18. Since they had collected the purchase tax, they were required to deposit the same in the government exchequer and there could be no justification for them to retain the purchase tax and appropriate the same to their own use. Retention of such purchase tax collected by the appellant amounts to unjust enrichment which is not permissible in view of the law laid down by the Constitution Bench of this Court in the case of Mafatlal Industries Ltd. and Others Vs. Union of India And Ors., reported in (1997) 5 SCC 536. This Court in the said case held as under:-
“254…………..The Excise Officer cannot tax more than what is permitted by the statute. If the levy is in excess of the statute, then its retention by the State is unauthorised by law. What is being retained is not in enforcement of the charging section but something else. Such illegally collected tax is not the property of the State and is not within the disposing power of the State…………..”
19. In Sahakari Khand Udyog Mandal Ltd. v. CCE & Customs, reported at (2005) 3 SCC 738, this Court (at page 748) elaborated upon the aspect of unjust enrichment thus:
“31. Stated simply, “unjust enrichment” means retention of a benefit by a person that is unjust or inequitable. “Unjust enrichment” occurs when a person retains money or benefits which in justice, equity and good conscience, belong to someone else.32. The doctrine of “unjust enrichment”, therefore, is that no person can be allowed to enrich inequitably at the expense of another. A right of recovery under the doctrine of “unjust enrichment” arises where retention of a benefit is considered contrary to justice or against equity….34. In the leading case of Fibrosa v. Fairbairn, Lord Wright stated the principle thus: (All ER p.135 H) “[A]ny civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is, to prevent a man from retaining the money of, or some benefit derived from, another which it is against conscience that he should keep. Such remedies in English law are generically different from remedies in contract or in tort, and are now recognised to fall within a third category of the common law which has been called quasicontract or restitution.”
The above principle has been accepted in India. This Court in several cases has applied the doctrine of unjust enrichment.
20. In Orient Paper Mills Ltd. v. State of Orissa & Ors., reported at AIR 1961 SC 1438, this Court did not grant refund to a dealer since he had already passed on the burden to the purchaser. It was observed that it was open to the legislature to make a provision that an amount of illegal tax paid by the persons could be claimed only by them and not by the dealer and such restriction on the right of the dealer to obtain refund could lawfully be imposed in the interests of general public.
21. The law laid down in Orient Paper Mills Ltd. (supra) was quoted with approval by this Court in Mafatlal Industries Ltd. (supra), and the relevant portion of the said judgment has been quoted hereinabove.
22. A reference may also be made to a decision of the Constitution Bench in Godfrey Phillips India Ltd. & Anr. v. State of U.P & Ors. reported at (2005) 2 SCC 515. In that case, the constitutional validity of the Uttar Pradesh Tax on Luxuries Act, 1995 as also other State Acts has challenged inter alia on the ground of legislative competence of the State Legislatures. The Court allowed the petition and held that the State Legislatures were not competent to impose luxury tax on tobacco and tobacco products and the Acts were declared ultra vires and unconstitutional. In the intervening period, however, tax was collected by the appellants from consumers and also paid to the State Governments. In certain cases, interim relief was obtained by the appellants from this Court against recovery of tax and as alleged by the State Governments, the appellants continued to charge tax from consumers/customers. The Court held:
It was stated on behalf of the State Governments that after obtaining interim orders from this Court against recovery of luxury tax, the appellants continued to charge such tax from consumers/customers. It is alleged that they did not pay such tax to respective State Governments. It was, therefore, submitted that if the appellants are allowed to retain the amounts collected by them towards luxury tax from consumers, it would amount to ‘unjust enrichment’ by them. In our opinion, the submission is well founded and deserves to be upheld. If the appellants have collected any amount towards luxury tax from consumers/customers after obtaining interim orders from this Court, they will pay the said amounts to the respective State Governments.”
23. The learned counsel appearing for the appellants would not dispute the position that the payment made to them by DFSC also included the element of purchase tax. That being the position and they having collected the purchase tax on paddy from the buyer, the same has to go to the government exchequer. If however, such tax was found to be legally not payable after its collection from the purchaser, it either has to go back to the purchaser from whom it was collected or has to be surrendered to the State exchequer and a dealer cannot retain it as otherwise the same will amount to unjust enrichment which is legally impermissible.
24. In the present case, since the aforesaid purchase tax was collected by the appellants, the same is now required to be paid back to the State exchequer in terms of the orders.