Raghbar Dass Hukam Chand and Co. and Jai Bharat Gum and Chemical Ltd. Vs. State of Haryana and ors. - Court Judgment

Excerpt:
sales tax - assessment - refund of amount - sections 15a and 43 of general sales tax act, 1973 - respondent transacting business of trading - assessing officer/petitioner finalized deemed assessment and worked out refund due in respect of assessment - respondent filed application for refund of amount as per assessment orders - commissioner after examining application opined that amount of refund worked out by petitioner can not be approved in view of section 15a of act - hence, present petition by aggrieved petitioner - held, petitioner exercising power of determining amount of refund is vested with the power of such refund - petitioner determined amount of refund as per section 43 of act - orders passed by commissioner is liable to set aside - petition allowed - m.m. kumar, j.1. this batch of four petitions have raised an interesting question of law, namely, whether the higher authorities in the hierarchy of sales tax department, haryana in the garb of exercising power of granting sanction under rule 36 of the haryana general sales tax rules, 1975 to the refund orders passed by the assessing officer, could set aside such order of assessment. the aforesaid question has arisen in pursuance of various orders passed in these petitions whereby the order of assessment has been set aside.2. for the sake of convenience, facts are being referred from cwp no. 19941 of 2005. the petitioner-firm is duly registered under the haryana value added tax act, 2003 (for brevity, 'the vat act') and the central sales tax act, 1956. it was earlier also registered under the then prevailing statute known as the haryana general sales tax act, 1973 (for brevity, 'the gst act') which stood repealed on april 1, 2003. the petitioner-firm is transacting business of trading at jagadari and sh. ashok kumar is the sole proprietor of the firm.3. the excise and taxation officer-cum-assessing authority, jagadari finalised the deemed assessment and worked out the refund due in respect of assessment year 2001-02 vide order dated february 14, 2005 (p1). likewise it also finalized the deemed assessment in respect of assessment year 2002-03 vide order dated february 16, 2005 (p2). as a result of the assessment orders, the petitioner was found entitled to refund/adjustment of rs. 1,53,628 and rs. 4,57,808 in respect of the assessment year 2001-02 and assessment year 2002-03, respectively. the petitioner has given details of the background of the deemed assessment by placing reliance on the amendment dated october 30, 2001 made in the rules (p3).4. for effective administration of sales tax and vat, the whole state of haryana has been divided into four divisions and ambala division is one of them. the division consists of ambala, panchkula, yamuna nagar, karnal, kaithal and kurukshetra. a joint excise and taxation commissioner has been made head of each division who is responsible for tax administration in the area of his jurisdiction. for deemed assessment special procedure was adopted. the pecuniary jurisdiction for the assistant excise and taxation officer-cum-assessing authority (to be referred as 'aeto') was increased from rupees fifteen lacs to rupees fifty lacs. accordingly, cases in which annual aggregate of sales and exports did not exceed rs. 5,00,000 can be decided by aeto. accordingly, the aeto-respondent no. 2 finalised the assessment of the petitioner-firm in respect of two assessment years, i.e., 2001-02 vide order dated february 14, 2005 (p1) and in respect of assessment year 2002-03 vide order dated february 16, 2005 (p2).5. in respect of assessment year 1999-2000, an appeal filed by the petitioner-firm was pending before the haryana tax appellate tribunal. the tribunal had entertained the appeal without prior payment on may 13, 2005 being sta no. 2 of 2005. the tribunal has directed the assessing authority that the additional demand of rs. 1,18,374 in respect of assessment year 1999-2000 should be adjusted against the amount of refund allowed for rs. 1,53,628 in respect of assessment year 2001-02 (p1). the amount of refund/adjustment as indicated in the assessment order dated february 14, 2005 and february 16, 2005 (p1 and p2), has not been released. accordingly, the petitioner filed an application on august 16, 2005 praying for refund/adjustment of the amount as per the assessment orders. in pursuance of rule 36, the pecuniary jurisdiction for passing the order of refund is vested in the deputy excise and taxation commissioner (to be referred as 'detc'). the assessing authority forwarded the application of the petitioner-firm with his own recommendation and requested for approval of the refund as per the assessment orders.6. the detc after examining the case has opined that the amount of refund worked out by the assessing officer could not be approved in view of the provisions of section 15a of the act. he issued notice for appearance to the petitioner with a view to seek its explanation (p4 and p5). the petitioner sent their reply on september 10, 2005 and took the stand that section 15a of the act was not applicable in the facts and circumstances of the case. the petitioner-firm also pleaded that rule 36, did not entitle the detc to change the quantum of refund or to set aside the order of the assessing authority. however, the detc vide order dated october 10, 2005 rejected the recommendation of the assessing authority and also the objection filed by the petitioner-firm. he examined the issues on merit and concluded that the refund worked out by the assessing authority was contrary to the gst act and the rules framed thereunder (p6 and p7). this order is subject-matter