Holding

The Explanation attached to the Notification dated 4 May 1999 (and the subsequent 5 July 1999 Notification) denying refund of excess entry tax is unconstitutional as it violates Articles 14 and 265 of the Constitution.

Summary

Vikram Cement and two other units of Grasim Industries, which paid entry tax on coal, gypsum and bauxite under the Madhya Pradesh Entry Tax Act, 1976, challenged a State notification dated 4 May 1999 that reduced the tax rate to 1% for the period 1.5.1997‑30.9.1997 but attached an Explanation that any tax already paid at the higher pre‑reduction rates would not be refunded. The appellants, having paid the higher rates, sought refund of the excess amount. The High Court dismissed the writ petition, holding the issue had been decided in another case. The Supreme Court held that the Explanation created two arbitrary classes of taxpayers, lacked any rational nexus with the purpose of the notification, and violated Articles 14 and 265 of the Constitution. Consequently, the Explanation was declared unconstitutional and the appeal was allowed.

Issues considered

The Explanation to the 4 May 1999 Notification denying refund of excess tax paid violates Article 14 (equality) of the Constitution.
The Explanation violates Article 265 of the Constitution by imposing a tax contrary to law.
Whether the classification of taxpayers into those who paid the higher rate and those who did not is arbitrary and lacks a rational nexus with the legislative objective.

Legislation cited

Constitution of Indias. Article 14, s. Article 265
Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976

Subjects

Entry taxRefund of taxDiscriminationArticle 14Article 265Constitutional validityNotificationExplanationUnjust enrichmentMadhya Pradesh

Judgment

[2015] 4 S.C.R. 497

VIKRAM CEMENT & ANR. A

v.
STATE OF MADHYA PRADESH & ORS.

(Civil Appeal No.8192 of 2003) B

MARCH 17, 2015

[A.K. SIKRI AND R. F. NARIMAN, JJ.]

Madhya Pradesh Sthaniya Kshetra Me Mal Ke C
Pravesh Par Kar Adhiniyam, 1976 - Entry tax - Rate of
- Reduced by Notification dated 4.5.1999 for a limited
period i.e. from 1.5.1997 to 30.9.1997 - However,
Explanation to the Notification stating that if the tax was D
already paid at higher rate for that period, would not be
refunded to the assessee - Held: The Explanation to the
Notification is discriminatory as it carves out two
categories of tax payers i.e. one who have already paid
the tax and the other who paid the tax after the Notification E
was issued - There is no basis for or rationale behind
creating the two classes which would have any causal
connection with the objective sought to be achieved - The
Explanation is also violative of Art. 265 of the
Constitution - Therefore, the Explanation to the F
Notification is unconstitutional - Notification No.A-3-80-98-
ST-V (49) dated 4.5.1999 - Explanation to the Notification
- Notification dated 5. 7. 1999 - Constitution of India, 1950
- Arts. 14 and 265.
G
Allowing the appeal, the Court
'
HELD: 1. The Explanation attached to Notification

497 H
498 SUPREME COURT REPORTS [2015] 4 S.C.R.

'"'A dated 4.5.1999, or for that matter the Notification dated
5.7.1999, which states that the amount shall not be
refunded in any case on the basis that dealer had filed
the tax at a higher rate, results in invidious
discrimination towards those who have paid the tax
B . at a higher rate, like the appellants, when compared
with that category of the persons who were defaulters
and have now been allowed to pay the tax at the rate
of 1% for the relevant period. The con~equence is
that it carves out two categories of tax payers who
-c are· made to pay the tax at different rates, even though
they are identically situated. There is no basis for
creating these two classes and there is no rationale
behind it, which wo'uld have any causal connection
..JD· with the objective sought to be achieved. .The
Explanation is highly discriminatory in nature. [Paras
. 1 and 10] (503-F-H; 504-A-C; 508-D]
\D.S. Nakara & Ors. v. Union of India 1983 (2) SCR
1 E 165: (1983) 1 SCC 305; Re.: Special Courts Bill, 1978
1979 (2) SCR 476: (1979) 1 sec 380; EP Royappa v.
State of Tamil Nadu (1974) 2 SCR 348 - relie~ on.

