Thiru Manickam & Co. v. The State of Tamil Nadu — AIR 1977 SC 518

Issues

• Is the appellant entitled to a refund of State sales tax on yarn later sold inter-State and taxed under the CST Act?
• Does “refunded” in Section 15(b) CST require payment back to the original taxpayer, or may the State decide who receives it?

Rules

1. Ambiguous statutory words are read in their context to reveal the legislature’s intended sense and purpose.
2. An amendment that clarifies meaning need not be retrospective to confirm original intent.
3. For declared goods, Section 15(b) CST limits State tax and provides for refund when the same goods are taxed on inter-State sale.

Arguments

Judgment

The Supreme Court ruled for the appellant. The dealer who paid CST on inter-State sales of the same declared goods is entitled to refund of State tax earlier collected on those goods. The term “refunded” in Section 15(b) CST does not compel repayment to the original taxpayer; the State legislature/rules may identify the eligible recipient—here, the inter-State seller.

• The Court read “refunded” in light of the statute’s purpose for declared goods.
• The 1972 amendment clarified that reimbursement goes to the person making inter-State sales; not retrospective, yet it reflected the original intent.

Ratio

Statutory words take their contextual meaning. For declared goods under s.15(b) CST, refund of State tax should reach the inter-State seller taxed under the Central Act, as designated by State law/rules.

Why It Matters

• Prevents double tax burden on declared goods.
• Guides refund routing where the original State-tax payer differs from the CST-taxed dealer.
• Shows how clarificatory amendments confirm original legislative intent.

Key Takeaways

• “Refunded” in s.15(b) CST is purpose-driven; not tied to the original taxpayer.
• State rules may name the inter-State seller as refund recipient.
• Declared goods enjoy special safeguards to avoid cascading tax.
• Clarificatory amendments can resolve earlier ambiguity without being retrospective.

Mnemonic + 3-Step Hook

Mnemonic: “CST Sells? State Refunds.”

1. Spot declared goods + CST on inter-State sale.
2. Search State rules naming the refund recipient.
3. Seek reimbursement of prior State tax paid on the same goods.

IRAC Outline

Issue: Whether the appellant dealer can receive refund of State tax on yarn later taxed under CST for inter-State sales; who is the proper recipient of “refund”.

Rule: Section 15(b) CST (declared goods) + State Act/Rules; ambiguous terms read by context and purpose; clarificatory amendments show original intent.

Application: The State rules designate the CST-taxed inter-State seller as recipient; “refunded” is not confined to the original taxpayer.

Conclusion: Appellant entitled to refund; appeal allowed.

Glossary

Declared Goods

Goods of special importance under the CST Act; enjoy tax safeguards.

Section 15(b) CST

Limits State taxation and provides for refund when the same goods bear CST on inter-State sale.

Clarificatory Amendment

An amendment explaining the original meaning; not necessarily retrospective.

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