Castrol India Limited Vs State of Jharkhand (Jharkhand High Court)
Jharkhand High Court ruled that the tax department’s failure to refund excess tax deposits after a reassessment violates Articles 14 and 265 of the Constitution. The case involved Castrol India Ltd., which had deposited Rs. 24,00,000 for AY 2014-15 and Rs. 26,00,000 for AY 2013-14 as a condition for obtaining a stay on tax demands. Following a remand by the appellate authority, the final tax liability was significantly reduced, but the excess amount was not refunded despite multiple requests. The company filed writ petitions seeking a refund along with statutory interest under Section 55 of the Jharkhand VAT Act.
The court examined the assessment history, noting that the appellate authority had remanded the case for fresh adjudication. The reassessment orders dated 09.01.2021 and 29.03.2022 reduced the final tax liability to Rs. 11,067 and Rs. 2,746, respectively. However, the tax department failed to credit the petitioner’s previous deposits or issue a refund. The court found no valid justification for the retention of the excess tax amount, describing it as unjust enrichment by the department.
Relying on constitutional principles, the court emphasized that tax can only be levied and collected as per the law (Article 265) and that arbitrary retention of funds violates the right to equality under Article 14. Citing judicial precedents, the court reinforced that the government cannot hold onto funds beyond what is legally due. The ruling aligns with similar decisions, where courts have mandated refunds of excess payments made under tax disputes.
Consequently, the High Court ordered the immediate refund of the excess tax amount with 9% annual interest from 09.01.2021 until the date of payment. Additionally, the court imposed a cost of Rs. 2,00,000 on the tax authorities for their prolonged retention of the petitioner’s funds. The authorities were directed to comply with the order within six weeks. The ruling underscores the importance of adhering to constitutional tax principles and preventing undue financial burden on taxpayers.
FULL TEXT OF THE JUDGMENT/ORDER OF JHARKHAND HIGH COURT
Heard learned senior counsel for the petitioner and counsel for the respondents.
2. In both these writ petitions the petitioner seeks direction to the respondents to refund excess tax of Rs. 24,00,000/- deposited during appellate proceedings for Assessment Year 2014-15 and Rs.26,00,000/- deposited during appellate proceedings for Assessment Year 2013-14; and for a direction to the respondents to pay statutory interest under Section 55 of the Jharkhand VAT Act from the date of the remand assessment order and also for declaring the inaction of the respondent in refunding the excess tax as violative of Articles 14, 19 (1)(g) and Article 265 of the Constitution of India.
3. Admittedly, assessment orders were passed for both Assessment Years 2013-14 and 2014-15 and a demand notice was issued to the petitioner which was challenged by the petitioner under section 79 of the Jharkhand VAT Act along with an application seeking stay of the amounts assessed under the said assessment orders.
4. On 13.02.2019, in the stay applications filed in the respective appeals, the appellate authority passed orders stating that if the appellant deposits 15% of the demanded amount by 25.02.2019, it would result in a stay of both the Assessment Order and the demand notice.
5. Admittedly, the petitioner complied with the said order within the time prescribed and deposited Rs.24,000,00/- and Rs.26,00,000/- respectively. Ultimately, the appellate authority remitted the matter back to the Assessing Officer for fresh assessment in respect of both assessment years.
6. Thereafter, the petitioner requested the Assessing Officer to pass a fresh assessment order and such orders were also passed on 09.01.2021 reducing the tax liability of the petitioner.
The respondents thus demanded tax of Rs.11,067/-and Rs.2,746/- from the petitioner overlooking the fact that the petitioner had made deposit before the appellate authority of Rs. 24,00,000/- and Rs. 26,00,000/-respectively and no credit to the same was given and the balance also was not refunded.
Subsequently, fresh assessment order post remand was also passed on 29.03.2022 reiterating that above amounts are due from the petitioner again without giving credit to the amount already deposited by the petitioner at the time when it had preferred an appeal.
7. Inspite of several reminders given by the petitioner the amount deposited by it at the time of filing of the appeal after deducting the tax, subsequently demanded, was not refunded by the respondents.
8. In the counter-affidavit filed by the respondent-authorities no valid reason is assigned why the amount deposited by the appellant at the time of filing the appeal is not being refunded, when admittedly after the remand order was passed by the appellate authority, while disposing of the matter the demand against the petitioner was substantially reduced to a mere Rs. 11,067/- and Rs. 2,746/- respectively by the assessing authority.
9. We fail to understand how the respondents could have retained the amounts deposited by the petitioner at the time of preferring the appeal and seeking stay of demand, after the appeal is decided, and the matter is remitted back, and after the assessing officer passes a fresh assessment order post remand.
10. The respondents cannot retain the amounts deposited by the petitioner pursuant to condition imposed by the appellate authority for stay of the assessment order and contend that there is no necessity to refund the same.
If the actual tax assessed from the petitioner is much less than the amount which the petitioner had deposited at the time of filing the appeal and seeking stay, retention of the balance after the assessing officer, post remand, reduced the demand drastically, would undoubtedly amount to unjust enrichment on the part of the respondents and would be violative of Article 14 and Article 265 of the Constitution of India.
11. Therefore, the respondents are directed to refund the amounts deposited by the petitioner after adjusting the same towards the tax finally assessed post remand by the assessing authority for the Assessment Year 2013-14 and Assessment Year 2014-15 with interest at the rate of 9% per annum from 09.01.2021 till the date of actual payment. The respondents shall also pay cost of Rs.2,00,000/- to the petitioner for unjustly retaining the said amount for the last four years. The cost as well as the refund shall both be paid to the petitioner within six weeks from the date of receipt of a copy of this order.
12. Both these writ petitions are allowed as above.
