount paid in excess of the liability may offend Article 265 of the Constitution of India. Secondly, even in case of self assessment, if any amount has been paid by way of mistake
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or inadvertence or on account of ignorance, the assessee may bring it to the notice of the authority concerned, which may take into account the relevant material and calculate the amount to be refunded. In case of self assessment there would not be any assessment order which can be challenged before the higher forum. Therefore, the contention that the self assessment made by the petitioner has attained finality and hence, the petitioner cannot claim refund unless the assessment is challenged is misconceived and contrary to the law laid down in the above decision. The upshot of the above discussion is that even in case where any amount is paid by way of self assessment, in the event any amount has been paid by mistake or through ignorance, it is always open to the assessee to bring it to the notice of the authority concerned and claim refund of the amount wrongly paid. The authority concerned is also duty bound to refund such amount as retention of such amount would be hit by Article 265 of the Constitution of India which bears the heading "Taxes not to be imposed save by authority of law" and lays down that no tax shall be levied or collected except by authority of law. Since the Education Cess and Secondary and Higher Secondary Education Cess collected from the petitioner is not backed by any authority of law, in view of the provisions of Article 265 of the Constitution, the respondents have no authority to retain the same. The decision of the Supreme Court in the case of Paros Electronics (P) Ltd. v. Union of India (supra) would have no applicability to the facts of the
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present case, inasmuch as, in that case the refund was not granted as the levy had become final being contested at all departmental levels. In the present case, the education cesses have been paid by the petitioner by way of self assessment and no assessment order has been passed thereon."
15. In the case of Hind Agro Industries limited supra, the Hon'ble High Court of Delhi has observed thus:
"16. There can be no manner of doubt that the custom authorities in the instant case were bound to refund the cess erroneously paid by the Appellants for the period from 15th January, 2001 till 19th February, 2002 under a mistake of law. They had paid the cess when in fact no such cess was payable. There is no question of processing a claim of refund of such amount in terms of the Customs Act at all because the payment made mistakenly was not under that Act. In the circumstances, the period of limitation under Section 27 of the Act would not apply, as explained in Salonah Tea Company Limited. The applications for refund having been made well within the period of three years' after discovery of mistake by the Appellants, are not barred by limitation. Question (a) in para 7 above is accordingly answered in favor of the Appellants. Consequently, the need to answer question (b) does not arise."
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16. It is well settled law that any amount paid by mistake or through ignorance of the repealed Act deserves to be refunded on the claim of refund made by the petitioners, retention of such amount would be hit by Article 265 of the Constitution of India.
17. The respondent No.1 submits that they are not liable to refund any amount to the petitioners. The counter affidavit filed by the respondent Nos.2 to 4 quoted supra indeed clarifies that the said R & D Cess paid by the petitioners lies in the consolidated fund of India which is managed by the respondent No.4.
18. The claim of refund of the petitioners cannot be denied for the reason that there is no legal provision to refund R & D Cess paid by the petitioners. No amount can be withheld by the respondents without authority of law under the said pretext. Any money collected, retained without authority of law requires to
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be refunded to which a citizen is entitled. Hence, the petitioners are entitled to the said Cess amount deposited subsequent to repeal of the Act without any interest by the respondent Nos.2 to 4.
For the aforesaid reasons, the petitions succeed. The respondent Nos.2 to 4 shall refund the R & D Cess of Rs.70,78,224/- in W.P.No.5468/2018 and Rs.36,95,266/- in W.P.No.5469/2018 paid by the petitioners respectively in an expedite manner in any event not later than four weeks from the date of receipt of the certified copy of the order.
With the aforesaid observations and directions, writ petitions stand disposed of.
Sd/-
JUDGE NC.