of challenge in the instant petition.7. the detc has opined that the reason for putting up the report for sanctioning the amount of refund exceeding rs. 10,000 before him is that he alone has been regarded as the sanctioning authority and the assessing authority has no power in that respect, after quoting the provisions of rule 36 of the gst rules. the detc has also rejected the arguments raised by the dealer-petitioner by observing as under:similarly the final argument that their appeal against the order for the year 1999-2000 revised by the detc (1)-cum-revisional authority is pending before the tribunal and the honourable tribunal has ordered the amount allowed to be refunded by the assessing authority to be adjusted against that demand and non-issue of refund by the assessing authority at this stage will amount to dis-honouring the order of the honourable tribunal is also devoid of merit. when the refund has not become final and the assessing authority has no legal power to allow the same then how can this be adjusted without going through the legality of the same.8. the detc also examined the admissibility of refund as per the provision of section 15a of the gst act. according to him, reduction or refund of payment under section 15a could accrue to a dealer who is a manufacturer of goods, and he has held that in the present case, the dealer is a trader and that there is no provision under the gst act or the rules to allow refund to such a dealer. the detc interpreted section 15a of the gst act observing that it prohibits the refund of purchase tax paid on paddy which is further subject to the provisions contained in clause (iii) of sub-section (1) of section 15. he has concluded that recommendation of refund by the assessing authority is contrary to the provisions of the gst act and the rules on the basis of following rationale which reads thus:further this section 15a is also subject to the provision contained in clause (iii) of sub-section (1) of section 15, which deals with the levy of tax on paddy purchased from within the state and used in the manufacture of rice. this clause (iii) provides that the tax leviable on rice procured from paddy purchased in the state and the purchase tax has been paid on this paddy in the state shall be reduced by the amount of this purchase tax paid in the state. thus the turnover liable to tax on the sale of rice (procured from out of the paddy purchased and milled inside the state) to dealers within the state is the difference between the sale value of rice and the purchase value of paddy on which purchase tax has already been paid. and the dealer from whom the rice in question has been purchased herein has paid, if any, only the purchase tax on paddy and this fact has also been admitted by the learned itp in his submissions available on file. and further as discussed section 15a specially prohibits the refund of this purchase tax on paddy by any dealer and this matter has already been decided by the honourable apex court in favour of the revenue in the monga rice mill's case [2004] 135 stc 549. no support can be taken by the dealer of the decision of the honourable tribunal in l t. overseas case after the decision of the honourable apex court. the contention by the learned ftp that the sale has been made in the course of exports out of the territory of india and hence they are eligible for refund is also devoid of any merit. he has failed to draw my attention to any provision in his support under which a refund can be allowed. the provisions relating to export just contain that there will be no tax on the sale of goods in the course of exports and nowhere under the central sales tax act (central act) refund of tax paid on the purchase of goods sold to the exporters in the course of export under section 5(3) of the central act has been provided for. in the present case the assessing authority has not levied any tax on the sale of rice made in the course of export under section 5(3) of the central act.9. the respondent has filed a written statement and has not disputed the broad facts. however, it has been claimed that alternate remedy of appeal under section 39 of the act and revision under section 40 have not been exhausted before approaching this court by filing the petition under article 226 of the constitution. they have also defended the impugned order refusing to accord sanction to the refund vouchers on merit. it has further been claimed that the instructions dated november 26, 2001 on which reliance has been placed by the petitioner do not apply to the facts of this case and has disputed the power of the assessing authority to finalise the deemed assessment on the basis of those instructions.10. mr. avneesh jhingan, and mr. sandeep goyal, learned counsel for the petitioners, have vehemently argued that the power of the sanctioning authority to the refund orders forwarded by the assessing authority does not extend to set aside the order by appreciating the controversy on merit. according to the learned counsel, if such a course is permitted then it would result into encroaching upon the power of the appellate authority which according to section 39 vests in a designated appellate authority. both the learned counsel have maintained that in the garb of exercising power of granting approval to the refund vouchers, the officer cannot set aside the order by entering into merit of the assessment order. in support of their submission learned counsel have placed reliance on a judgment of the supreme court rendered in the case of state of madhya pradesh (now maharashtra) v. haji hasan dada [1966] 17 stc 343 and argued that until the order of assessment is set aside in an appropriate proceedings initiated under the statute, full