Bombay High Court
Jayant Dyes And Chemical Co. vs Deputy Commissioner, Sales Tax, (Adm ... on 22 October, 2002
Equivalent citations: 2003(1)MHLJ784, [2004]136STC250(BOM)
Author: V.C. Daga
Bench: V.C. Daga, J.P. Devadhar
JUDGMENT V.C. Daga, J.
1. This group of petitions involves common question as to whether, in view of the subsequent judgment of the Maharashtra Sales Tax Tribunal for the subsequent assessment years, wherein it was held that the activity of reducing the strength of dyes did not amount to "manufacture", the petitioners are entitled to claim refund from the respondents in respect of earlier assessments which had attained finality.
2. The facts giving rise to these petitions being, common the same are drawn from Writ Petition No. 2962 of 1988 for the sake of clarity.
FACTS
3. The petitioners are M/s. Jayant Dyes and Chemical Co., the partnership firm registered under the Bombay Sales Tax Act, 1959 ("Act" for short). The petitioners deal in dyes. Dyes are reduced in strength according to the requirements of the customers. The petitioners were treating the said process of reduction of strength of dyes as process of manufacturing and were paying due taxes, treating themselves as manufacturers so far as this activity is concerned. Accordingly, the petitioners were assessed for three assessment years i.e. smvt year 2037, 2038 and 2039 on 2nd June 1983, 29th June 1984 and 10th April 1985 respectively.
4. The aforesaid assessment orders for all the three years though were appealable but, admittedly, no appeals were carried to challenge the legality and validity of the aforesaid assessment orders for the aforesaid three years, with the result, all these assessment orders have become final and conclusive.
5. The petitioners, on 6th February 1986, made application under Section 52 of the Act to the Commissioner of Sales Tax to determine the question as to whether or not the activity in reducing dyes amounts to "manufacture". The Deputy Commissioner, Mumbai vide his order dated 30th December 1986 held that the process of reduction of dyes did amount to "manufacture".
6. Being aggrieved by the said finding recorded by the Deputy Commissioner, appeal was preferred to the Maharashtra Sales Tax Tribunal ("Tribunal" for short). On 27th March 1987, the Tribunal after hearing the rival contentions was pleased to hold that the process of reduction of dyes did not amount to "manufacture". With the result, the order of the Deputy Commissioner of Sales Tax dated 30th December 1986 came to be set aside. No reference was preferred by the Commissioner of Sales Tax to challenge the said findings recorded by the Tribunal or to get re-determination of the question of law referred to hereinabove by any superior forum. It is not in dispute that after determination of the above issue as to whether activity of reducing dyes amounts to manufacture, the view expressed by the Tribunal is still holding field for want of any challenge in the higher forum.
7. The petitioners, armed with the aforesaid finding of the Tribunal that the process of reduction of dyes did not amount to "manufacture", applied on 11th May 1987 to the Deputy Commissioner of Mumbai for refund of the amount of tax paid by them : contending that the taxes were paid under mistake of law and sought rectification of the earlier assessment orders for three assessment years and also prayed for revision of the assessment orders referred to in para-3, supra : dated 2nd June 1983, 29th June 1984 and 10th April 1985 which had already become final in absence of any further challenge in the superior forum.
8. The refund applications or the prayer to revise the earlier assessment orders for three years came to be rejected on 23rd July 1987, on the ground that the petitioners having not preferred appeals against the said assessment orders and the same having become final, no refund claim could be allowed.
9. Being aggrieved by the aforesaid order of rejection dated 23rd July 1987, the petitioners preferred appeal to the Tribunal. The Tribunal vide its order dated 24th June 1988 rejected the said appeals. Not being satisfied by the said order of the Tribunal, the petitioners preferred present writ petitions under Article 226 of the Constitution of India and sought to raise a question as to whether or not the refund claims made by the petitioners were maintainable and in alternative challenged the assessment orders even on merits. That is how this batch of petitions was placed before us for final hearing involving common facts and questions of law.