2. The effect of tile Notification· dated 4.5.1999
. would be that any person bringing raw materials, yiz.
F coal, gypsum and bauxite, within the State of Madhya
Pradesh was liable to pay the entry tax only at the
rate of 1%. Once this aspect is kept in mind, the legal
effect thereof has to be that all the persons including
the appellants, who had already paid the tax, were
G supposed to pay. the tax at the rate of J % only.
Therefore, if they had paid the tax at a higher rate,
they were entitled to the refund of excess amount of
tax paid. Thus, as the entry tax payable was at the
H rate of 1% only, asking any person to pay at a higher
Y. ~VIKRAM CEMENT &1ANR. v: STATE OF MADHYA 499
PRADESH & ORS.

rate would be clea~ly·violative: of Article 265 of the, A
Constitution. Article 265 of the Constitution .has to be
read along with Article 14 in the given context. (Paras
~· 12, 13) [508-E-G~ 5d9~A-C] · ..; .. .
1
\'":;v ts r ,•
Kunnathat Thathunni Moopil Nair v. State of Kera/a & · · s
Anr. (1961) 3 SCR 77; Corporation Bank v. Saraswati
Abharansala & Anr. 2008 (16) SCR 340: (2009) 1 SCC
540 -:,relied on.

3. On a presumpti~n that while a~ding this. ·C
Explanation to the Notification, the Government had
, kept in mind the principle of unjust enrich~ent, there
cannot be any justification for adding the Explan~tion.
In order to determine as to whether a particular dealer
is in fact entitled to refund or not, the Government D
can go into the .issue of unjust enrichment while
considering his application for, refund. That would
depend on the facts of each case. It cannot1;-.be
~ ~ ~·

presu med that the burden was positively passed on
to the buyers by these dealers and, therefore, they ~ E
are not
entitled to 'refund. Therefore, the imp~gned
Expl~Hations in the Notifi~ations"dated: 4.5.1999''and
5.7.1999 are1 unco.nstitutiona1. [Paras 1sj~nCI t16l (51,3-
D-H; 514-A] ' ' · ·::1rl 1·r1· • 1
~ .
'
J
.
.

Case Law Reference

1983 (2) SCR 165 Relied on c:. ,· f;>ara 8

1979 (2) SCR 476 Relied on Para' 9
I ·,;, : ·.

(1974) 2 SCR 348 Relied on · Para 10
o~·~ ' 1'Jbf·r '-?--
. r·,_.,~rc., ~ ()\.'~ lb~'( ::,• ~l ,

v8 (!~~t);GµS~R 7;7'Gt' · r..~~lied1f>'! ,, oV1 ,.,Para 13
"·~2008 ('£6) sc!R '~40~'· 1 ·1 Relied· on1 ti n~ .:: ·Pi:lra 14
Si:lRyc ~ vi:;• '{ · . ; , ·ll! ~r,r• ·\ . _,., t ·.Si _ ;,3 "'"'C:'l'.l:! , 11H
500 SUPREME COURT REPORTS [2015] 4 S.C.R.

A CIVIL APPELLATE JURISDICTION: Civil Appeal No.
8192 of 2003.

From the Judgment and Order dated 11.09.2002 of the
High Court of Madhya Pradesh at Jabalpur in Writ Petition
B No. 6459 of 2000.

Niraj Sharma for the Appellant.

Arvind Verma, C. D. Singh for the Respondents.

C The Judgment of the Court was delivered by

A.K. SIKRI, J. 1. The bare minimum facts which are
required to be mentioned to decide this appeal are
recapitulated, in brief, hereinbelow:
D
2. The appellant Nos. 1 and 2 are the units of Grasim
Industries Limited, which carries on manufacture and sale of
cement. It requires raw material in the form of coal, gypsum
and bauxite. On the aforesaid raw materials, the appellants
E had been paying entry tax for entry of these goods in the
territory of the State of Madhya Pradesh under M.P.
Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam,
1976 (hereinafter called the 'Entry Tax Act'). In the year
F 1997, the entry tax on the aforesaid items of raw mate~ials
payable under the Act was at the following rates:
COAL - 2.5%
GYPSUM - 2%
G BAUXITE - 10%
In the year 1999, respondent No.1 - State issued
Notification No. A-3-80-98-ST-V (49) dated 4.5.1999. By
this Notification it reduced the rate of entry tax, namely,
H coal, gypsum and bauxite by making the entry tax payable
VIKRAM CEMENT & ANR. v. STATE OF MADHYA 501
PRADESH & ORS. [AK. SIKRI, J.]

