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2018 DIGILAW 690 (GUJ)

ESSAR OIL LIMITED v. STATE OF GUJARAT

2018-05-07

A.Y.KOGJE, M.R.SHAH

body2018
JUDGMENT/ORDER : M. R. Shah, J. As a common question of law and facts arises in this group of appeals and as such, the appeals arise out of the impugned common judgment passed by the learned Gujarat Value Added Tax Tribunal at Ahmedabad (hereinafter referred to as the "learned Tribunal") , all these appeals are heard, decided and disposed of together by this common judgment and order. 2. While admitting the present appeals, the Division Bench of this Court, has framed the following question of law: "Whether the Value Added Tax Tribunal was right in law and facts in refusing refund of the tax collected from the appellant though the levy was held to be impermissible on the ground that such revenue would amount to unjust enrichment?" 3. The facts leading to the present appeals in the nutshell are as under: 3.1 That the appellant herein, M/s.Essar Oil Limited entered into an agreement of lease with M/s.Essar Gujarat Limited to give the said company static reactive volt ampere compensatory system for EAF-1 on lease. That the said agreement was executed at Chennai on 29.09.1994. That as the lease was covered under Section 2(30C) of the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as "the VAT Act") defining the clause "specified sale", the appellant herein collected from lessee - Essar Gujarat Limited and paid sales tax on the amount which it had received as rental from the lessee. 3.2 That thereafter, the appellant herein - Essar Oil Limited claimed refund of the tax paid by it on the ground that as per the decision of the Hon'ble Supreme Court in the case of 20th Century Finance Corporation Limited And Another v. State of Maharashtra, (2000) 6 SCC 12 , tax was not leviable by and paid to the State of Gujarat. That the assessing authorities and the first appellate authorities denied the refund to the appellant - lessor. That the assessing authorities and the first appellate authorities denied the refund to the appellant - lessor. Therefore, the appellant herein - Essar Oil Limited preferred Second Appeals No.1062/2005 to 1068/2005, before the learned Tribunal, the details of which are as under: Appeal No. Year Tax Penalty Interest Total Paid Balance 1062 1.7.94 - 5.3.96 20, 95, 09 10, 85, 794 - 31, 80, 892 31, 80, 892 - 1063 6.3.96 - 31.3.96 1, 97, 543 - 87919 2, 85, 462 2, 85, 462 - 1064 1996-97 15, 46, 190 2000 4, 73, 062 20, 21, 252 20, 21, 252 - 1065 1998-99 10, 55, 827 31295 10990 10, 98, 022 9, 62, 356 1, 35, 666 1066 1999-2000 10, 55, 051 1200 13775 10, 70, 026 10, 69, 343 683 1067 2000-01 11, 58, 920 - 969 11, 59, 889 11, 59, 178 711 1068 2001-02 11, 58, 920 - 4 11, 58, 924 11, 58, 924 - TOTAL 82, 67, 549 11, 20, 289 5, 86, 629 99, 74, 467 98, 37, 407 1, 37, 060 3.3 It was the case on behalf of the appellant before the learned Tribunal that in view of the decision of the Hon'ble Supreme Court in the case of 20th Century Finance Corporation Limited And Another v. State of Maharashtra and as the contract of lease was entered into within the State of Tamil Nadu, the State in which the contract of lease was entered into, was entitled to levy tax and therefore, tax recovered by the State of Gujarat was per se illegal and without authority under the law and therefore the appellant is entitled to the refund of the tax paid by the appellant and collected by the State of Gujarat. 3.4 That by the impugned common judgment and order, the Tribunal, after following the decision of the Hon'ble Supreme Court in the case of 20th Century Finance Corporation Limited And Another v. State of Maharashtra and the decision of this Court in the case of Ambalal Sarabhai Enterprises Ltd. v. Sales Tax Officer-1, Class-1, City Circle, 2006 145 STC 523 , has observed and held that as the agreement between the appellant and Essar Gujarat Limited was entered into at Chennai, Tamil Nadu, on 29.09.1994, the State of Tamil Nadu can levy the tax and not the State of Gujarat. However, thereafter, considering the decision of the Hon'ble Supreme Court in the case of Mafatlal Industries Ltd. v. Union of India, (1997) 5 SCC 536 , applying the doctrine of unjust enrichment and after observing that neither the appellant nor its lessee will credit the refunded amount of tax to the State of Tamil Nadu, the Tribunal has refused to refund the amount of tax and has dismissed the appeals. 