State need not refund tax collected by mistake if payer has recovered the amount from others: Madras High Court
The Madras High Court ruled that a recreation club cannot claim a refund for mistakenly paid taxes if the financial burden was already passed on to its members. The court cited the doctrine of unjust enrichment, stating that the state is not obligated to refund money that was effectively collected from the public.
Why it matters
This legal precedent clarifies the limits of tax restitution and protects the state from claims where the taxpayer has already recouped their losses.
A recreation club cannot seek the refund of tax collected from it by the State under a mistaken impression, if the club had already passed on the burden of paying that tax to its members and recovered the money from them, the Madras High Court has ruled.
A Division Bench of Justices R. Anita Sumanth and C. Kumarappan held that the plea of unjust enrichment could not be raised against the State, as the retention of mistakenly collected tax would ultimately be used only for the benefit of the people at large.
The verdict was passed while partly allowing a civil appeal filed by the Madras Club seeking refund of ₹15.51 lakh with interest from the Commissioner of GST and Central Excise. The judges ordered repayment of only ₹6.41 lakh with interest, since the club had recovered the rest of ₹9.09 lakh from its members.
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