Taxes cannot be realised without authorisation in the relevant taxing statute

Taxes cannot be realised without authorisation in the relevant taxing statute

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Recently, in Shabina Abraham & Ors. vs. Collector Of Central Excise & Customs [Civil Appeal no.5802 of 2005, decided on 29, July, 2015] the judgment of the Kerala High Court has been set aside by Hon’ble Supreme Court. This appeal raised questions as to whether the dead person’s property, in the form of his or her estate, can be taxed without the necessary machinery provisions in a tax statute. The precise question that arose in the appeal was whether an assessment proceeding under the Central Excises and Salt Act, 1944, can continue against the legal representatives/estate of a sole proprietor/manufacturer after he is dead. It was held by the Apex Court that the tax could not be realised from the dead person’s property, in the form of his or her estate, without the necessary machinery provisions in the tax statute.

The Supreme Court in Salonah Tea Company Ltd. vs the Superintendent of Taxes (1988)173 ITR 42, has held that the taxes collected without the authority of law form a citizen should be refunded because no state has the right to receive or to retain taxes or monies realised from citizens without legal authority.

The Apex court has also observed that the court, in an application under article 226 of the Constitution, has the power to direct the refund. The period of three years, prescribed under the limitation Act as the time within which recovery of money paid under a mistake must be claimed by a suit in a civil court, is ordinarily taken as the period beyond which the court should not grant relief under article 226. But this is not an inflexible rule. Where the demand of justice is compelling, the high court may in the exercise of its discretion, interfere and great relief.

In the above case (in brief), the appeals arose of the judgment and order of June 14, 1979 of the High Court of Gauhati, setting aside the order and notice of demand, but declining to order any refund of the taxes paid. The Supreme Court struck down the act as ultra vires. On April 6, 1961, a new act was passed which received the assent of the president. The high court against struck down the act declaring it ultra vires the Constitution on August 1, 1963. On December 13,1963. In the Khyerbari Tea Co. Ltd. Vs State of Assam (1964) SCR 975, in a challenge to the act under article 32 of the Constitution, the Supreme Court held the act to be ultra vires. On April 1, 1968 the appeals preferred by State of Assam against the High court, were allowed on the basis of the declaration of the act to be intra vires. Thereafter, notices were issued by the superintendent of taxes, Nowgong, requiring the appellant under section 7(2) of the act to submit return for the periods -ending June 30, 1961. September 30, 1961. December 31, 1961 and March 31, 1962. Returns were duly filed. Assessment orders were passed under section 9(3) of the said act. On July 10, 1973 , the high court passed the judgment in Loong Soong Tea Estate (Civil appeal No. 1005 of 1969) declaring the assessment as without jurisdiction. It was the case of the appellant petitioner that in view of the above judgment, the appellant came to know about the mistake in paying the tax as per assessment order and also that the appellant became entitled to refund of the amount paid. The above write petition was filed in November 1973. Before the High Court of Assam which set aside the assessment orders, but refused to grant the relief of refund of the tax paid. On appeal the SC observed that the high court came to the conclusion that when a petitioner approaches the High Court with the sole claim for refund of money by a writ of mandamus, it is normally not granted but where the refund is prayed as a consequential relief, it is normally entertained. In this case the SC observed that tax was collected without the authority of law. The appellant had to pay tax in view of notices without jurisdiction. In the premises it is manifest that the respondent had no authority to retain the money collected without authority and as such the money was liable to be refunded. The SC also held that the High Court was not correct in refusing to grant the relief of refund.

The above decisions of the Hon’ble Supreme Court have far reaching effects & can help the concerned persons seeking justice.

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