at the rate of 1 % only. This Notification remained in force A
for a limited period, that is from 1.5.1997 to 30.09.1997.
The rate of entry tax prior to 1.5.1997 and after 30.09.1997
remained the same, namely, 2.5%, 2% and 10% for coal,
gypsum and bauxite respectively. B

3. We are concerned here with the aforesaid period
when entry tax payable was @ 1% only. However, while
reducing the entry tax to 1%, in the same very Notification
an Explanation was also appended stating that the amount c
which is already paid by the dealer at the higher rate shall
not be refunded. This Explanation is worded in the following
terms:

"Explanation - The amount shall not be refunded in D
any case on the basis that the dealer had paid the tax
at a higher rate."

As the Notification was issued only in May 1999 and it
realted to the past period, i.e. 1.5.1997 to 30.09.1997 and E
the entry tax is payable at the point of entry of the goods
into the State, as and when the appellants were bringing
the aforesaid raw material into the State of Madhya
Pradesh, they had been paying the entry tax. During the F
period 1.5.1997 to 30.09.1997, they had paid the entry tax
· at the rate which was prevalent at that time, though
reduced to 1% vide the Notification dated 4.5.1999. In this
manner, according to the appellants, though they had paid G.
the entry tax at the higher rate, which was now reduced to
1% vide the aforesaid Notification, they became entitled to
get the refund of the excess amount paid, but were still
deprived of that refund because of the aforesaid
Explanation. H
502 SUPREME COURT REPORTS [2016) 4 S.C'.R.

A '4. Naturally, being aggrieved· by the said Explanatiori,''
the appellants challenged the validity of the Explanation by·
filing writ petiion in the High Court of Madhya Pradesh.'··
The challenge was led primarily onrtwo counts: (i) in·the'first
8 instance, it was pleaded that this Explanation was' arbitrary
and discriminatory ~eing violative. o(~rticle 14 ,_the?f
Constitution'•
inasmuch
/ ..
as. the· classification
'.- ,.,/ {".,
which;1 has
·~~!;.__,
carved
f' '· L.'- - '/

out because of the said explanation had the effect of
;f' l ~,. t...-
' "

treatinQ the appell9rits and q!p~rs ~~p had pajd h:p<,,at a
C higher•'
r<Ite,
"
differently
'
from those
_·c. ()
who. had - .•
not paid tlie tax
·+ - ~-,,-.,

at all and were defaulted. 'if w~s 'argued tliat ; such a
classification was not based on any intelligible differentia
and had no nexus with any objective sought to be achieved.
o A number of judgments in support of this contention were
cited in the High Court. (ii) The second argument raised
was that it amounted to exaction of tax at a· higher rate,
namely, at the rate of 2.5%, 2% and 10% for coal, gypsum
and bauxite respectively, though the rate fixed ultimately for
E
the period in question by the Notification dated 4.5.'1999
1
was 1 %. Therefore, suc'h • an 'Explanation' in the
Notification was in the teeth o'f Article 265 of the
Constitution and per se illegal.
F
5. The High.Court, though took note of the aforesaid
arguments;< did not deal with these arguments in the manner
in which these submissions were made and dismissed :the.
writ petition vide impugned judgment dated· n .9.2002 only
G on the ground that identical issue had been considered by·
its own Division Bench earlier in the case of Century
Textiles and Industries Ltd. v. State. of Madhya
Pradesh & Ors.!11 To be fair to the High Court, we would
H 1 Writ Petition No. 2917 of 2000
. VIKRAM CEMENT & ANR. v. STATE OF MADHYA 503
PRADESH & ORS. [AK. SIKRI, J.]

also mention that the High Court has referred to anothe~. _ A
judgment of this Court in Indian Oil Corpo_ration v.
Municipal Corporation,_ Jullundharr21 and. having relied
upon the observations in the said case to the effect that
where the octroi duty had already been collected, there ~as B
no question of any equity in favour of the Indian. Oil
Corporation to claim the refund thereof.