effect has to be given to such an order. they have also placed reliance on a division bench judgment of the allahabad high court in the case of tin plate company of india limited v. sales tax officer [1993] 90 stc 314 and division bench judgment of the rajasthan high court in the case of union of india v. state of rajasthan [1993] 91 stc 284. on the basis of the aforesaid judgments, they have argued that correctness of the declaration made in the assessment order cannot be reconsidered in the refund proceedings. they have then placed reliance on two judgments of the supreme court under the customs and excise acts, namely, priya blue industries ltd. v. commissioner of customs (preventive) : [2004] 172 elt 145 and collector of central excise, kanpur v. flock (india) pvt. ltd. : [2000] 120 elt 285 and argued that once the assessment order is passed the refund has to be claimed in accordance with such an order.11. ms. ritu bahri, learned state counsel, on the other hand submitted that the petitioner could have availed of alternative remedy of filing an appeal and raised all those issues which are now being agitated before this court. she has pointed out that the existence of an alternative remedy should ordinarily be insisted upon by the courts and the petitioners are liable to be relegated to the remedy of appeal. she has however, argued that the amount of refund is always adjustable. in cases where dealer is likely to pay dues of the department, the refund is not permitted. according to her, if the assessment order is so absurd that nobody can sustain such an order then there is no bar on the power of the superior officer to refuse the grant of sanction to the refund order.12. after hearing learned counsel for the parties and perusing the paper book with their assistance, we would first examine and analyse the provision of rule 36 which is the basis of exercising power by the officer sanctioning the refund. the aforesaid rule in so far it is applicable to the facts of the present case reads thus:rule 36. determination of amount of refund (section 43).: when the assessing authority is satisfied after such scrutiny of accounts and such enquiries as it considers necessary that the claim for refund is admissible, he shall, subject to proviso to section 43 determine the amount of refund due if not already determined under sections 39, 40, 41 and 42 and record an order sanctioning the refund, if the amount to be refunded does not exceed ten thousand rupees. if the amount to be refunded exceeds ten thousand rupees but does not exceed five lacs rupees, he shall submit the record of the case together with his recommendation to the officer in-charge of the district. if the amount of refund exceeds five lac rupees but does not exceed ten lac rupees, the district in-charge shall refer the case to joint excise and taxation commissioner of the division for his approval. in case the amount of refund exceeds ten lacs rupees, the case shall be referred by the district in-charge along with his recommendations to the commissioner for his prior permission. the decision in all such cases shall be taken within a period of ninety days.13. a perusal of the rule shows that the assessing authority after scrutiny of account and making of inquiries [subject to any adjustment as contemplated by proviso to section 43(1) of the gst act] is obliged to determine the amount of refund if not determined by the appellate authority under section 39 or by the revisional authority under section 40, etc. the provision also postulates the pecuniary limits. the assessing authority could exercise the power of refund if the amount of refund is rs. 10,000 or less than rs. 10,000. however, in cases where the amount of refund exceeds rs. 10,000 but does not exceed rs. 5,00,000 then the assessing officer is required to submit the record of the case along with his own recommendation to the officer in charge of the district. in cases where the amount exceeds rs. 5,00,000 but does not exceed rs. 10,00,000 then district in-charge is under obligation to refer the case to joint excise and taxation commissioner of the division. in case, the amount of refund exceeds rs. 10,00,000 then the case is required to be referred by the district in-charge along with his recommendations to the commissioner for granting prior permission. there is nothing in rule 36 which may go beyond the power to accord approval to the amount of refund by the higher authorities in hierarchy that may suggest that such an authority is competent to exercise power by substituting its own opinion with that of the assessing authority.14. the necessary distinction between the powers of recording assessment order and the power of determination of amount of refund by an assessing authority has to be borne in mind. according to the definition clause of section 2(a) of the gst act read with rule 2(c) of the rules, the assessing authority continues to be the excise and taxation officer or the assistant excise and taxation officer. the assessment order has to be framed by the assessing authority in exercise of powers under chapter v which deals with returns, assessment, reassessment and collection. after the assessment order has been passed under chapter v of the gst act, the question of refund has to be considered in accordance with section 43 under chapter vii. section 43 of that chapter deals with refund and, therefore, it would be useful to read section 43, which is as under:section 43. refund.: (1) (the assessing authority or a person appointed to assist the commissioner under sub-section (1) of section 3, as the case may be) shall, in the prescribed manner, refund to a dealer or to any other person the amount of tax or penalty or interest paid by him in excess for the amount due from him under this act, either by a refund voucher, or at the option of the dealer by adjustment of the amount so paid against the amount due from him in respect of any other period:provided that the (assessing authority or a person appointed to assist the commissioner under sub-section (1) of section 3, as the case may be) shall first adjust the amount to be refunded towards the recovery of any amount due, on the date of adjustment from the dealer and shall then refund the balance, if any.