THE ARGUMENTS AND ANALYSIS THEREOF :
10. At the outset, the learned counsel for the petitioners contended that it was not necessary to challenge the assessment orders for earlier three years referred to hereinabove, as the machinery for granting refund is independently provided under the Act. He pressed into service the provision of Section 43 of the Act in support of his submission, which reads as under:
"Section 43, Refund of excess payment.--(1) The Commissioner shall, refund to a person the amount of tax, penalty and interest (if any) paid by such person in excess of the amount due from him. The refund may be either by cash payment or, at the option of the person by deduction of such excess from the amount of any other period :
Provided that, the Commissioner shall first apply such excess towards the recovery of any amount due in respect of which a notice under Sub-section (4) of Section 38 has been issued, and shall then refund the balance (if any).
(2) Where any refund is due to any dealer, according to the return furnished by him for any period, such refund may provisionally be adjusted by him against the tax due and payable as per the returns furnished under Section 32 for any period :
Provided that, the amount of tax, penalty or interest or of all of them due from, and payable by, the dealer on the date of such adjustment shall first be deducted from such refund before making adjustment." Relying upon the aforesaid provision, he contended that as per the law laid down by this Court and the Apex Court, the Act does not contain any limitation for claiming refund of the excess payment of tax made by the assessee to the Revenue.
11. The learned counsel for the petitioners urged that an excess tax collected has to be refunded in terms of Section 43 of the Act. He urged that the respondents were duty bound to repay the excess tax as it was their liability. Having examined the sweep of Section 43 extracted hereinabove, the said provision dealing with refund of excess amount of tax, will operate if the amount of tax, penalty (interest), if any, is paid by the assessee in excess of the amount due from him under the order of assessment or reassessment. Section 43 contemplates an obligation on the part of the Commissioner of Sales Tax to refund excess payment, if the refund is arising out of assessment or reassessment orders. This provision will not operate where the assessment order has become final or conclusive. What is contemplated under Section 43 is that the refund must arise out of modification or amendment or annulment of the assessment order. For example, if the order of assessment is modified in favour of the assessee and the refund is arising out of such order, then Section 43 contemplates that the Commissioner shall refund to a person the amount of tax, penalty and interest paid in excess of the amount due from him. In other words, assessment or reassessment order must give rise to the refund claim. The refund must be a consequence of the assessment or reassessment order. This is not a situation with respect to the case at hand. We, therefore, do not think that the petitioners can seek assistance of Section 43 of the Act to claim the amounts of refund.
12. The learned counsel for the petitioners then took us to the provision of Section 57 of the Act, which provides for revision. During the relevant assessment years the following provision providing for revision was holding the field, which reads thus :
"Section 57. Revision.--(1) Subject to the provisions of Section 56 and to any rules which may be made in this behalf.
(a) the Commissioner may, of his own motion, call for and examine the record of any order passed (including an order passed in appeal.) under this Act or the rules made thereunder by any officer or person subordinate to him and pass such order thereon as he thinks just and proper :
Provided that, no notice in the prescribed form shall be served by the Commissioner under this clause after the expiry of three years from the date of the communication of the order sought to be revised, and no order in revision shall be made by him hereunder after the expiry of five years from such date :
(b) the Tribunal, on, application made to it against an order of the Commissioner [not being an order passed under Sub-section (2) of Section 55 in second appeal], within four months from the date of the communication of the order, may call for and examine the record of any such order, and pass such order thereon as it thinks just and proper.
(2) Where an appeal lies under Section 55 and no appeal has been filed, no proceedings in revision under this section shall be entertained upon application.
(3) No order shall be passed under this section which adversely affects any person, unless such person has been given reasonable opportunity of being heard.
(4) If the Tribunal rejects any application for revision under this section, the Tribunal shall record the reasons for such rejection."
Perusal of the aforesaid provision would again go to show that the petitioners had no locus to invoke the above revisional jurisdiction under Section 57 of the Act. The power to revise is given, to the Commissioner on his own motion, if the order is passed under the provisions of the Act or the rules made thereunder by an officer or person subordinate to him. It is also provided that no notice in the prescribed form shall be served by the Commissioner under this clause after the expiry of three years from the date of communication of the order sought to be revised and no order in revision shall be made by him hereunder after the expiry of five years from such date. The bare reading of the aforesaid provision would go to show that at the instance of the assessee the revision petition is not maintainable. Consequently, the view taken by the Tribunal that the revision petition was not maintainable at the instance of the petitioner/assessee cannot be faulted with. Sub-section (2) of Section 57 will have no application to Clause (a) but it will only apply to the cases covered by Clause (b).
