The Hon’ble HC, Gujarat in the matter of State of Gujarat v. Advanced Systek Private Limited [R/Special Civil Application No. 8391 of 2019 dated July 24, 2020] dismissed the appeal challenging the refund of excess tax deposited by the Assessee and held that the Revenue department has to refund the excess tax deposited by the Assessee on fixed price contract. Further, the Revenue department cannot forfeit the excess amount of tax deposited by the Assessee.
Facts:
Advanced Systek Private Limited (“the Assessee”) is engaged in the business of sale of machineries to public sector companies in oil and gas sector. The Assessee received purchase orders from the Companies who had invited bids for the installation of the machinery and after receiving global tenders and the Assessee was supposed to deliver goods at a fixed price irrespective of the tax payable or any other expenses which were to be incurred by the Assessee. The Assessee mistakenly considered the applicable rate of tax at 10% / 12.5% instead of 4% thereby, depositing excess Central Sales Tax (“CST”).
Revenue Contention’s:
The Revenue department submitted that during the course of assessment it has right to forfeit the alleged excess amount of CST deposited by the Assessee on the ground that the tax amount is shown separately in the commercial invoices prepared by the Assessee. Therefore, such tax would be part of the inclusive amount of sale price and would amount to the tax collected by the Assessee and if the refund is granted to the Assessee, it would amount to unjust enrichment.
Issue:
Whether the excess tax paid by the Assessee can be forfeited by the department or the same is required to be refunded to the Assessee in case of fixed price contract.
Held:
The Hon’ble HC, Gujarat in R/Special Civil Application No. 8391 of 2019 dated July 24, 2020 held as under:
- The Court observed that when the Assessee has sold the goods on the price, which is inclusive of taxes, the turnover is to be calculated as per the formula provided in Section 8A of the Central Sales Tax Act, 1956 (“CST Act, 1956”). In the facts of the case, the rate of CST applicable for the goods supplied by the Assessee is 4%. Therefore, 4% tax is required to be applied on the turnover as calculated under Section 8A of the CST Act, 1956.
- The Assessee deposited the CST at the rate of 10% – 12.5% by making reverse working of the turnover under Section 8A of the CST Act, 1956. The correct amount of tax payable would be therefore, much less than what the Assessee has deposited. This has resulted into the excess amount of tax deposited by the Assessee amounting to Rs. ₹ 1, 81, 49,641/-.
- In the facts of the present case, the Assessee cannot be said to have collected the CST at the rate of 10% or 12% from its buyers/receiver of the goods in view of the contract of fixed price, there is no question of passing over the same to its buyer in view of the decisions of the Apex Court in the case of Mafatlal Industries Ltd. v. Union of India [ 1997 (89) E.L.T. 247 (SC)]. Even otherwise the provisions of the CST Act, 1956 do not contemplate any power to forfeiture of refund by the Revenue department.
- Relied on the decision of the Hon’ble Supreme Court in the case of Khemka & Co. (Agencies) Pvt. Ltd. v. State Of Maharashtra & State of Mysore Versus Guldas Narasappa Thimmaiah Oil Mills [1975 (2) SCC 22] to hold that the provisions of Section 31 of the Value Added Tax, 2005 (“VAT Act, 2005”) enabling the Assessing Officer to forfeit the excess amount of tax deposited by the assessee cannot be applied to the provision of the CST Act, 1956.
- Therefore, the Court directed the Revenue department to issue refund order in favour of the Assessee within three months from the date of receipt of this order together with simple interest at the rate of 6% p.a. from the date of deposit till the date of realisation.
Relevant Provisions:
Section 8A of the CST Act, 1956
“Determination of turnover
1) In determining the turnover of a dealer for the purpose of this Act, the following deductions shall be made from the aggregate of the sale prices, namely:-
(a) The amount arrived at by applying the following formula-
rate of tax x aggregate of sale Prices
100 + rate of tax
Provided that no deduction on the basis of the above formula shall be made if the amount by way of tax collected by a registered dealer, in accordance with the provisions of this Act, has been otherwise deducted from the aggregate of sale prices.
Explanation: Where the turnover of a dealer is taxable at different rates, the aforesaid formula shall be applied separately in respect of each part of the turnover liable to a different rate of tax ;
(b) the sale price of all goods returned to the dealer by the purchasers of such goods—
(i) within a period of three months from the date of delivery of the goods, in the case of goods returned before the 14th day of May,
(ii) within a period of six months from the date of delivery of the goods, in the case of goods returned on or after the 14th day of May, 1966:
Provided that satisfactory evidence of such return of goods and of refund or adjustment in accounts of the sale price thereof is produced before the authority competent to assess or, as the case may be, reassess the tax payable by the dealer under this Act ; and
(c) such other deductions as the Central Government may, having regard to the prevalent market conditions, facility of trade and interests of consumers, prescribe.
(2) Save as otherwise provided in sub-section (1), in determining the turnover of a dealer for the purposes of this Act, no deduction shall be made from the aggregate of the sale prices.”