(2) where an amount required to be refunded by the assessing authority to any person by virtue of an order issued under this act is not so refunded to him within the period as may be prescribed, the dealer shall be entitled to interest at such rates and on such terms and conditions as may be prescribed.15. it is pertinent to notice that rule 36 has been framed to achieve the object contemplated by section 43. therefore, rule 36 has to be read in the light of the provisions of section 43. a perusal of section 43 shows that an obligation is cast on the assessing authority or any other authority to refund to a dealer or any other person the amount of tax or penalty or interest paid by him in excess of the amount due from him under the act. according to the proviso, it is also a legal obligation casts on the assessing authority or any other authority to first adjust the amount to be refunded towards the recovery of any amount due on the date of adjustment from the dealer and then to refund the balance. in cases where refund amount is not paid within the period prescribed, the dealer is also entitled to interest at the prescribed rate. it is, thus, obvious that after the assessment order has been passed under chapter v, the question of refund would arise thereafter. as to how the refund is to be worked out, it has been made clear by section 43 read with rule 36. accordingly, the obligations cast on the assessing authority or any other sanctioning authority is clearly delineated by section 43 read with rule 36. it would obviously mean that the amount of refund, as worked out in the assessment order, would remain the same without any change and cannot be altered without altering the assessment order itself in appeal or revision, etc. however, it does not mean that the whole amount of refund worked out by the assessing authority in an assessment order would become payable to the dealer. there may be other dues of the revenue payable by a dealer which have to be first adjusted from the amount to be refunded as is provided by the proviso to section 43(1) of the gst act. the whole gamut of determination of refund does not imply that the assessment order has to be tinkered with but it only implies that the amount of refund worked out by the assessment order is required to be adjusted towards the recovery of dues of the revenue which might be payable by the dealer. therefore, there is a marked distinction between the order of assessment and an order concerning determination of amount of refund. both orders operate in two distinct areas which do not intermingle because determination of amount of refund itself presumes the existence of a valid assessment order whereby the amount of refund has been worked out and made payable to a dealer subject, however, to the adjustment of any dues of the revenue. it is for that reason that rule 36 casts a duty on the assessing authority to scrutinize their accounts, make such inquiries which are considered necessary and to determine the claim of refund. after recording his satisfaction, the assessing authority may have to pass order of refund himself or on account of pecuniary limits it may have to forward the case along with his recommendation to the next higher authority. at this stage, the assessing authority cannot reopen the assessment order nor does such a power exist with the higher authority in the hierarchy of administration. once the power of the assessing officer for determination of amount of refund is confined only to the area of examining the accounts or making such inquiry to determine whether the amount of refund has been correctly worked out, the power of the higher sanctioning authorities in the hierarchy of administration would not extend to review the order of assessment, examine the same on merit and set it aside. the exercise of such a non-existing power would be wholly without jurisdiction because it would belong to the appellate authority, which under the act has been defined by section 39 or revisional authority as defined by section 40, etc. therefore, there is no jurisdiction to set aside the assessment order by the authority under rule 36 which vests in the appellate authority or the revisional authority.16. there is ample authority for the proposition that assessment order cannot be tinkered with and have to be respected unless such orders are set aside in appeal (section 39) or revised in exercise of revisional power (section 40). in that regard, reliance may be placed on the judgment of the honourable supreme court rendered in the case of haji hasan dada [1966] 17 stc 343. in that case, the assessee was engaged in the business of yarn and was registered under the c. p. and berar sales tax act, 1947. he was assessed on his turnover from his business and he paid the amount of tax as assessed. later on, he filed an application before the assistant commissioner for refund of certain amount by raising the plea that in the turnover of his business of yarn, the charges concerning dyeing were included which were not taxable under the statute. the aforesaid plea was based on a decision of the board of revenue holding that the dyeing charges were not taxable. accordingly, the honourable supreme court held that the order