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Judgment
Ajit J. Gunjal, J.-This appeal is filed under Section 16 of the Karnataka Tax on Entry of Goods Act, 1979 (for short, ''KTEG Act'') against the order dated 20th May, 1996 passed by the Joint Commissioner of Commercial Taxes, Bangalore, setting aside the assessment order dated 5th December, 1994 for the assessment year 1989-90.
Brief facts can be stated are as under:
The appellant is a dealer in textile goods and has submitted a monthly return under the Karnataka Tax on Entry of Goods Act, 1979, the relevant year being 1989-90 and the annual return was also filed. The assessment order was passed by the Assessing Authority on 5-12-1994. In the said order an exemption was granted on a turnover of Rs. 2,09,30,554/- as re-export of textiles. According to the appellant, there is no dispute that there was a re-export of textile and the goods were not liable for entry tax. However, the entry tax had been paid at 2% on the turnover. The appellant contends the said sum was collected by the Assessing Authority in violation of the Act and the said amount was sought to be forfeited under Section 3-BB of the Karnataka Tax on Entry of Goods Act.
The appellant had paid the entry tax when the goods entered the local area. However, the Assessing Authority after verification of the books of accounts for the purpose of sales tax assessment found that the assessee had totally purchased the textiles worth Rs. 3,65,12,145/-. Out of the said goods, the assessee had re-exported the goods worth Rs. 13,89,802/-. A claim statement is made well-within the stipulated time and exemption was allowed on the purchase of handloom goods to the extent of Rs. 52,24,400/-. This was also exempted as no entry tax was leviable on handloom goods. A proposition notice was issued to the appellant which was served on the assessee on 20th October, 1994. In response to the said proposition notice the assessee filed his objections stating that the collection of entry tax and payment of tax are altogether different situation and not to be combined. He further contended before the Assessing Authority that the tax had been paid out of the profit earned by the assessee subsequent to the event of purchase and re-export. Hence, according to him, the burden of entry tax was not passed onto the customers. The Assessing Authority found that though such a contention was being raised by the assessee stating that they had not transferred the burden of tax on the customers but had failed to prove their contention. Hence, he rejected all the objections raised by the assessee and final assessment order was passed confirming the proposed turnover and levy of tax. The said order passed by the Assessing Authority, in the first instance is produced at Annexure-A. Aggrieved by the said order, the appellant filed an appeal under Section 13(5) of the KTEG Act before the Joint Commissioner of Commercial Taxes (Appeals). The Joint Commissioner by means of his order dated 29-6-1995, a copy of which has been produced as Annexure-B to this appeal remitted the matter to the Assessing Authority and directed him to properly scrutinise the books of account as to whether there was any provision made for payment of tax in the ledger even though taxes collected; and whether it was passed onto the customers or not. He was also further directed that an enquiry has to be made as to whether the entry tax has been charged on them while the purchase amount is paid.
After the matter was remanded to the Assessing Authority, the Assessing Authority, on inspection of business premises of the assessee on 30-1-1990 and also after verification of the books of account of the assessee has observed that the dealer has not made any provision in the sales ledger showing in the column "tax collection on re-export transaction" and he also did not find any evidence to show that the assessee has charged any entry tax in the bills. He further found that the goods were re-exported by the dealer and a turnover of Rs. 2,09,30,553/- is allowed in exempting from tax and concluded that the assessee was entitled for refund of Rs. 4,18,611/- which he had paid as entry tax when the goods entered the local area. However, the Revisional Authority exercising his powers under Section 15(3) of the KTEG Act initiated suo motu revisional proceedings and issued a notice calling upon the assessee to show cause as to why the order passed by the Assessing Authority directing refund of Rs. 4,18,611/- should not be interfered. The assessee filed his reply vide Annexure-E, dated 3rd May, 1996, inter alia, contending that the Assessing Authority had rightly come to the conclusion that the entry tax paid by him was not passed on to the customers. He further contended that it cannot be presumed that the said tax has been passed on to the customers and he had not collected tax on re-exports; and therefore the order passed by the Assessing Authority was not liable to be interfered with. However, before the Revisional Authority, he reiterated his stand that he had not collected any amount by way of entry tax, or passed on the tax to the customers to whom they have re-exported the goods. Hence, the question of collection of any tax from the customers is non-existent and was denied. The Revisional Authority vide his order dated 20-5-1996 rejected all the contentions of the assessee and came to the conclusion that the reply to the show-cause notice conceals certain important material facts. He found that a provision was made by the assessee for the entry tax in fixing the sale price by him. He also further found that for the computation of taxable turnover, the returns filed by the assessee''s records itself would disclose the inclusion of entry tax in the value of the goods to be exported outside the local area; that the computation made from the purchase value and also the sale value are also the same. In view of this, he came to the conclusion that the entry tax paid by him has been indirectly collected from the customers by including the said entry tax in the sale price and in the light of the said conclusion he revise of the order passed by the Assessing Authority and made an order forfeiting the said amount.
