M/S. Jay Vee Rice & General Mills vs State Of Haryana & Ors

5. The appellants-companies are engaged in the business of purchase of paddy and manufacture of rice therefrom. The assessees are registered under the Haryana General Sales Tax Act, 1973 (hereinafter referred to as "the Act") and also under the Haryana Value Added Tax Act, 2003. The assessees were granted exemption from the payment of sales tax under Rule 28A of the Haryana Sales Tax Rules, 1975 (hereinafter referred to as "the Rules") for a period of seven years with effect from 3.10.1995 to 2.10.2002 under Exemption Certificate, which has been attached with the appeals. By virtue of this Exemption Certificate issued 3 under the Haryana Sales Tax Rules, 1975, the appellants were exempted from payment of sales tax.

7. Therefore, although the appellants were exempted from the payment of sales tax, but since they had collected purchase tax on paddy from the DFSC as part of the price received from the DFSC, the respondents took up a plea that they are required to pay purchase tax so collected as tax or as the amount as tax collected and the amount which since collected was required to be deposited in the government treasury.

11. It is interesting to note that while the Act and the Rules were so amended, due to a legislative omission, the statutory Forms ST-72 and ST-73 relating to grant of exemption remained unchanged. Eligibility in Form ST-72 was granted to the appellants for a period of 9 years and upto a total benefit of 41.95 lakhs.

14. On further appeal filed by the assessees, the Haryana Tax Tribunal dismissed the appeals holding that since the exemption certificate was only for sales tax and the same was not amended, the liability to pay purchase tax would arise and would continue. While holding that the appellants should restitute the amount which they had received from the DFSC as purchase tax, the Tribunal also made an observation and sent to the Government, a request to provide relief to them in the exercise of its sovereign power. The said request was however, not acceded to by the Government.

16. The aforesaid facts would clearly indicate that the Assessing Officer as also the First Appellate Authority did not decide the liability of the appellant to pay the purchase tax, but had held that since the payment of the price of rice received from the government was inclusive of purchase tax, the same was required to be deposited with the government exchequer. Therefore, since the amount had not been deposited by the appellants, they could be recovered by the assessing authorities. The Tribunal, however, held that since the exemption certificate was only for sales tax and the same was not amended, the liability to pay purchase tax would continue. The High Court, moreover, held that the appellants were liable to pay purchase tax as there was no exemption granted to the appellants from payment of purchase tax at any point of time.

15. Being aggrieved by the aforesaid order, the appellants filed writ petitions in the High Court, which were dismissed under the impugned judgment and order out of which the present appeals arise.

24. In the present case, since the aforesaid purchase tax was collected by the appellants, the same is now required to be paid back to the State exchequer in terms of the orders.

25. Since we have held that the appellants are now required to pay back the purchase tax element which was collected by them to the respondents, all the appeals could be disposed of on the aforesaid ground alone. We have seen from the decision in Godfrey Phillips India Ltd. (supra) that even when the legality of a tax has been challenged successfully, there can be no question of the said tax being retained by the dealer/manufacturer, notwithstanding its illegality. In the present instance, it is beyond doubt and clear from the appellants' own admission that the 1 procurement price included the element of purchase tax. That there may be an issue relating to the levy of purchase tax does not in any way, affect the conclusion that the appellants, who have been unjustly enriched, must deposit the purchase tax element with the State.

27. The present appeals are dismissed.

...........J. [Anil R. Dave] New Delhi, September 23, 2010.