UNION OF INDIA v. STATE OF RAJASTHAN. — 1993 DIGILAW 227 (RAJ)

JUDGMENT V. K. SINGHAL, J. - These writ petitions are being disposed of by this common order as the point involved is common in all these matters. The petitioner, i.e., Northern Railway, placed orders for purchase of wagons with Central India Machinery Manufacturing Company Limited, Bharatpur. The seller has charged 7 per cent sales tax on the sales so effected but shown taxable at 3 per cent in return. A provisional assessment was made on May 28, 1973, of such sales for part of the year of 1972-73 under section 7B of the Rajasthan Sales Tax Act, 1954, on the ground that Notification No. F5(84)FD(CT)/72-18 dated December 22, 1972, is not applicable to the petitioner since the wagons are not required for official use. The matter was challenged before the appellate authority and then before the Board of Revenue and the case was remanded by the Board of Revenue on September 17, 1980 to make the assessment and to accept D form if they are found in order as per notification dated December 22, 1972, referred to above with the observation that the observation of lower authorities with regard to use was not correct. While finalising the assessment under section 10 of the Rajasthan Sales Tax Act for the year 1972-73 on August 31, 1981 the assessing authority came to the conclusion that the company has not produced the declaration form as they were not collected from the Railway Board till then and that the assessee-company collected taxes at 7 per cent on the sales of wagons from the Railway Board. Against this order an appeal was filed to the Deputy Commissioner (Appeals), Jaipur, where the declaration forms subsequently obtained were submitted and the matter was sent back to the assessing authority for examining and verifying the claim of the assessee on concessional rates of tax as per the order dated October 29, 1982. The matter was considered by the assessing authority again on August 8, 1984 and the declaration forms were found in order and it was also found that a sum of Rs. 6,44,230 is refundable which could be refunded in accordance with the provisions of section 23-B of the Act. The matter was considered by the assessing authority again on August 8, 1984 and the declaration forms were found in order and it was also found that a sum of Rs. 6,44,230 is refundable which could be refunded in accordance with the provisions of section 23-B of the Act. The petitioner thereafter moved an application under section 23-B of the Act on March 27, 1985, which was rejected vide order dated July 16, 1985, on the ground that no one has appeared on behalf of the Railway Board on June 24, 1985 and that the letter submitted on August 17, 1982, was issued to M/s. Central India Machinery Manufacturing Company Limited, Bharatpur and at that time no amount was refundable. In the assessment order dated August 31, 1981, no refund was due and the declaration forms submitted along with the letter dated August 17, 1982, were returned since the application dated March 27, 1985, was beyond the period of 12 months and the same was dismissed on this ground. Against this order an appeal was preferred to the Deputy Commissioner (Appeals), Jaipur, where the matter was remanded to the assessing authority and the application submitted by the petitioner was considered in time. In pursuance of the order of the appellate authority dated July 20, 1987, the matter was again examined by the assessing authority and it was held that the Railway has not come with the clean hands and is engaged in transportation of passengers and goods which is a commercial activity and use of wagons is a commercial business use. Reliance was placed on the proviso which was added with effect from December 22, 1972 wherein it was provided that the Government department shall be liable for payment of difference of the amount of tax between the full rate and the tax paid under the notification in case the material is used for the purpose other than official use and that using the goods for commercial purposes will not be entitled for benefit under the notification or to make a claim for refund. The relevant language of the notification by which the provisos were added is as under : "(1) Provided that where a Central/State Government department after purchasing goods under this notification utilises such goods for any purpose other than official use; then such purchasing Government department shall be liable to pay the difference of the amount between the amount of tax on the sale of such goods payable at the full rate applicable thereto under section 5 and the amount of tax paid under this notification : (2) Provided also that where a Government department has made purchases under this notification for official use and after so purchasing, uses the goods for commercial purposes or purposes other than official use, then such Government department shall not be entitled to claim benefit under this notification and shall also not be entitled to make a claim for refund in case a higher rate of tax was charged from by the seller." The present writ petition has been filed against order dated January 7, 1989, by which, the claim of the petitioner's refund was rejected on the ground that the use of the coaches was for transportation which is a commercial and business activity and not for official use. Directions were also given to issue notice under section 16(1)(k) for levy of penalty for issue of wrong declaration to the Railway Board. The submissions of Mr. Singhi are as