Refund cannot be Denied on Mere Ground of Enabling Provision: Allahabad HC [Read Judgment]

Provident fund - India - Taxscan

In a recent ruling in Commissioner of Commercial taxes v. M/s Ram Diesel(India), the Allahabad High Court held that refund cannot be denied to an assessee merely by pointing out that there is no enabling provision in the Act in the circular to grant the same.

The bench comprising Justice Ashwani Kumar Misra was hearing a revision petition filed by the assessee who is engaged in the activity of selling Diesel Engine Pump Sets of less than 10 horse power.

The grievance of the petitioners was that the UP Government realized tax along with interest from them on the basis of the Circular dated 5.9.2012, whereby realization of tax above 4% together with interest was granted remission provided such amount has not been realized by the seller from its consumers.The petitioners claimed that they have not realized any tax from its consumers and had deposited the amount of tax under protest. The refund application of the petitioners were rejected on ground that there is no provision in the circular to grant refund.

Before the High court, the petitioners argued that denial of refund would amount to unjust enrichment and it would be against the law laid down by the Apex Court in cases Anand Gramodyog Samiti vs.Commissioner Trade Tax and Vikram Cement & Another vs. State of Madhya Pradesh & Others.

The bench, relied upon the decision in Anand Gramodhyog Samiti  wherein the Apex Court held that mere absence of enabling provision would not be a ground to deny refund of tax, in case tax is not otherwise liable to be realized from the assessee. “In case State’s action is allowed to stand, it would mean that an honest tax payer would be discriminated since those who have not paid tax have already been granted relief of remission. This issue has also been dealt with by the Apex Court in Vikram Cement (supra) and it has specifically been held that such action on part of the State is otherwise violative of Article 14 of the Constitution of India inasmuch as the tax in the constitutional scheme can be levied only in accordance with law.”

In view of the above two decisions, the bench held that the authorities were not justified in refusing to grant relief of remission merely on the ground that an enabling provision does not exist in the circular. The orders of the authorities, therefore, cannot be sustained insofar as it refuses to grant relief of remission to the revisionist on the ground of absence of enabling provision in the circular.

Read the full text of the Judgment below.