3.5 At this stage, it is required to be noted that before the learned Tribunal, the appellant heavily relied upon the Certificate on the letter-head of Essar Oil Limited dated 30.08.2012 by which the appellant herein, Essar Oil Limited, had undertaken and declared that in case the amount if refunded to it, the same shall be returned to the lessee. The aforesaid has elaborately been dealt with by the learned Tribunal which shall be dealt with hereinafter. Thus, by impugned judgment and order, the learned Tribunal has dismissed the second appeals and refused to refund the amount of tax to the common appellant herein, Essar Oil Limited, giving rise to the filing of the present appeals. 4. Shri Mihir Joshi, learned Senior Advocate, has appeared on behalf of the common appellant and Shri Ronak Raval, learned Assistant Government Pleader, has appeared on behalf of the respondent-State authorities. 5. Shri Mihir Joshi, learned Senior Advocate appearing on behalf of the common appellant, has vehemently submitted that in the facts and circumstances of the case, the learned Tribunal has materially erred in dismissing the appeals and refusing to refund the amount of tax to the appellant by applying the doctrine of unjust enrichment. 5.1 It is vehemently submitted by Shri Mihir Joshi, learned Senior Advocate appearing on behalf of the common appellant that as such, as per the decision of the Hon'ble Supreme Court in the case of 20th Century Finance Corporation Limited And Another v. State of Maharashtra, and as the lease agreement between the appellant and Essar Gujarat Limited was entered into at Chennai in Tamil Nadu, only the State of Tamil Nadu can levy tax and therefore, the State of Gujarat has no authority to levy and collect tax and therefore, in the present case, tax levied and collected by the State of Gujarat was absolutely unauthorised and without authority under the law. It is submitted that therefore, the State of Gujarat was liable to refund the tax collected which was absolutely unauthorised and without authority under the law. 5.2 In support of his submission that the levy and collection of tax by the State of Gujarat was unauthorised and/or not in accordance with law, Shri Mihir Joshi, learned Senior Advocate appearing on behalf of the common appellant has heavily relied upon the decision of the Hon'ble Supreme Court in the case of 20th Century Finance Corporation Limited And Another v. State of Maharashtra, more particularly, paragraph-24 of the said decision. 5.3 It is further submitted by Shri Mihir Joshi, learned Senior Advocate appearing on behalf of the common appellant that as such, the learned Tribunal has specifically observed and held after following the decision of the Hon'ble Supreme Court in 20th Century Finance Corporation Limited And Another v. State of Maharashtra that tax was leviable only by the State of Tamil Nadu and no by the State of Gujarat. It is submitted that therefore, once it was held by the Tribunal that the tax in question was leviable by the State of Tamil Nadu and not by the State of Gujarat, the learned Tribunal ought to have ordered the refund of the said tax by the State of Gujarat, which the State of Gujarat levied and collected unauthorisedly and unlawfully. 5.4 It is further submitted by Shri Mihir Joshi, learned Senior Advocate appearing on behalf of the common appellant that as such and in the facts and circumstances of the case, the learned Tribunal ought not to have applied the doctrine of unjust enrichment more particularly, when the proceedings had arisen out of the assessment proceedings. 5.5 It is further submitted by Shri Mihir Joshi, learned Senior Advocate appearing on behalf of the common appellant that in fact, when the appellant herein filed the Undertaking that the appellant shall refund the amount of tax to the lessee from whom the tax was collected, the doctrine of unjust enrichment shall not be applicable in such case. 5.6 In support of his above submissions, Shri Mihir Joshi, learned Senior Advocate appearing on behalf of the common appellant has heavily relied upon the decision of the Hon'ble Supreme Court in the case of R.S.Joshi, Sales Tax Officer, Gujarat And Others v. Ajit Mills Limited And Another, (1977) 4 SCC 98 (paragraph-12 onwards) . 5.6 In support of his above submissions, Shri Mihir Joshi, learned Senior Advocate appearing on behalf of the common appellant has heavily relied upon the decision of the Hon'ble Supreme Court in the case of R.S.Joshi, Sales Tax Officer, Gujarat And Others v. Ajit Mills Limited And Another, (1977) 4 SCC 98 (paragraph-12 onwards) . 5.7 It is further submitted by Shri Mihir Joshi, learned Senior Advocate appearing on behalf of the common appellant that even otherwise, in the facts and circumstances of the case, the learned Tribunal ought not to have applied the doctrine of unjust enrichment as in the present case, the transaction was between two known persons. It is submitted that therefore, the question of unjust enrichment shall not arise. 