under : (a) That the notification dated January 7, 1989, which has inserted two provisos for the period December 22, 1972 to June 17, 1975 is ultra vires the power conferred under section 4(2) of the Rajasthan Sales Tax Act, (b) that the assessing authority while finalising the assessment of the seller if has come to the conclusion that the tax is payable at a concessional rate on account of furnishing the declaration form and refund is also due on account thereof, then when an application for refund is made, the provisions of section 23B does not permit to reinvestigate the validity of the form issued by the purchaser, (c) proceedings under section 16(1)(k) cannot be initiated when a refund is claimed by the purchaser. Mr. Mr. Bapna appearing on behalf of the respondent, has submitted that in respect of the assessment year 1973-74 the appeal is pending before the Tribunal and for the assessment year 1974-75 the appeal is pending before the Deputy Commissioner (Appeals) and for the year 1975-76 before the Tribunal. Since the petitioner has already availed the remedy as provided in the Act, therefore, the writ petitions in respect of these years are not maintainable. For the assessment year 1972-73 it is submitted that the provisions of section 4(2) confers the power on the State Government to issue notification granting exemption prospectively as well as retrospectively and, therefore, even the condition can be imposed with retrospective effect. In order to appreciate the arguments of both the learned counsel and the facts as narrated above it would be relevant to reproduce the provisions of section 4(2) of the Rajasthan Sales Tax Act which are as under : "Where the State Government is of the opinion that it is necessary or expedient in the public interest so to do, the State Government may, by notification in the Official Gazette, exempt, whether prospectively or retrospectively from tax the sale or purchase of any goods or class of goods or any person or class of persons on such conditions and on payment of such fee as may be specified in the notification." From a bare perusal of this section it would be evident that the State Government has power to issue a notification in the Official Gazette to exempt from tax the sale or purchase of any goods, person or class of goods or persons on such conditions and on payment of such fees as may be specified in the notification. This power could be exercised prospectively or retrospectively. The exercise of the power for granting exemption could be with certain conditions but those conditions must be mentioned in that notification granting the exemption. If the notification is issued granting the exemption and any person acts upon it, subsequent issue of a notification with retrospective effect putting the conditions on the grant of exemption may result in denial of the exemption and thus the effect would be levy of tax on the transaction. This is not contemplated by the power conferred under section 4(2) of the Act. This is not contemplated by the power conferred under section 4(2) of the Act. The State Government could grant the exemption retrospectively but the conditions to grant such exemption have to be specified in that very notification. If the notification granting the exemption is issued prospectively then subsequently putting the conditions for the grant of such exemption retrospectively will be outside the purview of power under section 4(2) of the Rajasthan Sales Tax Act. Under section 4(2) of the Act, therefore, the State Government can issue the notification granting the exemption retrospectively with any condition it likes but the said section does not contemplate withdrawal of the exemption retrospectively by putting any condition. The notification dated January 7, 1989, therefore, is violative of power conferred under section 4(2) of the Rajasthan sale Tax Act. The second objection of the learned counsel for the petitioner with regard to the scope of provisions of section 23-B is to be examined in the facts of this case. The notification dated January 7, 1989, therefore, is violative of power conferred under section 4(2) of the Rajasthan sale Tax Act. The second objection of the learned counsel for the petitioner with regard to the scope of provisions of section 23-B is to be examined in the facts of this case. The provisions of sections 23-B are as under : "Notwithstanding anything contained in this Act or in any other law for the time being in force, where any amount is either deposited by any person under the provisions of this Act or paid as tax by a dealer but such amount or any part thereof is subsequently found to be not payable by such person or dealer, a refund of such amount or any part thereof can be claimed only by the person from whom such person or dealer had actually realised such amount whether by way of tax or otherwise and the period of limitation provided in the proviso to sub-section (1) of section 23 shall apply to the aforesaid claims : Provided that if the first purchaser of goods has passed on the incidence of tax to the next dealer or person or he has utilised the goods in the manufacture of other goods for sale or in the execution of works contract and has passed on the incidence of tax to the next dealer or person in any form then a refund of such amount or any part thereof can be claimed only by the person or dealer who has actually suffered the incidence of tax : Provided further that the burden of proving the incidence of tax so suffered will be on the dealer or person