6. Learned counsel appearing for the appeliants has
placed before us the same ~rguments which wefe c
advanced before the High Court with the plea that the High -
• I • •, ~ '

Court did not even consider those arguments appropriately.
He submitted that it w~s a clear case of discrimination qua
the appellants who had faithfully paid the tax and, therefore;
the_provis.ions of Article 14 -6f the Constitution will squ~rely' D~
attract in the facts of the present case. The learned· counsel
- I ~ ~
l ~
t .\.• <,,.

for the State, on the other hand, referred to the reasoning
given by the High Court in the impugned judgment in·
' -

support of his submissions while countering the arguments E
by the learned counsel for the appellants. ,,.

7. After giving our thoughful consideration to the issue
involved, we are of the view that there is force iri' the
subriissio~ of the lear~ed counsel for the appellants: The F,
Explanation attached to Notification dated 4.5.1999, o.r for'
that mater the Notification dated 5.7.1999, which states that
·; ~ -~ .
the amount shall not be refunded in any case on the basis
t
that dealer had filed the tax at a higher rate, results in G
invidious dis~rimination towards those who· have paid the
tax at a higher rate, like 'the appellants, when compared

2 (1993) 1 sec 333 H
504 SUPREME COURT REPORTS [2015] 4 S.C.R.

A with that category of the persons who were defaulters and
have now been allowed to pay the tax at the rate of 1% for
the relevant period. The consequence is that it carves out
two categories of tax payers who are made to pay the tax
8 at different rates, even though they are identically situated.
There is no basis for creating these two classes and there
is no rationale behind it which would have any causal
connection with the objective sought to be achieved. It
would be pertinent to mention that on repeated query made
C by this Court to the learned counsel for the respondents,
he could not explain or show from any material on record
as to what led the authorities to provide such an
Explanation. Therefore, it becomes apparent that there is
D no objective behind such an Explanation appended to the
Notification dated 4.5.1999 which is sought to be achieved,
except that the Government, after collecting the tax from
those who had paid at a higher rate, did not intend to
E refund the same. This can hardly be countenanced, more
so when it results in discrimination between the two groups,
though identically situated.

8. The law on the scope and meaning of Article 14 of
F the Constitution has now been well articulated. We may
gainfully refer to the case of D.S. Nakara & Ors. v. Union
of lndia131, wherein this Court observed as under: "10. The
scope, content and meaning of Article 14 of the Constitution
has been the subject-matter of intensive examination by this
G Court in a catena of decisions. It would, therefore, be
merely adding to the length of this judgment to recapitulate
all those decisions and it is better to avoid that exercise

H 3 (1993) 1 sec 305
VIKRAM CEMENT & ANR. v. STATE OF MADHYA 505
PRADESH & ORS. [A.K. SIKRI, J.]

save and except referring to the latest decision on the A
subject in Maneka Gandhi v. Union of lndia[41, from which
the following observation may be extracted:

" ... what is the content and reach of the great
equalising principle enunciated in this Article? There 8
can be no doubt that it is a founding faith of the
Constitution. It is indeed the pillar on which rests
securely the foundation of our democratic republic.
And, therefore, it must not be subjected to a narrow, c
pedantic or lexicographic approach. No attempt
should be made to truncate its all embracing scope
and meaning for, to do so would be to violate its
activist magnitude. Equality is a dynamic concept D
with many aspects and dimensions and it cannot be
imprisoned within traditional and doctrinaire
limits .... Article 14 strikes at arbitrariness in State
action and ensure fairness and equality of treatment.
The principle of reasonableness, which legally as well E
as philosophically, is an essential element of equality
or non-arbitrariness pervades Article 14 like a
brooding omnipresence."

