1995 (11) TMI 386 - HC - VAT and Sales Tax

Court upholds tax department's refund adjustment due to arrears, dismisses challenge based on notice requirement.

The court upheld the adjustment of the refund amount by the tax department due to arrears for a subsequent year, leading to a reduced refund for the ... - Issues:1. Entitlement to refund under the Kerala General Sales Tax Act, 1963.2. Validity of the order adjusting the refund amount for dues of subsequent years.3. Requirement of notice before issuing an order under section 44(3) of the Act.4. Entitlement to interest on the refund amount.Entitlement to Refund:The petitioner, a jeweler and assessee for sales tax, sought a refund of Rs. 45,634 under section 44(1) of the Kerala General Sales Tax Act, 1963. The appellate authority modified the initial order, leading to the refund claim. However, the department adjusted the refund amount due to arrears for the year 1993-94, issuing an order for a reduced refund of Rs. 17,790. The court held that such adjustment was justified considering the arrears and interim stay orders, concluding that no injustice was done warranting extraordinary jurisdiction under article 226 of the Constitution of India.Validity of Adjustment Order:The petitioner challenged the adjustment order, contending that it should have been issued after providing notice and alleging a violation of natural justice. The court ruled that the order under section 44(3) of the Act did not require prior notice to the assessee. It clarified that the adjustment was lawful, as it was based on the power granted to the assessing authority to offset amounts due against the refundable sum. The court upheld the validity of the adjustment order and dismissed the petitioner's plea to quash it.Requirement of Notice and Natural Justice:The court determined that no statutory provision mandated prior notice before issuing an order under section 44(3) of the Act. It held that the nature of the proceedings did not necessitate notice to the assessee before passing such an order. Therefore, the court found no illegality in the adjustment order issued without prior notice, rejecting the petitioner's argument based on the principles of natural justice.Entitlement to Interest on Refund:Regarding the interest payable on the refund amount, the court acknowledged the appellant's entitlement to interest at 6 per cent from October 30, 1994, to the date of the adjustment order. The court directed the respondents to refund the entire amount of Rs. 45,635 to the appellant promptly, along with 6 per cent interest from August 1, 1995, until the date of payment. The court allowed the appeal on this ground, granting relief to the appellant in terms of interest on the refund amount.In conclusion, the court allowed the appeal, directing the refund of the full amount with interest, while upholding the validity of the adjustment order and rejecting the petitioner's claims regarding notice and natural justice.