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Assessee Entitled To Tax Refund On Subsequent Reduction Of Sale Price On Price Variation

The Supreme Court has clarified in M/s. Universal Cylinders Limited vs The Commercial Taxes Officer, that a sales tax assessee is entitled to get the refund of excess tax paid on provisional sale price if the price gets reduced subsequently on price variation. The judgment authored by Justice Deepak Gupta, on sharing bench with Justice Madan.B Lokur, was delivered in an appeal from the Rajasthan High Court.

The appellant was a manufacturer and supplier of LPG Cylinders to Government-owned companies like IOCL, BPCL etc. The prices for LPG cylinders are fixed by the Ministry of Petroleum and Natural Gas as per its pricing policy. The prices are fixed for a period at a later point of time.
Pending the finalization of prices for the period 2000-01, the appellant supplied cylinders to IOCL at a provisional rate of Rs.682/- per cylinder. Sales tax on this price was collected by the appellant and remitted to the Department. Later, the Ministry finalized the price for the period as Rs.645/- per cylinder, which is lesser than the provisional price fixed in the agreement between appellant and IOCL.

Therefore, oil company deducted/adjusted the excess payment of Rs.37/  and proportionate sales tax thereon from the payments due to the appellant. Thereafter, the appellant approached the department for refund of excess tax paid on the provisional price of Rs.682/- per cylinder. The Department rejected refund on the ground that there is no provision under the Act for reducing or refunding the amount of tax once the amount of tax has been paid. It was also observed that the arrangement of the assessee with the oil companies was in the nature of a private agreement and the sales tax department had nothing to do with this. The High Court also confirmed the rejection order, resulting in the matter coming before the Supreme Court.

Article referred: http://www.livelaw.in/assessee-entitled-tax-refund-subsequent-reduction-sale-price-price-variation-holds-sc-read-judgment/

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