11. The decisions clearly lay down that though Article F
14 forbids class legislation, it does not forbid
reasonable classification for the purpose of legislation.
In order, however, to pass the test of permissible
classification, two conditions must be fulfilled, viz. (i) G
that the classification must be founded on an
intelligible differentia which distinguishes persons or

4 (1978) 1 sec 248 H
506 SUPREME COURT REPORTS {2015] 4 S:C.R

A . things that are grouped together frqm those that are
left out of the group; and (ii) that that differentia must
have a rational relation to the objects sought to be
achieved by the statute in question [See Shri Ram
B· Krishna Dalmia v: Shri Justice S.R: Tendolkar &
Ors.151]. The classification may be founded on
differential basis according to objects sought to be
achieved but what is implicit in it is that there ought to
be a nexus, i.e. casual connection between the basis
c of classification and object of the statute under
'i"'
consideration. It is equally well settled by the
decisions' of this Court that Article 14 condemns
discrimination not only by a substantive law but also by
D a law of procedure.

I , (emphasis supplied)"

· 9. In Re.: Special Courts Bill, 1978161, this Court
undertook a survey of plethora of'decisions touching upon
E the 'Equality' doctrine enshrined in Article 14 of the
Constitution and culled out certain principles. lh principle
No.3, the Court highlighted that though classification was
permissible and it was not for the Courts to insist on
F delusive exactness or apply doctrinaire tests for determining
t~e .validity of classification in any given case, but, at the
sai;ne ti111~ 1 classification would be treated as justified only
if it.is not palpably arbitrary. It was ~lso emphasized that
G the underlined purpose in Article 14 of the ~.onstitution was
to treat all persons similarly circumstanced alike, both in
I_

5 1959 SCR 279, 296

H 6 (1979) 1 sec 380
VIKRAM CEMENT & ANR. v. STATE OF MADHYA 507
"
PRADESH & ORS. [A.K. SIKRI, J.]

privileges conferred and liabilities imposed. Following was A. ,
the emphatic message given by the Court:
. ' '
"(4) ... lt only means that ~all persons similarly
v, 1 circumstanced shall be treated alike bc;>th in privileges

13
,co~ferre~ and liabilities imposed. Equal laws would B
have t<;> be applied to all in the same situation, and
:, . there should be no discrimination between one 'person
~ and another if as regards the subject matter of the
legislation their position is substantially the same'. c'
·-'
(emphasis supplied)"

Another principle which was restated ,was that the
classification must not be arbitrary but must be rational, ,that
D
is to say, it must not only be based on some qualities or
characteristics which are to be found in all persons
grouped together and not in· others who are left out, but
those ,qualities and characteristics must have reasonable
relation ~o ti)~: object of the legislation. E·
,.
" 10. Article 14 eschews arbitrariness in any form. !his
principle was eloquently explained in EP. Royappa v.·
State of Tamil Nadul7l holding that the ·basic principle,
which informs both Articles 14' and 15- is equality and F
inhibition against discrimination.· We would like to quote the
f6ifowing passage from that judgment as well, which is as.i
under: " ·.l A " ' L 1
.. ,.._.~1

b ' .
G
"From a positivistic point of view, . equality. is
, antithetic. to arbitrariness. In fact, equality and

7 (1974) 2 SCR 348 , H,
508 SUPREME COURT REPORTS (2015] 4 S.C.R.

A arbitrariness are sworn enemies; one belongs to the
rule of law in a republic while the other, to the whim
and caprice of an absolute monarch. Where an act is
arbitrary it is implicit in it that it is unequal both
8 according to political logic and constitutional law
and is, therefore, violative of Article 14, and if it affects
any matter relating to public employment, it is also
violative of Article 14. Article 14 and 16 strike at
arbitrariness in State action and ensure fairness and
c equality of treatment."

On the application of the aforesaid principles to
the facts of the present case, the irresistible conclusion is
that the Explanation is highly discriminatory in nature.
0
11. The matter can be looked into from another angle
as well, which will yield the same results.