of refund made on the application was unsustainable in the eyes of law unless the order of the assessing authority was set aside in appeal or revision. placing reliance on a judgment of the bombay high court rendered in the case of state of bombay v. purshottamdas dwarakadas patel [1957] 8 stc 379, their lordships observed as under (page 347 of 17 stc):.in that case it was held by the high court that 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, unless the order was set aside in appropriate proceedings by way of appeal or revision. the court in that case in a reference made under the bombay sales tax act disapproved of the view of the board of revenue which had, in arriving at its decision, followed the precedent in sheikh gauhar sheikh nazir's case [1952] 3 stc 331 (mp).application for refund of tax was, therefore, not maintainable under section 13 of the c.p. and berar sales tax act, 1947, as originally framed.17. it has also been observed by their lordships that the order of assessment is undoubtedly not final and could be set aside in appeal or modified in revision under the provisions of the statute. the assessing officer or any higher officer in the hierarchy of administration would not enjoy any power to review the assessment order nor such an officer could be authorized to ignore the previous order. thereafter, the order of refund contrary to the earlier order of assessment could not be passed. it follows that even an order refusing refund by ignoring the earlier order could also not be passed.18. we further find that similar principles have been laid down by the division bench of the allahabad high court in the case of tin plate company of india limited [1993] 90 stc 314. in that case, the dealer was allowed exemption in respect of sales of tin-plates to manufacturers of tin containers against declarations furnished by the purchasers under section 4b of the u.p. sales tax act, 1948. the dealer made an application for refund and the assistant commissioner instead of allowing the refund directed the sales tax officer to examine the claim for exemption of sales supported by declarations made by the purchasers. the sales tax officer accepted the explanation filed by the petitioner. however, the assistant commissioner again insisted on the sales tax officer making further inquiry. when the notice was issued by the sales tax officer again, the dealer approached the high court. the claim of the dealer was accepted by the division bench. the observations, which are relevant to the controversy in hand, are available in the last two paras, which are extracted as under (page 317):.after any assessment order is passed by the assessing authority the amount mentioned therein is the amount on the basis of which the recovery could be made or in case any excess amount is deposited, the refund could be claimed. if the case of refund has to be refused it has to based on the assessment order or by an order if it is rectified, or modified in a proceeding under section 21 or 22 of the u.p. sales tax act. it is not the case of the respondent that the said assessment order has been modified in any of those proceedings. in fact, the said assessment order is the final order and in refund proceedings it would not be appropriate for the assessing authority to examine and decide whether the exemption granted by it was final or not.(emphasis1 added)19. the aforesaid observations are clearly applicable to the facts of the present case and the area of jurisdiction of the authority which is to determine the amount of refund has been clearly delineated. on principle, similar view has been expressed by the division bench of the rajasthan high court in the case of state of rajasthan [1993] 91 stc 284. we further find that the reliance of the counsel for the petitioner on 'excise cases' may not be strictly relevant as those cases emanates from different statutory enactments but on principle of refund a similar view has been followed. therefore, we are of the view that on principle as well as on precedent, it stands established that an officer exercising the power of determining the amount of refund cannot exercise the power of review or appeal or revision. such an officer has to respect the order of assessment and then is required to proceed to determine the amount of refund. the provisions of section 43 read with rule 36 postulate the limits of their power as already noticed and, therefore, the orders passed by the detc are liable to be set aside.20. the arguments of the learned state counsel that the petitioner should first exhaust the remedy of appeal as per the provisions of section 39 has not impressed us because in cases where question of jurisdiction of concerned authority is involved, writ petitions under article 226 could be filed before the high courts. in that regard reliance may be placed on a judgment of the supreme court rendered in the case of isha beevi v. tax recovery officer : [1975] 101 itr 449 : [1976] 1 scc 70. it has been held that in order to avoid filing of alternative remedy of appeal a writ petitioner under article 226 is required to show that there was complete lack of jurisdiction on the part of the officer or authority to pass an order. similar view has been expressed in another judgment of the supreme court rendered in the case of surya dev rai v. ram chander rai : [2003] 6 scc 675. therefore, there is no blanket bar on the power of the high court to entertain a petition in the face of an order which is totally without jurisdiction. accordingly the objection raised by the learned state counsel is rejected.21. for the reasons stated above, these petitions succeed. the impugned order passed by the authority granting approval to the refund order is set aside.