Since the provision of Section 57(1)(a) was invoked by the assessee, the view taken by the Tribunal cannot be said to be wrong.
13. Mr. Joshi, learned counsel appearing for the petitioners tried to canvass that in the event of application to the Commissioner he is duty bound to exercise suo motu powers is also misplaced. We do not think, the submission advanced can be accepted. Viewed in the backdrop of this submission, in our view, no fault can be found with the order of the Tribunal rejecting contention of the petitioners in this behalf.
14. The petitioners further contended that since the tax was recovered under mistake of law, the petitioners were entitled to claim refund without challenging the assessment order. He placed reliance on the judgment of the Apex Court in the case of Bhadrachalam Paper Boards Ltd. v. Government of Andhra Pradesh (1998) (Vol. 111) STC 657, wherein while reversing the judgment of the High Court on the point of refund of amount of tax which was reimbursed by the assessee to the Forest Department, the Apex Court held that the assessee was entitled to refund, of the tax for the period of three years prior to the filing of the writ petition.
15. The facts in the above case of Bhadrachalam Paper Boards Ltd. (supra) were altogether different than the present one. In that case there was no order of assessment. Under the terms of the contract, the amount of tax was reimbursed by the assessee to the Forest Department treating the transactions as sale transactions. The High Court did record that there was no sale of goods attracting tax, but since there was no averment in the petition to the effect that the burden of the tax had not been passed on to the customers, the assessee was held not entitled to claim refund of the tax already paid. The High Court was pleased to dismiss the petition.
16. On appeal by the assessee to the Apex Court, the decision of the High Court was reversed on the point of refund and it was held that the assessee was entitled to refund of tax collected for the period commencing three years prior to the date of the filing of the petition. It is thus clear that the question of assessment or reassessment was never involved in this case; whereas in the case in hand is the case : wherein the assessment orders have become final as such, in our opinion, the ratio of the aforesaid judgment in the case of Bhadrachalam Paper Boards Ltd. (supra) shall hardly be of any assistance to the petitioners.
17. The learned counsel for the petitioners also relied upon two more judgments of the Apex Court, one in the case of C.S.T. v. Auraiya Chambers of Commerce (1986) 62 STC 327 and Anr. in the case of Kamala Mills v. State of Bombay (1965) XVI S.T.C. 613. In these cases, the Apex Court was dealing with the cases, wherein a levy of tax was held to be unconstitutional. Consequently, it was held that the assessee in that case was entitled to claim refund of tax. It is no doubt true that once the provision of Act is held to be unconstitutional, then, all the assessment orders passed under the Act would fall to the ground. They need not be challenged separately. But the facts of the case in hand are altogether different than the facts involved in the case of Kamala Mills and/or Auraiya Chambers of Commerce (cited supra).
18. At this juncture it will be relevant to note that refund may arise, for more than one reason. It may arise due to revision or modification or annulment of the assessment order or may become due : due to declaration of the provisions of the tax legislation, under which taxes were paid, ultra vires the Constitution or it may arise due to payment under mistake of law. The Apex Court in Mafatal Industries Ltd. v. Union of India (1998) (vol. 111) STC 467, had occasion to consider three types of the cases which can give rise to refund claim. The three types of cases classified and dealt with by the Apex Court are as follows:
Class I : "Unconstitutional levy"--where claims for refund are founded on the ground that the provision of the Excise Act under which the tax was levied is unconstitutional.
Class II : "Illegal levy"--where claims for refund are founded on the ground that there is misinterpretation/ misapplication/ erroneous interpretation of the Excise Act and the Rules framed thereunder. Class III : "Mistake of law" where claims for refund are initiated on the basis of a decision rendered in favour of another assessee holding the levy to be; (1) unconstitutional; or (2) without inherent jurisdiction.