5.8 It is further submitted by Shri Mihir Joshi, learned Senior Advocate appearing on behalf of the common appellant that even otherwise, in absence of any specific provision in the Act for unjust enrichment, the appellant cannot be denied the refund of tax which was levied and collected by applying the doctrine of unjust enrichment. 5.9 Making above submission and relying upon the decisions of the Hon'ble Supreme Court in the case of Mafatlal Industries Ltd. v. Union of India [Paragraphs-83 and 108(iii) ] and Commissioner of Central Excise, Tiruchirapalli v. Dalmia Cement (Bharat) Limited, (2016) 1 SCC 124 and the decision of the Division Bench in the case of Cadila Healthcare Ltd. And Anr. v. Deputy Commissioner of Sales Tax Div. And Ors. - Special Civil Application No.9980/2001 dated 16.07.2012, it is requested to allow the present appeals and direct the respondent - State of Gujarat to refund the amount of tax paid by the appellant herein on transaction of lease as per the lease agreement dated 29.09.1994 between the appellant and Essar Gujarat Limited. 6. The present appeals are vehemently opposed by Shri Ronak Raval, learned Assistant Government Pleader appearing for the respondent - State authorities. 6.1 It is vehemently submitted by Shri Ronak Raval, learned Assistant Government Pleader appearing for the respondents, that in the facts and circumstances of the case, the learned Tribunal has rightly dismissed the appeals and has rightly refused to return the amount of tax paid by the appellant. 6.1 It is vehemently submitted by Shri Ronak Raval, learned Assistant Government Pleader appearing for the respondents, that in the facts and circumstances of the case, the learned Tribunal has rightly dismissed the appeals and has rightly refused to return the amount of tax paid by the appellant. 6.2 It is submitted by Shri Ronak Raval, learned Assistant Government Pleader appearing for the respondents that in the present case, it is an admitted position that as such, tax would be leviable by the State of Tamil Nadu. It is submitted that in the present case, considering the law prevailing at the relevant time, the appellant in fact, after collecting tax from the lessee, paid the tax with the State of Gujarat. It is submitted that it is true that in view of the subsequent decision of the Hon'ble Supreme Court in the case of 20th Century Finance Corporation Limited And Another v. State of Maharashtra, tax in question can be said to have been leviable by the State of Tamil Nadu. It is submitted that however, when the appellant had in fact collected the tax from its lessee and even considering the undertaking given by the appellant, it cannot be said and even it is not the case on behalf of the appellant that the lessee, who is the sister concern of the appellant, would as such pay/deposit the tax with the State of Tamil Nadu. It is submitted that even the appellant is not forthcoming with a case that after getting the refund of tax in question from the State of Gujarat, it will deposit the same with the State of Tamil Nadu. It is submitted that it is an admitted position that the liability to pay tax would be on the lessor, the appellant, either with the State of Tamil Nadu or with the State of Gujarat. It is submitted that even if it is held that the tax was leviable by the State of Tamil Nadu, it is the liability of the appellant - lessor to pay tax to the State of Tamil Nadu. It is submitted that in the present case, the appellant is not submitting that after getting refund of tax in question, the same shall be deposited / credited / paid to the State of Tamil Nadu. It is submitted that in the present case, the appellant is not submitting that after getting refund of tax in question, the same shall be deposited / credited / paid to the State of Tamil Nadu. It is submitted that therefore, in the facts and circumstances of the case, the learned Tribunal has rightly applied the doctrine of unjust enrichment and has rightly refused to refund the amount of tax to the appellant. 6.3 So far as submission on behalf of the appellant that there is no specific provision in the Act for unjust enrichment, Shri Ronak Raval, learned Assistant Government Pleader, has submitted that as such, the doctrine of unjust enrichment would be on equitable ground and there need not be any specific provision in the Act for unjust enrichment. It is submitted that even in the case of Cadila Healthcare Ltd. And Anr. v. Deputy Commissioner of Sales Tax Div. And Ors., in paragraph-34, the Division Bench of this Court has specifically observed that even in absence of statutory provisions, in case of indirect taxes, Indian courts have been applying the principle of unjust enrichment on the premise that collection of tax though may have been declared unlawful, if in the meantime, the assessee had passed on the burden thereof to the consumer, refund of such tax to the assessee would amount to unjust enrichment and such refund, therefore, should not be granted. 