No Provision To Issue Directions For Refund Of Tax Prior To Insertion of Section 22(1B) To The Central Sales Tax Act- SC

A Supreme Court Bench of Justice MR Shah and Justice Krishna Murari heard an appeal against an order passed by the Central Sales Tax Appellate Authority. While disposing of the appeal, the Court held that "At this stage, it is required to be noted that prior to insertion of Section 22(1B) to the Central Sales Tax Act, 1956 (hereinafter referred to as the 'Act 1956'), there was no provision by which the Appellate Authority could have issued directions for refund of the tax collected by the State which has been held by the Appellate Authority to be not due to that State, or alternatively, direct that State to transfer the refundable amount to the State to which central sales tax is due on the same transaction."

Counsel Amar Dave appeared on behalf of the Appellant, Counsel Mahfooz A Nazki appeared on behalf of the State of Andhra Pradesh, Senior Advocate Arunabh Chowdhary appeared on behalf of the State of Jharkhand and ASG N. Venkataraman appeared along with Senior Advocate Arijit Prasad on behalf of the Union of India.

In this case, the Appellant was liable to pay central sales tax to the State of Jharkhand. However, treating the sale as a stock transfer, the Appellant had paid the tax on the transaction to the State of Andhra Pradesh, which was not leviable by the State of Andhra Pradesh.

Therefore, the amount of central sales tax recovered by the State of Andhra Pradesh was required to be transferred to the State of Jharkhand, and the same was required to be adjusted towards the amount of tax to be paid to the State of Jharkhand.

Although the Central Sales Tax Appellate Authority found that although transactions were in the nature of inter-state, no further consequential order was passed towards adjusting the amount of tax paid.

The Supreme Court noted that prior to the insertion of Section 22 (1B) to the Central Sales Tax Act, 1956, there was no provision by which the Appellate Authority could have issued directions for refund of the tax collected by the State which has been held by the Appellate Authority to be not due to that State, or alternatively, direct that State to transfer the refundable amount to the State to which central sales tax is due on the same transaction.

The Court further noted that in the case, the transaction was for the period prior to insertion of Section 22(1B) to the Act 1956 and the impugned order has been passed by the Appellate Authority pre-insertion of Section 22(1B) to the Act 1956. Therefore, the Court held that the Appellate Authority had not committed any error in not issuing any direction which now was permissible under Section 22(1B) of the Act 1956.

However, the Court also held that the State of Andhra Pradesh could not retain the amount of central sales tax paid by the Appellant on the transaction of sale. Therefore, the Court held that in line with Section 22(1B) of the Act 1956, the State of Andhra Pradesh must transfer to the State of Jharkhand the amount of central sales tax deposited by the Appellant with the State of Andhra Pradesh with respect to transaction in question, however, subject to the Appellant submitting the proof of the amount of central sales tax already paid on the transaction in question.

Further, the Court directed that the State of Jharkhand must adjust the same towards the central sales tax liability of the Appellant on such transaction, within a period of 3 months from the date of the order.

Cause Title - Tata Motors Limited v. Central Sales Tax Appellate Authority & Others

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