REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 4060 OF  2006

Commnr. of Sales Tax, U.P. ...Appellant

Versus

M/s Hind Lamps Ltd.   ...Respondent

J U D G M E N T

Dr. ARIJIT PASAYAT, J.

1. Challenge in this appeal is to the judgment of a learned

Single Judge of the Allahabad High Court allowing the Trade

Tax Revision filed by the respondent (hereinafter referred to as

the ‘assessee/dealer’). The question involved lies within a very

narrow compass, i.e. whether a dealer can make adjustment

while depositing tax on the basis of tax out,  admitted to be

payable, of certain amounts which according to him had been

deposited in excess for some other assessment periods.  The

High Court held that it was permissible under the U.P. Trade

Tax Act, 1948 (in short the ‘Act’)  and U.P. Trade Tax Rules,

1948 (in short the ‘Rules’).

2. Background facts in a nutshell are as follows:

Dealer-respondent was required to pay tax in respect of

returns filed for the months of April, May and August, 1977.

In respect of the assessment years i.e. 1969-70 to 1971-72,

appellant had filed appeals before the Assistant Commissioner

(Judicial) Sales Tax, which were allowed and the matter was

remanded for re-consideration of the Assessing Authority.

According to the dealer, the following amounts were to be

refunded:

1968-69   Rs.74,833/-

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1969-70 Rs.95,506/-

1970-71 Rs.1,35,666/-

1971-72 Rs.2,38,435/-

The dealer adjusted aforesaid amounts from the amounts

payable as tax in respect of three months i.e. April, May and

August, 1977. But, in the final assessment proceedings, the

Assessing Officer refused to give credits of the amounts in his

order  dated  27.2.1982  on  the  ground  that  there  was  no

provision  for  such  adjustment  and  the  dealer  cannot  itself

adjust the amounts, if any, refundable to him. Consequently,

interest for late payment was levied.  The order was confirmed

by  the  first  Appellate  Authority  i.e.  Deputy  Commissioner

(Appeals) Sales Tax, Agra. In appeal, the Sales Tax Tribunal,

Agra,  Bench  (3)  (hereinafter  referred  to  as  the  ‘Tribunal’)

affirmed the view of the Assessing Officer and first Appellate

Authority.  

The dealer  carried the matter further by filing a Trade

Tax Revision and as noted above, learned Single Judge held

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that it is open to the assessee to make the adjustment with

reference to Section 29 of the Act.  

3. Learned counsel for the Revenue submitted that the High

Court  clearly  misconstrued  the  provisions  contained  in

Section 29 of the Act and, therefore, the view of the Assessing

Officer  as affirmed by the  first  Appellate  Authority  and the

Tribunal should not have been interfered with.  

4. Learned counsel  for the respondent on the other hand

submitted that the assessee is entitled to refund and there is

no reason as to why he cannot make adjustment.  

5. Section 29 of the Act reads as follows:

“(1) The  assessing  authority  shall,  in  the manner  prescribed,  refund  to  a  dealer  any amount  of  tax,  fees  of  other  dues  paid  in excess of the amount due from him under this Act.

Provided  that  the  amount  found  to  be refundable shall first be adjusted towards the tax or any other amount outstanding against

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the dealer under this Act or under the Central Sales Tax Act, 1956 and only the balance, if any, shall be refunded:

(2)  If  the  amount  found to  be  refundable  in accordance  with  sub-section  (1)  is  not refunded  as  aforesaid  within  three  months from the date of order of refund passed by the Assessing  authority  or,  as  the  case  may  be, from the date of receipt by him of the order of refund, if  such order is passed by any other competent authority or court, the dealer shall be entitled to simple interest on such amount at the rate of eighteen percent per annum from the date of such order or, as the case may be, the  date  of  receipt  of  such  order  of  refund passed by the assessing authority to the date of refund.

Explanation-I

The date of refund shall be deemed to be the date  on  which  intimation  regarding preparation of the refund voucher is- sent to the dealer in manner prescribed.

Explanation -II

The  expression  "refund"  includes  any adjustment under  the proviso  to sub-Section (1)."

6. The High Court  referred to the proviso to sub-section (1)

of Section 29 to hold that the amount found to be refundable

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shall be first adjusted against the tax or any  other amount

outstanding against the dealer under the Act or the Central

Sales Tax Act, 1956 (in short the ‘Central Act’).  

7. The approach of the High Court is clearly erroneous. A

bare reading of the proviso referred to shows that the amount

must  have  been  found  to  be  refundable  and  due  to  be

refunded.  No  authority  has  found  any  amount  to  be

refundable.  Stand  of  the  dealer  that  since  the  matter  was

remanded by the appellate authority any amount paid beyond

the admitted tax has to be construed as refundable. This plea

is clearly untenable.  

8. The expression used is “found to be refundable”. In other

words, it must be as a result of adjudication. The amount has

to be found to be refundable. In the instant case, there is no

such adjudication. Even otherwise,  the power of adjustment

lies  with  the  authority  under  the  Statute.   While  granting

refund, he has to first find out  whether there is any amount

which  has  to  be  adjusted  against  tax  or  other  amounts

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outstanding against the dealer under the Act or the Central

Act  and  the  balance  has  to  be  refunded.   This  power  of

adjustment lies only with the authority under the Statute. The

dealer  cannot  make  any  adjustment  on  his  own,  and  not

certainly under the proviso to sub-section (1) of Section 29 of

the Act as has been held by the High Court. The Explanation I

makes the position further clear that the date of refund shall

be deemed to be the date on which first intimation regarding

preparation of the refund voucher is sent to the dealer in the

prescribed  manner.  Obviously,  therefore,  date  of  refund  is

relatable  to  the  intimation  regarding  the  preparation  of  the

refund  voucher.  Explanation  II  shows  that  the  expression

“refund” includes the adjustment which is permissible under

the  proviso  to  sub-section  (1).  It  is  to  be  noted  that  the

manner in which the refund has to be granted is provided in

Rules 89 and 90 appearing in Chapter XV.

9. That being so, the High Court was not justified in its view

in  holding  that  the  dealer  could  itself  make  adjustment  of

amount.  

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10. The appeal filed by the appellant deserves to be allowed

which we direct.  However, there shall be no order as to costs.  

............................................J. (Dr. ARIJIT PASAYAT)

….........................................J. (Dr. MUKUNDAKAM SHARMA)

New Delhi, July 31, 2008

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