2015 (4) TMI 1124 - HC - VAT and Sales Tax

Court orders prompt refund processing for input tax rebate, rejecting unjust enrichment argument.

The court ruled in favor of the petitioners, directing the first respondent to process the refund applications for input tax rebate promptly. The court ... Refund - Claim of exemption / rebate - sunflower cake and rice bran used as input in the extraction of sunflower oil/bran oil - refund was sought being eligible input rebate for the said period which had not been claimed in the original returns filed - Held that:- Infact the Division Bench has clearly held in M/s.M.K.Agro Tech (Private) Limited [2015 (1) TMI 854 - KARNATAKA HIGH COURT] to the effect that where a dealer is in the business of manufacture of only one product namely oil which is liable to tax and merely because in the process of manufacture of oil certain ancillary or by-product arises which is sold and which is exempted from tax, that would not attract the provisions of Section 17 of the Act relating to partial rebate. Petitioners would be entitled for the relief sought for in the present writ petitions. - Decided in favor of appellant. Issues:Refund of input tax rebate claimed by petitioners for specific tax periods under Karnataka Value Added Tax Act, 2003.Analysis:The petitioners sought a refund of input tax rebate totaling Rs. 81,31,623 and Rs. 77,02,584 for the tax periods of February to July, 2014, based on their claim that sunflower cake and rice bran were used as inputs in the extraction and sale of sunflower oil and solvent bran oil, respectively. However, a Division Bench judgment in a related case held that certain ancillary or by-products exempted from tax would not qualify for partial rebate under section 17 of the Act. Consequently, the petitioners filed revised returns claiming full input tax rebate. The respondents withheld processing the refund applications pending a Special Leave Petition challenging the Division Bench judgment. The petitioners argued that under section 10(3) of the Act, they were entitled to a refund of excess input tax paid, as the statute mandates such refunds without delay if the input tax deductible exceeds the output tax payable.The respondents, represented by the High Court Government Pleader, contended that the Doctrine of Unjust Enrichment applied, and the petitioners were not entitled to a refund of input tax. However, the petitioners countered that section 10(5) of the Act explicitly provided for the refund of excess input tax paid by a dealer, and therefore, the Doctrine of Unjust Enrichment was not applicable. The court noted that the statute's language was clear and unambiguous, emphasizing that where the input tax deductible exceeds the output tax payable, the excess amount must be refunded to the dealer along with interest, as per the provisions of section 10(5).The court further highlighted that the delay in processing the refund applications was not due to the contentions raised by the respondents but rather because of the proposed Special Leave Petition challenging the Division Bench judgment. Referring to the Division Bench ruling, the court emphasized that the denial of input tax deduction based on the sale of exempted goods was incorrect and that the legislative intent was being defeated by such interpretation. Consequently, the court allowed the writ petitions, directing the first respondent to process the refund applications and refund the claimed amounts to the petitioners promptly, subject to the outcome of the Special Leave Petition challenging the Division Bench judgment. Additionally, the court allowed the respondents to obtain an Indemnity Bond from the petitioners before issuing refunds, ensuring compliance with the refund process within a specified timeframe.