claiming such refund." In the present matter the dispute with regard to purchase of wagons by the petitioner and its use was considered by the Division Bench of Board of Revenue on September 17, 1980. It was held, "it is a case of provisional assessment and at the time of provisional assessment the observation of the learned lower authority that the goods sold by the petitioner to Railway Board were not sold for the use of the official purpose cannot be accepted as correct". It was held, "it is a case of provisional assessment and at the time of provisional assessment the observation of the learned lower authority that the goods sold by the petitioner to Railway Board were not sold for the use of the official purpose cannot be accepted as correct". In the order dated August 8, 1984, the assessing authority while giving effect to the appellate's order found that the declaration forms are in order and the tax is leviable at 3 per cent instead of 7 per cent. In accordance with the provisions of section 23-B it has to be found that the amount is to be deposited by any person under the provisions of the Act or was paid as tax by the dealer. This implies that the provisions would be applicable only when the amount is deposited by any person under the provisions of the Act or has been paid as tax by the dealer. Thereafter, there should be an assessment of the tax or liability in which it is found that the said person or dealer is not liable to pay the amount. A refund of such amount could be claimed by the person from whom such person or dealer has actually realised such amount whether by way of tax or otherwise. An application has to be submitted within the limitation as prescribed under section 23(1). If the incidence of tax has been passed by the first purchaser to the next dealer or person or he has utilised the goods in the manufacture of other goods for sale then the refund could be claimed by the person or dealer who has actually suffered the incidence of tax. If the incidence of tax has been passed by the first purchaser to the next dealer or person or he has utilised the goods in the manufacture of other goods for sale then the refund could be claimed by the person or dealer who has actually suffered the incidence of tax. Thus the provisions of section 23-B are applicable (1) where the amount has been deposited by any person or paid as tax by dealer; (2) there is subsequent determination of liability and it is found that such person or dealer is not liable to pay the same; (3) the refund of such amount could be claimed by the person from whom such person or dealer has actually realised such amount by way of tax or otherwise; (4) the period of limitation for making the application as provided in the proviso to sub-section (1) of section 23 is applicable; (5) if the incidence has been passed on by such dealer or person to next person or dealer then the person who has actually suffered the incidence of tax would be entitled for the refund. From the above it would be evident that the scope of section 23-B does not permit redetermination of liability be examining declaration form issued and once the assessment of the seller is finalised then the only to be seen is as to from whom the amount was actually realised and whether the application is within limitation and whether the incidence of tax has been suffered by the person claiming the refund. The jurisdiction under section 23-B of the Act would, therefore, be (a) who is the person entitled for refund; (b) whether the claim has been made within limitation; (c) whether the applicant has suffered the incidence of tax. The declaration form which has been found correct in the assessment proceedings of the seller could not be reconsidered while granting the refund to a purchaser and the judgment given in the assessment proceedings with regard to the declaration form shall be final subject to any appeal or revision, etc. In the present matter once the assessing authority has held that the declaration form is in order then it was open to deny the refund under section 23-B on the ground that the declaration form was not correct one. In the present matter once the assessing authority has held that the declaration form is in order then it was open to deny the refund under section 23-B on the ground that the declaration form was not correct one. Accordingly, we hold that the assessing authority has acted beyond jurisdiction in examining the claim of refund on the ground of the use of the declaration forms which matter has already been examined in the assessment proceedings of the seller. Accordingly, the Writ Petition No. 957 of 1991 is allowed and the notification dated January 7, 1989, is quashed. It is not necessary to examine the third contention of Mr. Singhi with regard to the issue of notice under section 16(1)(k) in view of the decision given on the first two points. The other three writ petitions in which the subject-matter is pending before the Deputy Commissioner (Appeals) or Tribunal on the ground that the petitioner has already availed of alternate remedy and it would not be proper to examine the correctness of various orders passed by the authorities under the Act. So far as the validity of notification in these three writ petitions is concerned, the same has already been held ultra vires powers conferred under section 4(2) of the Act and, therefore, these writ petitions Nos. 1118 of 1991, 848 of 1991 and 2826 of 1991 are partly allowed. W.P. No. 957/91 allowed and W.P. Nos. 848, 1118 and 2826/91 partly allowed.