Court orders 12-18% interest on delayed tax refunds, sets one-month deadline for payment.

Escotel Mobile Communication Ltd. Versus State of Haryana and another

Escotel Mobile Communication Ltd. Versus State of Haryana and another - [2007] 9 VST 382 (P&H) Issues Involved:
1. Right to payment of interest on refund.
2. Validity of the inclusion of 'activation charges' in turnover.
3. Delay in processing and payment of refund.
4. Applicability of penal action under section 10A of the Central Sales Tax Act, 1956.
5. Entitlement to interest on delayed refund under section 43 of the Haryana General Sales Tax Act, 1973, read with relevant rules.

Issue-wise Detailed Analysis:

1. Right to Payment of Interest on Refund:
The primary issue raised by the assessee-petitioner was the right to payment of interest on the refund amount under section 43 of the Haryana General Sales Tax Act, 1973 (the Act) and rules 35 and 38 of the Haryana General Sales Tax Rules, 1975 (the Rules). The court emphasized that under section 43(2) of the Act, the dealer is entitled to interest at the prescribed rate if the refund is delayed. Rule 35(1)(b) mandates a refund within 90 days of the application, failing which interest is payable at the rate specified in section 25(5) of the Act.

2. Validity of the Inclusion of 'Activation Charges' in Turnover:
The Tribunal had set aside the assessment orders, following the Supreme Court's judgment in Bharat Sanchar Nigam Ltd. v. Union of India, which held that activation charges could not be included in the turnover. The Tribunal's view, as cited in the judgment, was that 'activation charges is a service provided by the service providers to the users of handsets' and not includible in the value of the SIM card.

3. Delay in Processing and Payment of Refund:
Despite the Tribunal's order for a refund, the assessee-petitioner experienced delays. The Assessing Authority recalculated the tax liability and determined the refund amount on June 21, 2006, but the refund was not processed promptly. The court noted that the refund for the assessment year 2000-01 was paid on June 29, 2007, and for 2001-02 on May 30, 2007, indicating a significant delay beyond the 90-day period stipulated in rule 35(1)(b).

4. Applicability of Penal Action under Section 10A of the Central Sales Tax Act, 1956:
The respondents argued that the refund was delayed due to pending penal action under section 10A of the 1956 Act. The Deputy Excise and Taxation Commissioner had observed that action under section 10 was pending for both financial years. However, the court found that the penal proceedings for the financial year 2001-02 were dropped on November 2, 2006, and the refund was recommended. The court did not accept the delay justification based on pending penal action.

5. Entitlement to Interest on Delayed Refund:
The court held that the assessee-petitioner was entitled to interest due to the delay in refunding the amount. It cited previous judgments, including Punjab State University Text Book Board v. State of Punjab and Muni Roller Flour Mills Pvt. Ltd. v. State of Haryana, which supported the payment of interest on delayed refunds. The court directed the respondents to pay interest at the rate of 12% per annum for the first month of delay and 18% per annum for subsequent months, as per section 25(5) of the Act.

Conclusion:
The court allowed the writ petition, directing the Excise and Taxation Officer-cum-Assessing Authority, Sonepat, to pay interest to the assessee-petitioner for the delayed refund. The interest was to be calculated at 12% per annum for the first month and 18% per annum for the subsequent months. The needful was to be done within one month from the date of receipt of the certified copy of the order.