M/S. Amrit Food Products vs. The State Of Assam And 5 Ors.
Original PDF →Facts
The petitioners, including Eastern Roller Flour Mills (P) Ltd. and others, filed writ petitions challenging the collection of cess by the Assam State Agricultural Marketing Board and Market Committees. The period in question is from July 1, 2017, to June 12, 2020. The petitioners argued that the collection of cess was illegal and ultra vires the provisions of the CGST Act, 2017, and the AGST Act, 2017. The respondents, including the State of Assam and the Marketing Board, contended that the doctrine of unjust enrichment should apply, preventing the refund of illegally collected cess if the burden was passed on to consumers. The petitions were filed before the Gauhati High Court.
Held
The Court held that the collection of cess by the respondent Board and Market Committees from the petitioners during the period from July 1, 2017, to June 12, 2020, was unconstitutional and ultra vires the provisions of the CGST Act, 2017, and the AGST Act, 2017. However, considering the averments made in the writ petitions and the present financial position of the respondent Board, the Court was not inclined to issue a writ directing the respondents to refund the illegally collected amount. The Court noted that the petitioners had not made any averments proving that the burden of cess was not passed on to the customers. Citing the doctrine of unjust enrichment and the principle that courts should not be used to unjustly enrich a person, the Court acknowledged that while the collection was illegal, a refund was not warranted in this specific case due to the lack of proof of non-passing of the burden and the financial state of the respondent Board. The Court referred to the Supreme Court's observations in similar cases regarding directing parties to divest themselves of unjustly retained benefits, but ultimately decided against such a direction here.
Key Issues
1. Whether the collection of cess by the Assam State Agricultural Marketing Board and Market Committees from the petitioners during the period from July 1, 2017, to June 12, 2020, was unconstitutional and ultra vires the provisions of the CGST Act, 2017, and the AGST Act, 2017? Petitioner's Argument: The petitioners argued that the collection of cess was illegal and beyond the powers of the respondent authorities under the relevant GST legislation. Revenue/State's Argument: The respondents argued that the doctrine of unjust enrichment should be applied, meaning that if the petitioners had passed on the burden of the cess to their customers, they should not be entitled to a refund. They relied on the principle that no person should be unjustly enriched. The respondents also highlighted the precarious financial condition of the Assam State Agricultural Marketing Board.
Sections Cited
Section 11-B
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Heard together (12 matters)
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Cause title — parties, addresses and appearances
O R D E R
2024 No.12/2017-Central Government (Rate) dated 28.06.2017 as well as the Notification bearing No.FTX.56/2017/25 dated 29.06.2017 issued by the Page No.# 17/22 Finance (Taxation) Department, Government of Assam have come into effect was unconstitutional as well as ultra vires the provision of the CGST Act, 2017 and AGST Act, 2017. 4. This Court further dealt with the question as to whether the petitioners therein would be entitled to the refund of the amount of the cess collected illegally by the respondent Board and the Market Committees.
This Court opined that on the ground that there were no specific pleadings made in the instant writ petitions that the goods which have been brought for re-sale, the burden of cess were not passed on to the customers of the petitioners, the question of the amount collected from the petitioners as cess during the period from 01.07.2017 to 12.06.2020 to be refunded to the petitioners do not arise.
In that regard, this Court finds it relevant to refer to paragraph Nos.22 and 27 to 31 of the said judgment, i.e. Bhater Traders and Another (supra) which are quoted herein under:-
The law if applied to the facts of the present cases would make the exemption so granted by the notification No.12/2017-Central Government (Rate) dated 28.06.2017 issued by the Government of India, Ministry of Finance, Department of Revenue at Sl. No.54 and the notification No.FTX.56/2017/25 dated 29.06.2017 issued by the Finance (Taxation) Department of the Government of Assam at Sl. No.54 in respect to service by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale and purchase of agricultural produce pre-supposes that the cess which was collected by virtue of the Act of 1972 had been subsumed by the CGST Act,2017 as well as AGST Act, 2017. Under such circumstances, the levy of cess by the Respondent Board or the Market
Page No.# 18/22 judgment being relevant are quoted hereinunder:- “33. We are passing this order keeping in view the peculiar situation as in either event it was cinema-goers who had lost a huge amount. It would be travesty of justice if the owners of the cinema theatre become eligible to appropriate such a huge amount for their own benefit. To the aforementioned extent, doctrine of unjust enrichment may be held to be applicable. A person who unjustly enriches himself cannot be permitted to retain the same for its benefit except enrichment. Where it becomes entitled thereto the doctrine of unjust enrichment can be invoked irrespective of any statutory provisions.
