Allowed

M/S.High Way Trading v. State of Orissa

Orissa HC20 May 2022STREV/42/2002

Case brief

AI extract

What is this about?

Revision petitions regarding sales tax assessment on carpet purchases. Court held carpets where 1st point tax was paid are exempt at last point, allowing tax adjustment against demand raised by revenue department.

What did the court decide?

Impugned orders of Tribunal ACST and STO set aside; carpets exempt from last point tax where 1st point tax paid; petitions allowed.

M/S.High Way Trading Vs State of Orissa — Pension and Retirement Benefits | Orissa HC (2022)

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IN THE HIGH COURT OF ORISSA AT CUTTACK

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STREV Nos.41 and 42 of 2002

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M/s. High-way Trading (Pvt.) Ltd. …. Petitioner

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-versus-

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…. State of Orissa represented by Opposite Party Commissioner of Sales Tax, Cuttack

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Advocates, appeared in these cases:

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For Petitioner : Mr. Jagabandhu Sahoo,
Senior Advocate
along with
Ms. Kajal Sahoo, Advocate
For Opposite Party : Mr. S.S. Padhy,
Additional Standing Counsel
CORAM:
THE CHIEF JUSTICE
JUSTICE R.K. PATTANAIK
JUDGMENT
20.05.2022
Dr. S. Muralidhar, CJ.

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These two revision petitions arise out of a common order dated 4^th July 2001 passed by the Orissa Sales Tax Tribunal, Cuttack (Tribunal) in S.A. Nos.1055 and 1056 of 1998-99 for the years 1992-93 and 1993-94. By the said impugned common order, the Tribunal partly allowed the appeals filed by the Petitioner against a common order dated 31^st July 1998 passed by the Assistant Commissioner of Sales Tax (ACST), Appellate Unit, Bhubaneswar dismissing the appeals filed by the Petitioner

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STREV Nos.41 and 42 of 2002 Page 1 of 8

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against the assessment order of the Sales Tax Officer (STO), Bhubaneswar II Circle affirming the demands raised for the years 1992-93 and 1993-94 of Rs.1,96,783/- and Rs. 2,67,853/respectively.

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It must be noted at the outset that while STREV No.41 of 2002 pertains to the year 1992-93, STREV No.42 of 2002 pertains to the year 1993-94. By orders dated 24^th February 2003, both these revision petitions were admitted. In STREV No.41 of 2002, an order was passed on 6^th February 2004 staying the demand after noting that the ACST, Puri Range, Bhubaneswar had by an interim order dated 25^th March 1996 noted that the purchase of pile carpets by the Petitioner had already suffered 1^st point sales tax.

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During the pendency of these petitions, STREV No.41 of 2002 happened to be dismissed for default by an order dated 13^th September, 2019. By a separate order passed today in CMAPL No.231 of 2022, that order has been recalled and STREV No.41 of 2002 has been restored to file.

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The following common question of law is framed for consideration:

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“Whether the carpets dealt with by the Petitioner on which 1^st point sales tax has been paid to the selling dealer, are exempted from sales tax at the last point of sale?”

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STREV Nos.41 and 42 of 2002 Page 2 of 8

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The background facts are that the Petitioner is registered as a dealer under the Orissa Sales Tax, 1947 (OST Act) under the territorial jurisdiction of the STO, Bhubaneswar II Circle. The Petitioner deals inter alia in carpets, vinyl flooring, textile clothes, tarpaulin etc. The Petitioner states that it maintains regular books of account in respect of its business as required by law.

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For the accounting period 1992-93, the Petitioner had effected total purchase of goods amounting to Rs.21,33,303.08/- and disclosed a gross turnover (GTO) of Rs.25,52,964.30/-. The corresponding figures for 1993-94 were Rs.10,73,942.88/- and GTO of Rs.18,10,189.64/-. The Petitioner claimed corresponding deduction from the return GTO towards 1^st point tax paid sales amounting to Rs.23,55,852.79 for 1992-93 and Rs.14,69,461/- for 1993-94.

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The STO in the assessment order for the respective years turned down the above claim of deduction on the ground that the impugned item viz., item sold by the Petitioner was not “pile carpet” as per the notification dated 30^th June 1990 and that the carpet sold was therefore subject to last point sales tax @ 16% in terms of Serial No.23 of the schedule of rate of sales tax. Accordingly, the impugned demand was raised in the two respective assessment orders dated 30^th November, 1995 of the STO.

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Both these orders were confirmed by the ACST by dismissing the Petitioner’s appeals by separate ex parte orders dated 31^st July,

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STREV Nos.41 and 42 of 2002 Page 3 of 8

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The further appeal before the Tribunal was allowed in part by the impugned common order.

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This Court has heard the submissions of Mr. Jagabandhu Sahoo, learned Senior Advocate for the Petitioner and Mr. S.S. Padhy, learned Additional Standing Counsel for the Opposite Party-Sales Tax Department.

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Mr. Sahoo referred to the Serial No.23 of the list of 1^st point goods as per the notification dated 22^nd December 1989 issued by the Finance Department with effect from 1^st January 1990 which reads “23. pile carpets”. Serial No.23 on the list of taxable goods, which prescribes the rate of tax to various goods, irrespective of its status as to whether the goods belong to 1^st point or last point as per notification dated 30^th June 1990 enumerates thus “23. Carpets, pile carpets including Kalins and Galichas - - - Sixteen percent”.

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It was submitted by Mr. Sahoo that there was no doubt that the Petitioner had purchased carpets on payment of sales tax to its selling dealer who in turn was a registered dealer. Therefore, this was a collection of sales tax by the seller as 1^st point sales tax. The only issue therefore was whether the carpets purchased by the Petitioner would come under the expression “pile carpets” and as such is covered under the notification?