12. We have to keep in mind that vide Notification
E dated 4.5.1999, it is the rate of entry tax on the aforesaid
raw materials which is reduced to 1%. The effect of that
would be that any person bringing raw materials, viz. coal,
gypsum and bauxite, within the State of Madhya Pradesh
F was liable to pay the entry tax only at the rate of 1%. Once
this aspect is kept in mind, the legal effect thereof has to
be that all the persons including the appellants, who had
already paid the tax, were supposed to pay the tax at the
G rate of 1% only. Therefore, if they had paid the tax at a
higher rate, they were entitled to the refund of excess
amount of tax paid. No reasons are coming forth in the
counter affidavit filed by the State either in the High Court
or in this Court or in any other form as to why there was a
H necessity of adding such an Explanation for not refunding
VIKRAM CEMENT & ANR. v. STATE OF MADHYA 509
PRADESH & ORS. [A.K. SIKRI, J.]

the excess amount paid by the dealer in excess of 1% A
which was the entry tax legally payable for this period. Once
we consider the matter from this angle, it also becomes
clear that as the entry tax payable was at the rate of 1%
only, asking any person to pay at a higher rate would be 8
clearly violative of Article 265 of the Constitution.

13. Article 265 of the Constitution has to be read along
with Article 14 in the given ccntext. This co-relation
between the two provisions is beautifully brought out in c
Kunnathat Thathunni Moopil Nair v. State of Kerala &
Anr.181 as under:
"10. The most important question that rarises for
consideration in these cases, in view of the. stand D
taken by the State of Kerala, is whether Art. 265 of
the Constitution is a complete answer to the atack
against the constitutionality of the Act. It is, therefore,
necessary to consider the scope and effect of that
E
Article. Article 265 imposes a limitation on the taxing
power of the State in so far as it provides that the
State shall not levy or collect a tax, except by authority
of law, that is to say, a tax cannot be levied or
collected by a mere executive fiat. It has to be done F
by authority of law, which must mean valid law. In
order that the law may be valid, the tax proposed to
be levied must be within the legislative competence of
the Legislature imposing a tax and authorising the G
collection thereof and, secondly, the tax must be
subject to the conditions laid sown in Art. 13 of the
Constitution. One of such conditions envisaged by Art.

8 (1961) 3 SCR 77 H
510 "" SUPREME COURT REPORTS (2015]4 S.C.R.

A 10 13(2) is that the Legislature shall not make any law
which takes away or abridges the equality c.lause in
J _ Art.14, which enjoins the State not to deny to any

person equality before the law or the equal protection
of the laws of the country. It cannot be disputed that if
the Act infringes the provisions of Art.14 of the
Constitution, it must be struck down as
unconstitutional. Fdf the purpose of"tnese cases, we
r: . t 1t • '· ,
shall assume that the State Legislature· had -the
c. necessary competence to enact the law, though t~e
petitioners have seriously challenged such a
competence. The guarantee of equal protection of the
laws must extend even to taxing statutes. lt has not
D been contended otherwise. It does not mean that
every person should be taxed equally. But it does not
mean that if property of the same character has to be
taxed, the taxation must be by the same standard, so
'vthat the burden of taxation, may -fall equally on all
,; persons holding that kind and extent of property. If the
.taxation, generally speaking, imposes a similar
- burden on everyone with reference to that particular
-.\kind and extent of property, on the same basis of
F l taxation, the law shall not be open to attack on the
iground of inequality, even though the result of the
, taxation may be that the total burden on different
persons may be unequal. Hence, if the Legislature
has-classified persons or properties into different
categories, which are subjected to different rates of
taxation with reference to income or property, such a
·,classification· would not be open to the attack of
inequality on the ground that the total burdyn r~sulting
H
VIKRAM CEMENT & ANR. v. STATE OF MADHYA 511
PRADESH & ORS. [A.K. SIKRI, J.)