19. The cases in hand squarely fall in the third category i.e. payment of tax under mistake of law. If that be so, the Apex Court held that no assessee can be avowed to re-open the assessment proceeding, that has been finally concluded against him, on the basis of a favourable decision in the case of another assessee. This is because an order which has become final in the case of an assessee will continue to stand until it is specifically recalled or set aside in his own case. The same is a view reiterated by the Apex Court in the case of Collector of Central Excise, Kanpur v. Flock (India) Pvt. Ltd., 2000 (120) ELT 285 (SC), which reads as under:
"Coming to the question that is raised there is little scope for doubt that in a case where an adjudicating authority has passed an order which is appealable under the statute and the party aggrieved did not choose to exercise the statutory right of filing an appeal, it is not open to the party to question the correctness of the order of the adjudicating authority subsequently by filing a claim for refund on the ground that the adjudicating authority had committed an error in passing his order. If this position is accepted then the provisions for adjudication in the Act and the Rules, the provision for appeal in the Act and the Rules will lose their relevance and the entire exercise will be rendered redundant. This position, in our view, will run counter to the scheme of the Act and will introduce an element of uncertainty in the entire process of levy and collection of excise duty. Such a position cannot, be countenanced....
The provision indicates the importance attached to an order of the appellate or revisional authority under the Act therefore, an order which is appealable under the Act is not challenged then the order is not liable to be questioned and the matter is not to be reopened in a proceeding for refund which if we may term it so in the nature of execution of a decree/order.
It is no doubt true that the above judgment is based on the provision of the Central Excise Act, 1944 and Rules framed thereunder, but the scheme of the Bombay Sales Tax in question is not different so far as this aspect of the matter is concerned. The Division Bench of this Court as back as in 1957 in the case of State of Bombay v. Purshottamdas Dwarkadas Patel, (1957 (VIII) STC 379 held as under :
"An application for refund of sales tax paid under an order of assessment cannot be entertained by the Sales Tax Officer on the plea that the order was made on an erroneous view of the law, without having the order set aside in proper proceedings by way of appeal or revision."
In this view of the matter, we are of the opinion that in absence of challenge to the assessment orders and those assessment orders having become final, it was not open for the petitioners to claim refund.
20. Mr. Joshi leaving the aforesaid line of argument, switched over to another submission and contended that the petitioners have also challenged those three assessment orders in the present petitions and, therefore, this Court should treat the writ petition against the original assessment orders and should set aside the same in view of the subsequent view of the Tribunal in the case of M/s Jayant Dyes and Chemical Co., wherein it was held that the reduction of strength of dyes did not amount to "manufacture" and further urged that by way of consequential relief refund claims be allowed. This door, in our opinion, is also not open to the petitioners for more than two reasons. Firstly, the petitioners must be non-suited on the ground of laches; and secondly, the petitioners had an opportunity to challenge the said assessment orders in a statutory appeal. Having failed to challenge the same in the appellate forum the petitioners allowed the said orders to become final. In Champaklal v. C.I.T. 1970 SC 645 it was held that a writ of certiorari is discretionary : it is not issued merely because it is lawful to do so. In Moon Mills v. Industrial Court, AIR 1967 SC 1450, it was observed by the Apex Court that writ of certiorari is legally a matter of sound discretion and will not be granted, if there is a negligence or omission on the part of the petitioner to assert his right. Apart from the above, having accepted the said orders by the petitioners, we do not think, we would be justified in exercising writ jurisdiction in favour of the petitioners on the facts of these cases.
21. A party cannot challenge the proceedings after long participation or acceptance of the order without raising any objection on the principle of acquiescence as held by the Apex Court in the case of Prasun Roy v. CMDA, (1987) 4 SCC 82.
22. In the case of Har Avatar Singh v. State of Punjab , petitioner, had filed writ petition in the High Court after nine years challenging acquisition of his lands where the High Court relying upon the decision in another case in a petition filed at the instance of some other persons had struck down the notification issued under Section 4 of the Land Acquisition Act by which the lands of those persons as well as that of the petitioner were acquired. The petitioner's claim for higher compensation was already granted by the District Court against which an appeal was pending in the High Court. As regards the writ petition filed after nine years, it was held that the petitioner had acquiesced in the acquisition of his land and hence the writ petition is not maintainable. Applying the aforesaid ratio laid down by the Apex Court to the facts of the present case it has to be held that, since the assessment orders have attained finality, the petitioners cannot obtain refund of tax paid under the assessment order.
In the result, all the petitions are dismissed. Rules stand discharged with no order as to costs.