In Mafatlal Industries Ltd. Section 72 of the Contract Act providing for restitution may be taken recourse to. Doctrine of “unjust enrichment” was resorted to, observing: “108. (iii) A claim for refund, whether made under the provisions of the Act as contemplated in Proposition (i) above or in a suit or writ petition in the situations contemplated by Proposition (ii) above, can succeed only if the plaintiff-petitioner alleges and establishes that he has not passed on the burden of duty to another person/other persons. His refund claim shall be allowed/decreed only when he establishes that he has not passed on the burden of the duty or to the extent he has not so passed
Page No.# 19/22 on, as the case may be. Whether the claim for restitution is treated as a constitutional imperative or as a statutory requirement, it is neither an absolute right nor an unconditional obligation but is subject to the above requirement, as explained in the body of the judgment. Where the burden of the duty has been passed on, the claimant cannot say that he has suffered any real loss or prejudice. The real loss or prejudice is suffered in such a case by the person who has ultimately borne the burden and it is only that person who can legitimately claim its refund. But where such person does not come forward or where it is not possible to refund the amount to him for one or the other reason, it is just and appropriate that that amount is retained by the State i.e. by the people. There is no immorality or impropriety involved in such a proposition. The doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched.”
In Sahakari Khand Udyog Mandal Ltd. v. CCE & Customs this Court has held:
“45. From the above discussion, it is clear that the doctrine of ‘unjust enrichment’ is based on equity and has been accepted and applied in several cases. In our opinion, therefore, irrespective of applicability of Section 11-B of the Act, the doctrine can be invoked to deny the benefit to which a Page No.# 20/22 person is not otherwise entitled. Section 11-B of the Act or similar provision merely gives legislative recognition to this doctrine. That, however, does not mean that in the absence of statutory provision, a person can claim or retain undue benefit. Before claiming a relief of refund, it is necessary for the appellant-petitioner to show that he has paid the amount for which relief is sought, he has not passed on the burden on consumers and if such relief is not granted, he would suffer loss.”
It may be true that hereat we are not concerned with refund of tax but then for enforcement of legal principles, this Court may direct a party to divest itself of the money or benefits, which in justice, equity and good conscience belongs to someone else. It must be directed to restitute that part of the benefit to which it was not entitled to.
We, therefore, direct that the State shall realise the amount to the extent the respondent had unjustly enriched itself and pay the same to a voluntary or a charitable organisation, which according to it is a reputed civil society organisation and had been rendering good services to any section of the disadvantaged people and in particular women and children. We would request the Hon’ble the Chief Minister of the State to take up the responsibility in this behalf so that full, proper and effective utilisation of the amount in question is ensured.”
In the said judgment, reference was also made to the judgment of the Nine Judges of the Supreme Court in the case of Mafatlal Industries Limited & Others vs. Union of India vs Others, reported in (1997) 5 SCC 536. It was observed by the Supreme Court that the claim for refund can only succeed if it is alleged and proved that the person from whom the tax was illegally collected had not passed on the burden of the duty to another person or other persons. In the instant case, there are no averments made in the writ petitions that the goods which have been brought for resale, the burden of cess were not Page No.# 21/22 passed on to the customers of the petitioners. Under such circumstances, the question of the amount collected from the petitioners as cess during the period from 01.07.2017 to 12.06.2020 to be refunded to the petitioners do not arise.
It is also equally important in view of the judgment in the case of Swanstone Multiplex Cinema Private Limited (supra) to address another issue as to whether the Respondent Board can be permitted to retain the benefit of the cess levied by them illegally during the said period. In the said case, the Supreme Court observed that the Court may direct a party to divest itself of the money or benefit which in justice, equity and good consense belong to someone else, and accordingly, in that case, the Supreme Court directed the State to realize the amount from the respondents therein and pay the same to a voluntary or a charitable organization.
In the instant case, the Respondent Board and the Market Committee after having lost their powers to levy cess, the financial position of the Respondent Board is in a penurious state. It is surviving as could be seen from the additional affidavit filed on 28.09.2023 on the basis of grant-in-aid received from the State Government. Under such circumstances, it is the opinion of this Court that directing the State to recover the said amount from the Respondent Board would not be in the interest of justice, equity, good conscience as well as also it would seriously hamper the functioning of the Respondent Board in terms with the provisions of the Act of 1972. 31. Accordingly, this Court is not inclined to pass any direction(s) for restitution by the respondent Board of the cess so collected during the period from 01.07.2017 to 12.06.2020.”
Taking into account that the issue involved in the instant batch of the writ petitions are pari-materia to the facts and issue involved in the writ petitions disposed of under judgment in the case of Bhater Traders and Another (supra), this Court therefore disposes of the instant writ petitions holding that the collection of the cess from the petitioners by the Page No.# 22/22 respondent Board or the Market Committees was unconstitutional as well as ultra vires to the provisions CGST Act, 2017 and the AGST Act, 2017. However, taking into account the facts involved, the averments made in the present writ petitions as well as the present financial position of the respondent Board, this Court is however not inclined to issue a writ directing the respondent to refund the said amount illegally collected from the petitioners.
Accordingly, the instant batch of writ petitions stand disposed of.
JUDGE Comparing Assistant
Reproduced from the public record of the Gauhati High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.