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The Petitioner submitted a clarification letter issued by M/s Trans Asia Carpet Ltd., which is a pioneer in the manufacture of

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STREV Nos.41 and 42 of 2002 Page 4 of 8

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pile carpets, which clarified that synthetic/woolen carpets are known in common parlance as pile carpets. In fact, the ACST had while passing an order on the stay application of the Petitioner on 25^th March 1996, relied on the said clarification and observed that since the dealer had effected purchases of pile carpets, there was a prima facie case in favour of the Petitioner. Accordingly, a full stay was granted of the demand by the ACST.

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Mr. Sahoo relied on the decision in P. Rama Rao and Sons v. State of Orissa [1990] 77 STC 303 (Ori) where in similar circumstances concerning the legality of levy of tax at different rates on ‘cement’ and ‘white cement’, the contention advanced on behalf of the Assessee was accepted by this Court, which was similar to the contention in the present case.

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Mr. S.S. Padhy, learned Additional Standing Counsel for the Opposite Party-Sales Tax Department on the other hand supported the impugned orders of the ACST and the Tribunal and submitted that they called for no interference.

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The above submissions have been considered. The taxing provision in the OST Act is Section 5 (1) which prescribes the rate of tax. The point of levy of tax on different goods are in accordance with Section 8 of the OST Act. Therefore, the reference to entry 23 of the rate of tax for determining amenability to tax is not relevant. The schedule of taxable goods under List‘C’ not only covers the goods notified as 1^st point tax paid items

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STREV Nos.41 and 42 of 2002 Page 5 of 8

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but all other residual items unless the goods were notified as tax free.

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There is merit in the contention of the Petitioner that pile carpets are also known as carpets. In common parlance, pile carpets are also understood as carpets. The carpets entered into the books of account of the Petitioner are in fact “pile carpets”.

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In similar circumstances, in P. Rama Rao ( supra ), it was stated that cement and white cement cannot be treated differently as both belong to the same species. Inter alia, it was observed in the said decision as under:

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“8……Therefore, it cannot be said that adjustment of tax paid under a mistaken belief cannot be made against the tax legally due. Such a view also finds support from a decision of Supreme Court in the case of Shiv Shanker Dal Mills v. State of Haryana AIR 1980 SC 1037 . The following paragraph lucidly expresses the position of law and we find support from the relevant portion of the said decision:

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“……Where public bodies, under colour of public laws, recover people’s moneys, later discovered to be erroneous levies, the dharma of the situation admits of no equivocation. There is no law of limitation, especially for public bodies, on the virtue of returning what was wrongly recovered to whom it belongs, nor is it palatable to our jurisprudence to turn down the prayer for high prerogative writs, on the negative plea of ‘alternative remedy’ since the root principle of law married to justice, is ubi jus ibi remedium….”

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xxx xxx xxx

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The same principle has been often discussed under the subject “restitution”. A person holding title

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STREV Nos.41 and 42 of 2002 Page 6 of 8

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to property is under an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it. Basis of the law should be restitution where it is unreasonable and unjust for the defendant to retain the benefit which he has received. The theory of implied contract still persists in law. “Restitution” means the restoring of anything unlawfully taken from another. It is most frequently used in the common law for setting them in possession of land and tenements that has been unlawfully dispossessed of them. Looked at from another angle under Section 72 of the Indian Contract Act, a person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it. Section 72 of the Contract Act includes payment made under a bona fide mistake of law. In our view, in case of payment of a tax which is ultra vires or unconstitutional or paid under a mistaken belief or wrong interpretation of the provisions of law, the party is entitled to have a refund or adjustment of it from the State whether he had paid it under protest or not. This also has been the consistent view of the Supreme Court. See [1958] 9 STC 747; AIR 1959 SC 135 (Sales Tax Officer v. Kanhaiya Lal) and [1961] 12 STC 357; AIR 1961 SC 1438 (Orient Paper Mills v. State of Orissa ). While dealing with cases of refund of tax collected without authority of law, the Supreme Court held that where public bodies under colour of public laws recover people’s money, later discovered to be erroneous levies, the dharma of the situation admits of no equivocation. There is no law of limitation especially for public bodies on the virtue of returning what was wrongly recovered to whom it belongs. In our view, what is appropriate in the case of tax collected under an invalid law is applicable to the case of tax paid under a bona fide mistaken belief. The adjustment of the amount in such cases would be in consonance with justice and, equity and good conscience.”

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STREV Nos.41 and 42 of 2002 Page 7 of 8

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It was further explained that there should not be an unjust enrichment on part of the State and that it would not be proper to tax a person twice in respect of the same transaction particularly when he has paid tax under a bona fide belief.

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In the present case, the Petitioner having already paid to the seller, the 1^st point sales tax, should not be asked to pay again sales tax on the last point of sale of the same commodity. Consequently, the question framed by the Court is answered in favour of the Assessee and against the Department by holding that carpets on which 1^st point sales tax has already been paid by the Petitioner to the selling dealer would not again be amenable to sales tax at the last point of sale. The impugned orders of the Tribunal and the corresponding orders of the ACST and STO to the above extent are hereby set aside.

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The revision petitions are allowed, but in the circumstances, with no order as to costs.

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(S. Muralidhar) Chief Justice (R.K. Pattanaik) Judge

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S.K.Guin/ Sr. Stenographer

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STREV Nos.41 and 42 of 2002 Page 8 of 8

M/S.High Way Trading v. State of Orissa

Case brief

What is this about?

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M/S.High Way Trading v. State of Orissa

Case brief

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