Supreme Tyres vs State of Madhya Pradesh and Others

Calling in question tenability of an order dated May 6, 2008, annexure P19, passed by the State Government in the Commercial Tax Department denying the benefit of section 25 of the Madhya Pradesh General Sales Tax Act, 1958 in not permitting remission of tax on account of loss suffered by the petitioner in the riots, this writ petition has been filed. The petitioner is a registered dealer and is a proprietor of the concern name by M/s. Supreme Tyres. It is said that in the riots, that took place in the year 1984, the petitioner suffered certain loss and, therefore, he sought remission of tax in accordance with the provisions of section 25 of the Madhya Pradesh General Sales Tax Act (hereinafter, referred to as section 25 of the Act). Matter was considered by this court in M.C.G. No. 746 of 2006 and an order was passed on 7th of March, 2008 remitting the matter back to the State Government for consideration. The State Government considered the matter and finally rejected the same, therefore, this writ petition.

It is the case of the petitioner that various purchases were made by the petitioner from various registered dealers and for the purchases so made tax was collected from the petitioners by registered dealer, which was actually paid by the petitioner and consequently, deposited by the registered dealer to the Revenue. On the ground, that for the stock, which was purchased by the petitioner from the registered dealer, the petitioner has paid tax through the registered dealer, from whom stock was purchased, an application was riled for remission of tax and the same was rejected by the State Government on two considerations: one, for the period in question, no tax was paid by the petitioner and, therefore, the question of granting benefit does not arise as section 25 of the Act is not applicable in the case of the petitioner. Second, even if the petitioner has paid the tax through the dealer, from whom the petitioner has purchased the stocks, then also, the benefit of remission of tax as contemplated under section 25 of the Act cannot be extended to the petitioner as he is not the person who actually remitted the tax.

We have heard learned counsel for the parties and considered the rival contentions. Section 25 of the Madhya Pradesh General Sales Tax Act provides as under:

"25. Remission of tax.--The Commissioner may subject to such conditions as may be prescribed, remit the whole or part of the amount of the tax payable by a registered dealer in respect of any year during which he suffered financially on account of riots, accidental fire or through natural calamities."

Thereafter, rule 48 as applicable in the State of Madhya Pradesh, which reads as under contemplates the provisions of laying down a procedure of remission of tax:

"48. Procedure for remission of tax.--Where a registered dealer has suffered financially on account of riots, accidental fire or throughout natural calamities in any year he may apply in writing to the appropriate Sales Tax Officer for remission of the amount of tax payable by him, ordinarily within ten days from the date of such occurrence."

It is clear from the aforesaid that on account of the riots that took place in the year 1984, when certain business establishments belonging to the Sikkh Community were destroyed, the State Government granted the benefit of remission from payment of tax as contemplated under section 25 of the Act and appropriate orders were passed. To that effect, there is no dispute. The fact as to whether, the petitioner is liable to the benefit of remission of tax under section 25 of the Act is to be considered. The State Government has rejected this contention on two counts; one, the petitioner has not paid any tax, and, second, the tax, if any paid, is by the registered dealer from whom; the stock was purchased by the petitioner and the section 25 of the Act is not attracted in the case of the petitioner.

However, the fact which has brought on record goes to show that even if the petitioner has purchased the stock from the registered dealer, but the tax was recovered from the petitioner by the registered dealer and, thereafter, deposited with the Revenue, by the registered dealer, it is a case, where the petitioner has ultimately paid the tax after it was deducted at source, which was recovered by the dealer. May be, the registered dealer had paid the tax but in fact, the amount of tax was recovered from the petitioner through the registered dealer from whom the stock was purchased by the petitioner. The purchases were made by the petitioner from the registered dealer and the tax was recovered from the petitioner on the purchases so made and ultimately, this was the tax that was deposited with the State Government. As the purchases were made by the petitioner and the tax was recovered from the petitioner through the registered dealer, if the contention of the State is accepted, the purpose of section 25 of the Act will be frustrated. Even if, the actual tax was deposited by the registered dealer, from whom the purchases were, made but it is the petitioner from whom this tax was recovered.

In fact the tax was deposited through the registered dealer by the petitioner, this aspect of the matter has been ignored by the State Government while rejecting the claim of the petitioner. In fact, we are of the considered view that the provisions of section 25 of the Act has to be given a liberal interpretation, as ultimately, it is the petitioner, who has suffered the riots and had paid the tax, may be through the registered dealer, from whom the purchases were made, the fact remains that the actual recovery of tax is made from the petitioner through, registered dealer and, therefore, the benefit of section 25 of the Act should be extended to the petitioner.

If the contention of the State Government is accepted, the purpose of incorporating section 25 of the Act would be frustrated. There may be cases, where, tax is recovered from a registered dealer may not be directly but indirectly as in this case. The purpose of section 25 of the Act is to give benefit to a registered dealer, who suffers the consequence of a riot or all accident and who has paid the tax. Merely because, the tax recovered from the petitioner, a registered dealer is paid through another registered dealer that does not mean that the amount of tax was not paid by the petitioner. The person, who paid the actual tax may not be relevant but the person from whom the tax was ultimately recovered is the question to be considered while interpreting section 25 of the Act and ultimately, if it is found that the tax is collected from a particular registered dealer, who had suffered the consequence of the riot or accident, even though deposited by another registered dealer, the registered dealer, in fact who paid the tax should be given the benefit of section 25 of the Act, that is how, the provision of section 25 of the Act has to be interpreted, else it would be doing damage to the intention of Legislature.

Accordingly, as the State Government has overlooked this aspect of the matter and the action of the State Government to deny the benefit of section 25 of the Act, as done, would frustrate the very purpose, for which the benefit indicated under section 25 of the Act is made, the State Government shall cause an enquiry into the matter with regard to purchases made by the petitioner, the fact with regard to actual payment of tax and further, the fact that the dealer deposited the tax with the Revenue and if it is found that the petitioner has paid the tax, even if through the another dealer, the amount should be refunded back to the petitioner with interest six percent, per annum from the date of deposit of tax with the Department. To that effect, a detail enquiry, should be conducted into the matter keeping in view the observations made by us in this regard.

The aforesaid exercise as indicated hereinabove, be concluded with a period of three months'' from the date of receipt of certified copy of this order.

With the aforesaid, this petition stands allowed and disposed of. Certified copy as per rules.