6.4 So far as reliance placed upon the decision of the Hon'ble Supreme Court in the case of R.S.Joshi, Sales Tax Officer, Gujarat And Others v. Ajit Mills Limited And Another by the learned Senior Advocate appearing on behalf of the appellant is concerned, Shri Raval, learned Assistant Government Pleader, has stated that the said decision shall not be applicable to the facts of the case on hand at all. 6.5 Making the above submissions, it is requested to dismiss the present appeals. 7. Heard learned counsel appearing for the respective parties at length. At the outset, it is required to be noted that the learned Tribunal, by impugned common judgment and order, has refused to refund the amount of tax paid by the appellant on the ground of unjust enrichment. 7. Heard learned counsel appearing for the respective parties at length. At the outset, it is required to be noted that the learned Tribunal, by impugned common judgment and order, has refused to refund the amount of tax paid by the appellant on the ground of unjust enrichment. Therefore, the short question which is posed for consideration of this Court is whether in the facts and circumstances of the case, the learned Tribunal is justified in denying the refund of tax to the appellant on the ground of unjust enrichment? 8. At the outset, it is required to be noted that as such, considering the decision of the Hon'ble Supreme Court in the case of 20th Century Finance Corporation Limited And Another v. State of Maharashtra , and considering the fact that the lease agreement/ contract of lease between the appellant and Essar Gujarat Limited dated 29.09.1994 was entered into in Tamil Nadu, learned Tribunal has specifically observed and held that the tax was liable to be paid with the State of Tamil Nadu and not the State of Gujarat. At this stage, it is required to be noted that the appellant - lessor herein paid the tax and deposited it with the State of Gujarat right from the year 1994 onwards after the assessment proceedings were concluded much prior to the decision of the Hon'ble Supreme Court in the case of 20th Century Finance Corporation Limited And Another v. State of Maharashtra, the particulars of which are stated and referred to hereinabove. That after the decision of the Hon'ble Supreme Court in 20th Century Finance Corporation Limited And Another v. State of Maharashtra, the appellant - lessor claimed refund of tax paid for the period between 01.07.1994 to 2001-02. The same came to be denied by the authorities below and the same has been confirmed by the learned Tribunal. It is required to be noted that finding recorded by the learned Tribunal that tax was payable to the State of Tamil Nadu and not the State of Gujarat has attained finality as the same has not been challenged by the State of Gujarat. It is required to be noted that finding recorded by the learned Tribunal that tax was payable to the State of Tamil Nadu and not the State of Gujarat has attained finality as the same has not been challenged by the State of Gujarat. Even otherwise, considering the decision of the Hon'ble Supreme Court in the case of 20th Century Finance Corporation Limited And Another v. State of Maharashtra, by which the Hon'ble Supreme Court has observed and held that where situs of sale has not been fixed or covered by any legal fiction created by the appropriate legislature, the location of sale would be the place where the property in goods passes. It is further observed and held that it is the passing of the property within the State that was intended to be fastened on for the purpose of determining whether the sale was "inside" or "outside" the State. Thereafter, the Hon'ble Supreme Court has held that where a party has entered into a formal contract and the goods are available for delivery irrespective of the place where they are located the situs of such sale would be where the property in goods passes, namely, where the contract is entered into. Under the circumstances, and as in the present case, the contract of lease between appellant Essar Oil Limited with Essar Gujarat Limited dated 29.09.1994 was entered into in the State of Tamil Nadu, the tax was payable to the State of Tamil Nadu and therefore, the tax was not leviable by the State of Gujarat. As observed hereinabove, as such, the respondent - State of Gujarat has not challenged the finding recorded by the learned Tribunal that tax was leviable by the State of Tamil Nadu and not the State of Gujarat. 