Entitlement To Refund Rests With Those Who Bear Ultimate Burden Of Tax Under Central Sales Tax Act: Gujarat High Court

Background

The Applicant herein was a dealer in natural gas and continued to fall within the ambit of CST Act after 2017 when the authorities in Rajasthan refused to issue Form 'C' declarations of purchase of natural gas at concessional rate basis the GST regime.

The State Government had averred that the registration certificates of the Applicants automatically stood cancelled and was not eligible for making purchases of natural gas against Form C declaration. Due to this stand of the State Government, the seller (Indian Oil Corporation) raised invoice charging full tax @20% on sales of natural gas to the Applicant. Thereafter, the Applicant approached the High Court wherein the CST Authorities were directed to issue Form 'C' declaration for the transactions.

The Applicants contended that the Respondents did not dispute the fact that the tax collected from the Applicant and deposited by Indian Oil was to be refunded.

It sought refund of the amount of Rs.2,30,11,188/- collected by the seller of natural gas and deposited with the respondent authorities under the Central Sales Tax Act, 1956.

On the contrary, the Respondents claimed that such refund could only be issued to the seller i.e., Indian Oil after assessment for the stated period. The Respondents further averred that the Applicant was not registered as a dealer in Gujarat.

Judgement

The Bench observed that the issue of consideration herein was covered squarely by the J.KI. Cement Ltd. vs. State of Gujarat, Special Civil Application No.15333 of 2019 judgement which had held:

"The burden of paying the amount in question was transferred by the respondents to the purchasers and, therefore, they were not entitled to get a refund. Only the persons on whom lay the ultimate burden to pay the amount would be entitled to get a refund of the same."

It was also held therein that if the amount is refunded to the seller, and not the dealer who ultimately paid the tax, such claim would be hit by the principles of "unjust enrichment". 

Accordingly, keeping in view this precedent, the Bench allowed the refund claim and admitted the application.

Case Title: SAINT-GOBAIN INDIA PRIVATE LIMITED Versus UNION OF INDIA

Citation:

Case No.: C/SCA/1481/2022