IMPORTANT POINT
Where Assessees, while supplying rice to DFSC, collected purchase tax amongst other things by way of the procurement price, retention of such purchase tax amounted to unjust enrichment which was not permissible.

JUDGMENT

Dr. Mukundakam Sharma, J. —

1. Leave granted.

2. Since 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 order.

3. The 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 alongwith procurement price of levy fixed under the said Levy Order and if so, what would be the effect of such collection.

4. There 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.

5. The appellants-companies are engaged in the business of purchase of paddy and manufacture of rice therefrom. 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.

6. However, 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.”

7. Therefore, 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 treasury.

8. The 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