9. However, the next question which is posed for consideration of this Court is whether the learned Tribunal is right in denying the refund to the appellant? 9. However, the next question which is posed for consideration of this Court is whether the learned Tribunal is right in denying the refund to the appellant? While deciding the aforesaid issue, few facts are required to be referred to which are as under: (i) that the contract of lease dated 29.09.1994 was entered into between the appellant and Essar Gujarat Limited; (ii) that Essar Gujarat Limited (lessee) is a sister concern of the appellant Essar Oil Limited; (iii) that even otherwise, the liability to pay tax is upon the lessor - Essar Oil Limited to the State of Tamil Nadu; (iv) that nothing is on record to show that the appellant is a registered dealer with the State of Tamil Nadu; (v) that the appellant herein - Essar Oil Limited had already recovered tax from the lessee and thereafter had paid the tax with the State of Gujarat, therefore, as such, the burden of tax has already been passed over to the lessee and after recovering the same from the lessee, the appellant - lessor has deposited/ paid the tax with the State of Gujarat and was paying the same since 1994. 10. Therefore, considering the aforesaid facts and circumstances, as such, the learned Tribunal has rightly denied the refund to the appellant - lessor who as such had already collected the same from the lessee and thereafter had paid to the State of Gujarat. 11. It is the case on behalf of the appellant - lessor that as the appellant had produced Certificate issued for and on behalf of Essar Steel Limited (lessor) and Essar Oil Limited (transferee of the lessee) dated 30.08.2012, by which the lessor - Essar Oil Limited had declared their intention for refund of the amount of tax collected by Cheque/ DD to the lessee concerned as and when they receive from the sales tax authority, once the appellant - lessor has given the undertaking that the tax received/ recovered from the lessee shall be refunded to the lessee, the learned Tribunal ought to have refunded the amount of tax to the lessor which, in turn, would be refunded to the lessee as per the Certificate dated 30.08.2012. In support of the above submission, learned Senior Advocate for the appellant has relied upon the decision of the Hon'ble Supreme Court in the case of R.S.Joshi, Sales Tax Officer, Gujarat And Others v. Ajit Mills Limited And Another. The aforesaid submission based on the Certificate dated 30.08.2012 seems to be attractive but has no substance. Considering the Certificate, it appears that the lessor has agreed to refund tax to the lessee after receiving the same from the Sales Tax authority. However, it is required to be noted that as such, liability to pay tax even with the State of Tamil Nadu would be that of the lessor and not the lessee. Nothing is forthcoming whether the lessor, who otherwise under the law is liable to pay the tax, would pay the tax to the State of Tamil Nadu. The appellant - lessor is not stating that it shall pay the tax to the State of Tamil Nadu after getting the refund from the State of Gujarat. By the Certificate dated 30.08.2012, the appellant - lessor has agreed to return the amount of tax to the lessee who as such is the sister concern of the appellant - lessor. As such, a lessee is not liable to pay tax and as observed above and it is not in dispute that it is the lessor who is liable to pay the tax. The lessor has already recovered the tax from the lessee and thereafter has deposited it with the State of Gujarat. Therefore, so far as the tax liability of the lessor to deposit the same by it even with the State of Tamil Nadu is concerned, nothing is stated in the Certificate dated 30.08.2012. Therefore, on the Certificate dated 30.08.2012, the appellant shall not be entitled to refund of tax. 12. Now so far as reliance placed upon the decision of the Hon'ble Supreme Court in the case of R.S.Joshi, Sales Tax Officer, Gujarat And Others v. Ajit Mills Limited And Another, by learned Senior Advocate for the appellant is concerned, considering the entire decision of the Hon'ble Supreme Court and applying the same to the facts of the case on hand, we are of the opinion that the said decision shall not be applicable to the facts of the case on hand. In the case before the Hon'ble Supreme Court, the core issue was as to whether it is permissible for the legislature to enact, having regard to the triple Lists of the Seventh Schedule and Articles 14 and 19, that sums collected by dealers by way of