P L D 1967 Karachi 358 (PLP)

ABDUL KADIR SHAIKH, J.‑This Sales tax Reference case under section 17 (1) of the Sales Tax, 1951, forwarded at the instance of the Department raises the following questions for determination by this Court. "Whether on the facts and in the circumstances of the case, the assessee is entitled to claim a refund of Rs. 5,113, Rs. 13,445 and Rs. 3,795 respectively for the years 1953‑54, 1954‑55 and 1955‑56 paid to the Government under the provisions of section 27 (2) of the Sales Tax Act, 1951 ?" The relevant facts are that the assessee is a limited liability company carrying on the business of manufacture of utensils, etc. Under Notification No. 3 dated the 16th of March 1952 issued by the Income‑tax Department no sales tax is payable on the manufacture of metal utensils but under a misapprehension of facts, the assessee paid the sales tax on the manufacture of articles by him during three accounting years ending on 31st March 1954, 1955 and 1956. The assessee then filed three separate applications for the refund of the tax under section 27 (2) of the Income‑tax Act claiming Rs. 5.113 for the first year, Re. 13,445 for the second and Rs. 3,795 for the last year. The Sales Tax Officer, however, turned down his claim on the ground that he had collected the tax in an. unauthorised manner from his customers and cannot be allowed to retain the amount. Three separate appeals in respect of three accounting periods were filed by the assessee to the Appellate Assistant Commis sioner of sales tax. The appeal in respect of the assessment year 1953‑54 came up before Mr. E. Rehman, Assistant Commissioner (Appellate), who allowed the same by an order dated the 30th of October 1958 on the ground that the assessee was entitled to the refund of the excess amount paid to the Department as Sales‑tax. The other two appeals for the subsequent two year however, came to be heard by another officer, namely, Mr. D. Nabi, who took a different view in the matter and dis allowed the claim for the assessee for the same reason as given by the Sales Tax Officer. This led to three appeals before the Income‑tax Appellate Tribunal; one by the Department against the order dated the 30th of October 1958, passed by Mr. E. Rehman, and the other two by the assessee against the two orders of the same date, i.e. the 28th of February 1959, passed by Mr. D. Nabi. The Appellate Tribunal heard these three appeals jointly and disposed there of by a consolidated order dated 24th of May 1961 rejecting Departmental appeal and accepting the two appeals of the assessee. The Tribunal was of the opinion that under section 27 (2) the assessee was entitled to the refund of amount paid by him in excess of the amount‑with which he is chargeable, and it makes no difference if the assessee had in turn, collected the amount as an unauthorised tax from his customers. After wards, at the request of the Department under section 17 (1) of the Sales Tax Act, the Appellate Tribunal referred the above mentioned question for opinion of this Court. Mr. S. A. Nusrat, the learned counsel appearing on behalf of the Department, advanced the same contention as was raised before the Appellate Tribunal that since the assessee had collected sales tax from his customers unauthorisedly, he was not entitled to retain the unauthorised collection or claim the refund thereof after having paid the amount to the Government. In order to appreciate this contention it is necessary to refer to section 27 of the Sales‑tax Act which entitles an assessee to claim refund of the excess amount paid as sales tax. This section reads as under:‑ "

27. Refund.‑(1) Where partly manufactured goods are purchased by a licensed manufacturer and t1c has been paid on those goods on interpretation or on any previous sale, a refund of the amount of the tax so paid shall be made to the licensed manufacturer. (2) If any person satisfied the Sales Tax Officer that the amount of tax paid by him exceeds the amount with which he is properly chargeable under this Act, he shall be entitled to a refund of such excess, and the provisions of this Act in respect of appeal and revision shall apply to an order passed by the Sales Tax Officer under this subsection as they apply to an assessment. ‑‑ (3) An application pursuant to subsection (1) or sub section (2) may be made in the prescribed manner within three years of the date of payment of the tax in respect of which the refund is claimed."

4. It is plain from the language of subsection (2), that an assessee is entitled to the refund of amount paid by him in excess of the amount with which he is properly chargeable if the conditions laid down under subsection (3) are complied with; those being that his application must be on the prescribed form and that it should be made within the prescribed period. It is not the case of the Department that the application of the assessee for the refunds claimed were not on the prescribed form or that the same were not filed within the period of limitation. The only reason which commended itself to the Sales Tax Officer for the refusal of the refund was that the assessee had collected the amount unauthorisedly from his customers and he was not entitled to retain the unauthorised collection of tax.

