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IN THE HIGH COURT OF ALLAHABAD
R. Dayal and M. L. Chatuervedi, JJ.
SALES TAX COMMISSIONER - Appellant
Versus
SADA SUKH VYOPAR MANDAL - Respondents
Sales Tax Reference 254 Of 1956
Decided On : 10/30/1958
SALES TAX - Refund of tax paid on forward contracts - Circumstances disentitling assessee from refund - Applicability of Section 8-A (4) of the U. P. Sales Tax Act.
Fact of the Case:
The issue arose from a reference made by the Judge (Revisions) Sales Tax on 1371 reference applications before him. The reference applications were made in connection with a number of revisions which the various assessees had filed before the Judge (Revisions) against the assessment of sales tax made by the various Sales Tax Officers and for the consequential relief with respect to the refund of the amount of sales tax which the various applicants had deposited in the Government treasury.
Finding of the Court:
The court held that the assessees were entitled to a refund of the sales tax paid on forward contracts, even if the tax was voluntarily paid or realized without the assistance of any coercive process, in all cases, whether the taxes had been paid by the dealers from their own pockets without recovering the amounts from the customers, where the taxes had been debited in the account by the dealers against the customers but the amounts had not been recovered, or where the taxes had actually been recovered by the dealers from the customers.
Issues: 1. Whether any sales tax which has been deposited by any dealer on forward transaction before or after the issue of notice of demand is refundable on the ground of the tax having been declared ultra vires, even when the tax was voluntarily paid or realised without the assistance of any coercive process in all or any of the following cases: (a) where the taxes have been paid by the dealers from their own pockets without recovering the amounts from the customers, (b) where the amounts of taxes have been debited in the account by the dealers against the customers but the amounts have not been recovered, (c) in view of the provisions of Section 8-A (4) of the Sales Tax Act where the taxes have actually been recovered by the dealers from the customers. 2. If the taxes are refundable in all or any of the cases mentioned in the first question, what is the period within which the refund can be claimed? 3. Whether in the circumstances of the case, Section 8-A (4) of the U. P. Sales Tax Act is at all applicable and is not ultra vires of the U. P. Legislature?
Ratio Decidendi: 1. The court held that none of the circumstances urged disentitled the assessee from getting the refund to which he was entitled under Section 72 of the Contract Act, as held by the Supreme Court in its Civil Appeal No. 87 of 1957. The court reasoned that the assessee had a right to the refund, and that no equitable consideration could take away that right. 2. The court held that Section 8-A (4) of the U. P. Sales Tax Act was not applicable in the circumstances of the case, as the amount realized by the dealer-assessee as tax from a customer in connection with a forward contract could not be said to be an amount realized as tax on sale of any goods.
Final Decision: The court answered the re-formulated question No. 1 (a), (b) and (c) in the affirmative to the effect that the tax deposited by a dealer on forward transaction is refundable. The court gave no answer to question No. 2 in view of what it had said above. The court answered the first part of question no. 3 to the effect that Section 8-A (4) of the U. P. Sales Tax Act is not applicable in the circumstances of the case. The court ordered the Commissioner, Sales Tax, U. P. , to pay the costs of the assessee which it assessed at Rs. 500.
( 1 ) THE Judge (Revisions) Sales Tax has made a reference to this Court on 1371 reference applications before him. His referring order is dated the 30th December, 1955. One common referring order was made, as the points of law raised in those applications were mostly common and could be covered by the few questions formulated by the Judge (Revisions ). Out of these 1371 references, 1318 are on the applications under Section 11 of the U. P. Sales Tax Act made by the Commissioner, Sales Tax, Uttar Pradesh, and the remaining 53 are on the applications of different dealers. These applications for references were made in connection with a number of revisions which the various assessees had filed before the Judge (Revisions) against the assessment of sales tax made by the various Sales Tax Officers and for the consequential relief with respect to the refund of the amount of sales tax which the various applicants had deposited in the Government treasury.
( 2 ) THE above reference arises under the following circumstances. In the U. P. Sales Tax Act, U. P. Act No. XV of 1948, the word "sale" was defined in Clause (h) of Section 2 and in the definition it was stated that it would include "forward contracts. " The Sales Tax Department of the State Government accordingly started assessing sales tax on forward transactions as well. One of the assessees, by name Budh Prakash, moved a writ petition in this Court challenging the vires of the definition of "sale" given in the Sales Tax Act in so far as it purported to include forward transactions within its ambit. The matter came up for consideration by a Division Bench of this Court, and the Division Bench upheld the contention of Budh Prakash on the ground that the word "sale" in the relevant entry in Schedule 7 of the Government of India Act did not include forward transactions and the U. P. Legislature had no jurisdiction to legislate with respect to them or to impose a tax on those transactions. The State Government took the matter to the Supreme Court of India and the Supreme Court upheld the decision of this Court. The decision of the Supreme Court is reported in Sales Tax Officer, Pilibhit v. Messrs Budh Prakash jai Prakash [1955] 1 S. C. R. 243. The learned Judges further held Explanation III to Section 2 (h), which inserted a deeming clause concerning the completion of sale on forward contracts as well as Section 3-B of the Act to be ultra vires. After the decision of the Division Bench of this court, a number of revisions were filed by the assessees before the Judge (Revisions) claiming refund of the amounts paid by them as sales tax on forward contracts. Some others waited till the law on the point was finally declared by the Supreme Court and then filed their revisions.
( 3 ) THE Judge (Revisions) set aside the assessment of sales tax, as the assessment on forward contracts had been declared illegal by this Court whose order was confirmed by the Supreme court, but held that the amount of tax deposited could be refunded only in hose cases in which the dealers had not realised that amount from the customers and that the amount was not to be refunded in cases in which the dealers had actually realised those amounts from the customers. The Judge (Revisions) had not passed a final order but he remanded the cases to the Sales Tax authorities for further findings and necessary assessments. The Commissioner, Sales Tax, was dissatisfied with this order so far as it held the deposited tax to be refundable in cases where the dealers had not realised it from the customers, and he filed 1318 applications for reference under section 11 of the Sales Tax Act submitting that the following question be referred to this Court: whether a dealer who has paid to the State sales tax, whether realised or unrealised from the customers, on forward contracts of sale is entitled to a refund of the tax so paid by him on the ground of the tax having been declared ultra vires, even when the tax was vo
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