Mr. G. Sarangan, learned Senior Counsel appearing for the appellant challenging the correctness of the impugned order contended that in the absence of any evidence to show that the assessee had passed on the entry tax to the customers and he had collected the said amount, the Revisional Authority had exceeded in its jurisdiction in revising the order of the Assessing Authority, submitted that the entire approach made by the Revisional Authority in respect of the matters in controversy and the presumption drawn is erroneous in law. It is his submission that when the assessee had brought the goods to the local area by paying entry tax into the local area, it was open to the assessee not to pass on the entry tax to is customers and seek for refund of the entry tax paid. It is his further submission that it is open to the assessee to fix any price for sale of the goods and by that a presumption cannot be drawn that the sale price fixed is inclusive of entry tax. According to him, these are the matters of clear evidence and in the absence of clear evidence, the Revisional Authority has seriously erred in law in reversing the order of the Assessing Authority. According to the learned Counsel, Section 3-BB of the Act has no application to the facts and circumstances of the case. He also submitted that since the entry tax was wrongly collected from the appellant, the appellant was entitled to seek for refund of the said amount; and therefore the Revisional Authority was not justified in forfeiting the amount in exercise of the power conferred under Section 3-BB of the Act. In support of his submission he relied upon the judgment of the Kerala High Court in the case of Hindustan Petroleum Corporation Limited v State of Kerala and Others, (2002)125 STC 582 (Ker.).
Mr. Anand, learned Government Advocate, strongly supported the impugned order. It is his submission that in the absence of any evidence to show that the appellant had not passed on the tax liability including it in the sale price, it is not open to the assessee to seek refund of the said amount. It is his further submission that earlier whenever the goods were brought into the local area, the entry tax was levied and even if the goods were exported outside the local area, the same were not exempted from payment of entry tax. However, this Court in the case of Siddhagiri Wholesale Dealers and Distributors v Entry Tax Officer, II Circle, Commercial Tax Department, Belgaum, 1993(37) Kar. L.J. 482 (HC) (DB), has taken the view that once the entry tax has been levied when the goods are brought into local area which are re-exported, such goods are not liable for entry tax. According to the learned Government Advocate, it is only immediately, after the said decision, the assessee had made the claim for refund of entry tax though he had paid the entry tax in respect of the goods brought within the local area. Mr. Anand also pointed out that admittedly in the monthly returns filed by the assessee, it is stated that the computation of textile turnover of the assessee''s records show the inclusion of freight charges and entry tax in the value of the goods re-exported outside the local area. He also brought to our notice the computation made from the purchase value and sale value are the same which establishes that the entry tax which was paid had been collected by the assessee from the customers; and costing sheet of the assessee also shows that the entry tax of Rs. 5,30,594/- was collected on the sale price, which forms part of the record, which is at page 55. He relied on the judgment of the Supreme Court in the case of Mafatlal Industries Limited v Union of India and Others, (1998)111 STC 467 (SC), to show that the assessee by collecting the said entry tax from the customers included it in the sale price, is not entitled for unjust enrichment. He also relied on a judgment of this Court in the case of Spencer and Company Limited v State of Mysore, (1970)26 STC 283 (Mys.) (DB). He also relied on a judgment of the Hon''ble Supreme Court in Entry Tax Officer, Bangalore v Chandanmal Champalal and Company, (2004)3 SCST 2600 to buttress his contention that unjust enrichment is not permissible.
We have given our anxious consideration to the rival contentions raised by both the Counsels.