5. We are of the opinion that the contention of the Department cannot prevail on the clear language of section 27 of the Sales Tax Act. The requirement of this section is that once the assessee satisfies the Sales Tax Officer that the amount of tax paid by him exceeds the amount. with which he is properly chargeable under the Act, he is entitled to the refund of such excess. This provision of law makes no exception in respect of the amounts realised by an assessee unauthorisedly from his customers and paid to the Department. It is a well recognised principle of the Interpretation of Statutes that effect is to be given to the plain language of the statute. The words which do not occur in the Statute cannot be added, as that would tantamount to re‑construction of the statute rather than con struing the statute itself. In considering the claim of assessee for refund of the excess amount paid by him as tax all that has to be examined is whether he has applied on the prescribed form (the failure to do this may not be fatal) within the period of limitation and whether the amount of tax paid by him exceeds the amount with which he is properly chargeable under the Act No other extraneous consideration can be imported for refusing his claim. The question that the assessee had realised the amount in question as unauthorised tax from his customers is totally irrelevant for consideration of his claim to the refund under section 27 of the Act. Same view was taken by the Punjab High Court in the case of Sugar Syndicate, Bahadargarh v. Excise and Taxation Commissioner, Punjab (A I R 1956 Pb. 222), wherein it was held that refund which is otherwise due to the assessee, cannot be refused because he in turn unauthorisedly collected the amount in question from his customers. In this case the assessee though not liable to Sales Tax, paid the tax by mistake and then applied for the refund. His claim was refused on the ground that he had realised the amount unauthorisedly as sales tax from his customers. The assessee challenged this action in the High Court by way of petition under Article 226 of the Constitution of India. One of the arguments advanced by the Advocate‑General was that Court should not interfere with the order refusing to refund the tax on the ground that the assessee had realised this amount as unauthorized tax from his customers and then paid to the taxing authorities. Their Lordships repelling this argument observed: "This is undoubtedly so, but this fact does not affect the validity or invalidity of the levy or collection of the tax. Under the Act a dealer is liable to pay the sales tax on the taxable turnover every year at a rate fixed by notification under section 5 of the Act. The term "taxable turnover" under section 4 is stated to be the gross turnover exceeding the taxable quantum which is also defined in this section. It is therefore clear that a dealer is liable to pay this tax whether he realises it from his customers or not. It is well‑known that the dealers pass on the amount of tax to the customers but under the Act of 1948 they are not bound to do so and they do not, so to say; act as collecting agents for the taxing authorities. It appears to me therefore that the mere fact that Syndicate had realised certain amounts from its customers and under the belief which was obviously genuine that it was liable to pay the sales tax on sales held during January to March 1950, should not be taken into consideration when exercising discretion under Article 226 of the Constitution once it is held that the tax was illegally collected. The invalidity of its levy and its collection is admitted, by the respondent in the present case: The High Court should not hesitate to exercise by power under Article 226 of the Constitution to grant the necessary relief wherever a tax is illegally collected from a citizen of India. It would be travesty of justice to compel a person to pay a tax which he is not legally bound to pay or to refuse to refund the tax illegally collected on merely technical grounds." The facts of this case are quite similar to the one before us and we have no hesitation in agreeing with the view taken by the Punjab High Court. The crucial test is whether the excess amount claimed by the assessee was, in law, payable by him as tax or not. An assessee cannot in law be compelled to pay any amount as tax which is not payable by him, and if he his unwittingly or otherwise paid such tax, the same is to be refunded to him. The argument that the assessee cannot be permitted to retain the unauthorised collection of tax made by him from his customers applies with equal force to the Depart ment as well. That the sums in question are not payable by him and are excess payments made by him are facts which are admitted. The Department itself cannot in law retain these amounts unless these are payable by the assessee under the law. The Department has no authority in law to obtain or retain the unauthorised collection of tax made by an assessee from his customers. Therefore by no process of reasoning can the Department assume to itself the power to retain the illegal tax collection made by an assessee from his customers which has been paid in excess of the amount payable by the assessee. We are, therefore, clearly of the opinion that on the facts and‑in the circumstances of the case, the assessee is entitled to claim refund of the amount of Rs. 5,113, Rs. 13,445 and Rs. 3,795 for the years 1953‑54, 1954‑55 and 1955‑56, respectively, paid to the Government under the provisions of section 27 (2) of the Sales‑tax Act, 1951. In result the question referred to this Court is answered in. the affirmative. The respondent shall be entitled to costs of these proceedings. S. Q. Reference answered in the affirmative.