sales-tax but are not exigible under the Sales Tax and, indeed, prohibited by it, shall be forfeited to the public exchequer punitively under Entry 54 read with Entry 64 of List II. That, while considering the constitutionality of such provisions, the Hon'ble Supreme Court has observed in paragraph-12 that State has no divine right to rob the robber and the money, if illegally gathered either by mistake or by mendacity, must go back to whom it belongs, and not to the State. However, it may be noted that before the Hon'ble Supreme Court, the question was not with respect to refunding to refund the amount of tax collected illegally by applying the doctrine of unjust enrichment. Even otherwise, it is required to be noted that in the said case, tax was not exigible at all either by 'A' State or 'B' State. In the present case, as such, tax is leviable but by another State, namely State of Tamil Nadu. Under the circumstances, on facts, the said decision shall not be applicable to the case on hand, more particularly, when in the present case, the issue is with respect to non-refund of the amount of tax by applying the doctrine of unjust enrichment. 13. Even the reliance placed upon Paragraphs-83 and 108(iii) of the decision of the Hon'ble Supreme Court in Mafatlal Industries Ltd. v. Union of India shall not be of any assistance to the appellant in the facts and circumstances of the case. In the present case, as such, the appellant has passed on the burden to the lessee as observed hereinabove and the liability to pay tax would be upon the lessor, may be with the State of Tamil Nadu and nothing is on record and even it is not the case on behalf of the appellant that after getting back the amount of tax from the State of Gujarat, the same shall be deposited with the State of Tamil Nadu. 14. 14. Now so far as the submission on behalf of the appellant that as such, there is no specific provision in the Sales Tax relating to unjust enrichment and therefore, the appellant shall not be denied the refund on the ground of unjust enrichment, the aforesaid submission is required to be rejected outright. The doctrine of unjust enrichment is based upon equity and the same has been explained in detail by the Hon'ble Supreme Court in the case of Mafatlal Industries Ltd. v. Union of India. In the case of Mafatlal Industries Ltd. v. Union of India the Hon'ble Supreme Court has observed that it is a case of balancing public interest vis-a-vis private interest. It is observed that where the petitioner - plaintiff has not himself suffered any loss or prejudice (having passed on the burden of duty to others) , there is no justice or equity in refunding the tax (collected without the authority of law) to him merely because he paid it to the State. It is further observed that as against it, by refusing refund, the monies would continue to be with the State and available for public purposes. It is further observed that taxes are necessary for running the State and for various public purposes. It is further observed by the Hon'ble Supreme Court in the said decision that the doctrine of unjust enrichment is a just and salutary doctrine. Therefore, as such, there need not be any specific provision in the Act with respect to the doctrine of unjust enrichment. Even in the case of Cadila Healthcare Ltd. And Anr. v. Deputy Commissioner of Sales Tax Div. And Ors., the Hon'ble Supreme Court has specifically observed and held that even in absence of statutory provisions, in case of indirect taxes, Indian courts have been applying the principle of unjust enrichment on the premise that collection of tax though may have been declared unlawful, if in the meantime, the assessee had passed on the burden thereof to the consumer, refund of such tax to the assessee would amount to unjust enrichment and such refund, therefore, should not be granted. Therefore, there need not be any specific provision in the Act with respect to unjust enrichment. 15. Therefore, there need not be any specific provision in the Act with respect to unjust enrichment. 15. In view of the above and for the reasons stated above, we are of the opinion that the learned Tribunal has not committed any error in refusing to refund the amount of tax to the appellant - lessor by applying the doctrine of unjust enrichment. We are in complete agreement with the view taken by the learned Tribunal. The question of law framed, namely, "Whether the Value Added Tax Tribunal was right in law and facts in refusing refund of the tax collected from the appellant though the levy was held to be impermissible on the ground that such revenue would amount to unjust enrichment?", is held against the appellant and in favour of the revenue.