The monthly assessment returns filed by the assessee would clearly disclose the computation of taxable turnover. The costing sheet of the assessee also discloses that the assessee had collected the entry tax of Rs. 5,30,594/- which was included in the sale price. The fact that the computation made from the purchase value and the sale price being the same, there cannot be any doubt that the entry tax had been indirectly collected by the assessee. The Revisional Authority has found that the Assessing Authority had failed to observe and scrutinise the records and books of account of the assessee. We find that the inclusion of the entry tax in the price of the goods is in the ledger and the bills and this aspect had escaped the notice of the Assessing Authority. The computation of taxable turnover at page 55 of the assessment record shows that the inclusion of the freight charges and entry tax in the value of goods re-exported outside local area. The Revisional Authority, as a matter of fact, has found that the assessee had in its sale price included the entry tax paid by it. We do not find any good ground to disagree with the conclusion reached by the Revisional Authority. When the assessee has paid the entry tax and showed it in the monthly return filed by it, it is unthinkable and totally unbelievable that the assessee would not have passed on the entry tax paid by it while re-exporting the goods outside the local area. The normal inference that could be drawn is that the assessee who has paid the entry tax or who had incurred some expenditure would naturally include it when he re-exports or re-sells the goods he has bought. It is not possible to believe that the assessee, who has paid the entry tax, would incur loss to that extent by not collecting the entry tax while exporting the goods purchased by it. No doubt, the argument advanced by Sri Sarangan that it is open to the assessee to fix the sale price at its discretion and it cannot be presumed that the sale price consist component of entry tax, is attractive, but, the said contention, in our view, in the facts and circumstances of the present case, cannot be accepted. It is totally against the normal human conduct and business practice. Even in cases where there is no tangible evidence on records to show that entry tax collected is passed on to the customers while re-exporting the goods, in our view, unless special grounds are made out and it is shown that the goods are sold as an exception, less than the market value or the purchase price, which is inclusive of entry tax paid and other expenses incurred, the natural and reasonable inference or presumption to be drawn is that the sale price fixed by the assessee, is inclusive of entry tax and all other expenditure incurred. In the instant case, there is no evidence or material placed to show that the entry tax was not passed onto the purchasers while re-exporting the goods outside the local area except the assertion made by the assessee that it is not included in the sale price and the assessee had absolute discretion to fix the sale price as it deems fit. This aspect of the matter has completely been overlooked by the Assessing Authority. In our view, the Assessing Authority, in a mechanical manner, proceeded to accept the claim of the assessee that it has not passed on the entry tax while re-exporting the goods to its customers. There is absolutely no application of mind by the Assessing Authority on the relevant matter, which it was required to consider while passing an order of assessment. Therefore, in the light of what is stated above, we do not find any error in the order impugned passed by the Revisional Authority and we are unable to accede to the submission of Sri Sarangan that the Revisional Authority has exceeded its jurisdiction in interfering with the order of the Assessing Authority. As a matter of fact, the real question that arises for consideration is as to whether the assessee is entitled for the refund of the entry tax paid by it. Unless, the assessee shows with cogent evidence that it has not passed on the entry tax to its customers, the assessee is not entitled to seek for refund of the tax. In our view, the principle laid down in the case of Mafatlal Industries, would have direct bearing to the facts and circumstances of the present case. In the said case, the Supreme Court has observed as follows.-
"Where, however, a refund is claimed on the ground that the provision of the Act under which it was levied is or has been held to be unconstitutional such a claim, being a claim outside the purview of the enactment, can be made either by way of a suit or by way of a writ petition. This principle is, however, subject to an exception; where a person approaches the High Court or Supreme Court challenging the constitutional validity of a provision but fails, he cannot take advantage of the declaration of unconstitutionality obtained by another person on another ground; this is for the reason that so far as he is concerned, the decision has become final and cannot be reopened on the basis of a decision on another person''s case; this is the ratio of the opinion of Hidayatullah, C.J., in the case of Tilokchand Motichand and Others v H.B. Munshi, Commissioner of Sales Tax, Bombay and Another, AIR 1970 SC 898: (1970)25 STC 289 (SC), and we respectfully agree with it.