from such a classification is unequal. Similarly, A
different kinds· of property may be subjected to
different rates of taxation, but so long as there is 'a
rational basis for the classification, Art. 14 will not be
in the way of such a classification resulting in unequal . 8
burdens on different classes of •properties. But if, the
same class~of property similarly situated is subjected
r. to an incidence of taxation, which results in inequality,
the law may be struck down as creating an inequality
"amongst holders of the same kind of property. It must, C
therefore, ·be•held that a taxing statute is not wholly
immune from attack on the ground that it infringes the
equality clause in Art. 1'4, though the Courts are not
conqerned with the policy underlying a taxing statute or co
whether a particula£,Jcix could not have been imposed
in a different way or in way that the Court might think
more just and equitable. The Act has, therefore, to be
examined with reference to the attack based on Art.
,'E
14 ·of the Constitution."
: ,;~- I • ). ~ ' ..I ·!1 . '.
·~ 14. At. this stage,· we wo"uld like to refer to another
v ..)• ' ~ ·i t ~ '<f I

judgment of this Court which is quite proximate to the
situation at hand, namely, Corporation Bank'~.-·saraswati
Abharansala & Anr.!91 That was case where rate of Sales 'F
Tax was reduced from 1% to 0.5% vide SRO No. 1075/99
dated 27.12.1999, which was given retrospective effect
from 1.4.1999. The respondent in that cas13, who had paid
the sales tax @ 1% for the period 6.4.1999 to 10.1.2.1999, G
' -claimed refund of the excess tax paid, i.e. o~r and above
0.5%. This request was rejected by the Assistant

1 g (2009) 1 sec 540. ·H
512 SUPREME COURT REPORTS [2015] 4 S.C.R.

A Commissioner, Sales Tax. The assessee filed the writ
petition challenging the order of the Assistant
Commissioner, which was dismissed by the Single Judge
of the High Court. However, the assessee's intra-court
B appeal was allowed by the Division Bench directing the
authorities to refund the excess amount collected. The said
decisi9n of the Division Bench was upheld by this Court in
the aforesaid judgment holding that non-refund would not
only offend equality clause contained in Article 14 of the
C Constitution, it would also be in the teeth of Article 265 of
the Constitution which mandates that no tax shall be levied
or collected, except by authority of law. Following
passages from the said judgment are worth a quote:
D "20. Article 265 of the Constitution of India mandates
that no tax shall be levied or collected except by
authority of law.

21. In terms of the said provision, therefore, all acts
E
relating to the imposition of tax providing, inter alia, for
the point at which the tax is to be collected, the rate
of tax as also its recovery must be carried out strictly
in accordance with law.
F
22. If the substantive provision of a statute provides
for refund, the State ordinarily by a subordinate
legislation could not have laid down that the tax paid
even by mistake would not be refunded. If a tax has
G been paid in excess of the tax specified, save and
-except the cases involving the principle of 'unjust
enrichment', excess tax realized must be refunded.
The State, furthermore, is bound to act reasonably
H having regard to the equality clause contained in
VIKRAM CEMENT & ANR. v. STATE OF MADHYA 513
PRADESH & ORS. [A.K. SIKRI, J.]

Article 14 of the Constitution of India. A

23. It is not even a case where the doctrine of unjust
enrichment has any application as it is not the case of
the respondenUSetate that the buyer has passed on
the excess amount of tax collected by it to the B
purchasers.

24. In view of the admitted fact that tax had been
collected and paid for the period 6th April, 1999 and C
10th December, 1999 @ 1% of the price which
having been reduced from 1st April, 1999 to 0.5%, the
State, in our opinion, is bound to refund the excess
amount deposited with it."
D
15. It is possible, as was sought to be argued by the
learned counsel for the State, that while adding this
Explanation the Government had kept in mind the principle
of unjust enrichment. Presumably because of this reason,
the High Court also referred to the judgment in the case of E
Indian Oil Corporation (supra). However, on such a
presumption alone, there cannot be any justification for
adding the Explanation of the nature mentioned above. In
order to determine as to whether a particular dealer is in F
fact entitled to refund or not, the Government can go into the
issue of unjust enrichment while considering his application
for refund. That would depend on the facts of each case. It
cannot be presumed that the burden was positively passed
on to the buyers by these dealers and, therefore, they are G
not entitled to refund.

16. For all the aforesaid reasons, we are of the opinion
that the impugned Explanations in the Notifications dated
H
514 SUPREME COURT REPORTS [2015] 4 S.C.R.

A 4.5.1999 and 5.7.1999 are unconstitutional. We,
accordingly, allow the appeal and quash the said
Explanations.

No costs.
B
Kalpana K. Tripathy Appeal allowed.