A claim for refund, whether made under the provisions of the Act as contemplated in proposition (i) above or in a suit or writ petition in the situations contemplated by proposition; (ii) above, can succeed only if the petitioner/plaintiff alleges and establishes that he has not passed on the burden of duty to another person/other persons. His refund claim shall be allowed/decreed only when he establishes that he has not passed on the burden of the duty or to the extent he has not so passed on, as the case may be. Whether the claim for restitution is treated as a constitutional imperative or as a statutory requirement, it is neither on absolute right nor an unconditional obligation but is subject to the above requirement, as explained in the body of the judgment. Where the burden of the duty has been passed on, the claimant cannot say that he has suffered any real loss or prejudice. The real loss or prejudice is suffered in such a case by the person who has ultimately borne the burden and it is only that person who can legitimately claim its refund. But where such person does not come forward or where it is not possible to refund the amount to him for one or the other reason, it is just and appropriate that, that amount is retained by the State, i.e., by the people. There is no immorality or impropriety involved in such a proposition.
The doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched.
While examining the claims for refund, the financial chaos which would result in the administration of the State by allowing such claims is not an irrelevant consideration. Where the petitioner-plaintiff has suffered no real loss or prejudice, having passed on the burden of tax or duty to another person, it would be unjust to allow or decree his claim since it is bound to prejudicially affect the public exchequer. In case of large claims, it may well result in financial chaos in the administration of the affairs of the State".
Further, the Supreme Court has also, in the case of Entry Tax Officer, Bangalore, observed:
"An identical question was considered by a Division Bench of this Court comprising J.S. Verma and A.S. Ananda, JJ., in Indian Oil Corporation v Municipal Corporation, Jullundhar and Others, AIR 1993 SC 844: (1993)1 SCC 333 with respect to entry tax itself. After holding that the levy of duty was not justified in law, the Bench dealt with the question of refund in paragraph 23, in the following words.-
"23. Before parting with the appeal, we would however, like to take note of the submission made on behalf of the Municipal Corporation with regard to the question of refund of the octroi duty, already deposited by the appellant. The question of refund, in our opinion does not arise. The IOC has collected the octroi duty from its dealers and agents, who have in turn passed on the burden to the consumer. Thus, having collected the octroi duty, there is no equity in favour of the IOC to claim a refund of the same. Learned Counsel for the appellant also conceded that the question of refund, in the facts and circumstances of the case, does not arise and we, therefore, hold that the appellant shall not be entitled to any refund of the octroi duty already deposited by the appellant with the Municipal Corporation"".
The same view is taken by a Division Bench of this Court in the case of Spencer and Company Limited. It is observed:
"The clause ''all amounts collected by way of tax under the Act by a dealer'' in Rule 6(4)(h) of the Karnataka Sales Tax Rules, 1957 and Section 18 of the Karnataka Sales Tax Act, 1957, in our opinion, means all amounts collected in the character of or as being tax, under the Act. The evidence concerning the transaction must show that the buyer had agreed to pay sales tax in addition to the price and the seller''s account books should disclose such amounts separately. Where there is absence of such evidence, it cannot be said that amounts were collected by the dealer in the character of or as being tax. Therefore, in our judgment, a dealer can be said to have collected the amounts by way of tax under the Act where from the facts and circumstances, it can be inferred that the seller intended to pass on the tax and the buyer had agreed to pay the sales tax in addition to the price and that in the accounts of the dealer he has shown such amounts separately".
In this case also it is not brought to our notice that the appellant had not passed on the tax to the purchaser or the customers. The presumption is that they have done so. If they say otherwise it is for them to allege and establish the same. In the absence of any such allegation or proof a direction of refund is certainly not called for. In the absence of any evidence to show that the assessee had not passed on the tax to the customers, we find it difficult to accede to the submission made by Mr. Sarangan.
Insofar as the decision in the case of Spencer and Company Limited, relied on by Mr. Sarangan, in our opinion, is not applicable to the facts of the case; more so, when the Hon''ble Supreme Court in the decisions referred to above has observed that in the absence of any evidence, the assessee is not entitled for any refund of the tax paid. In our view, the finding recorded by the Revisional Authority being purely questions of fact, we do not find any justification to interfere against the order impugned in this appeal.
Therefore, in the light of the discussion made above, this appeal is liable to be rejected. Accordingly, it is rejected. However, no order is made as to costs.