2017 (4) TMI 1438 - HC - VAT and Sales Tax

Court overturns tax assessment, orders prompt refund to prevent abuse of power and ensure fairness.

The High Court set aside a notice of default assessment of tax and interest under Section 32 of the DVAT Act, deeming it an abuse of statutory powers ... Default assessment of tax and interest u/s 32 of the Delhi VAT Act, 2004 - demand with a view to somehow delaying or defeating the refund claim which has been pending since 5th April, 2014 - HELD THAT:- The refund due to the Petitioner to the extent it has already been ordered together with interest due thereon will be credited to the Petitioner’s account on or before 15th May, 2017. The remaining refund amount that may have been denied as a result of the above Notice of default assessment of tax and interest dated 18th April, 2017 which has now been set aside by this order will also be paid to the Petitioner together with interest due thereon within four weeks from today. Petition disposed off. Issues:1. Validity of the default assessment of tax and interest under Section 32 of the DVAT Act.2. Abuse of statutory powers by the Department in delaying or defeating the refund claim.3. Setting aside the notice of default assessment and ensuring timely refund to the Petitioner.4. Remedies available to the Petitioner in case of non-compliance with the court's directions.Analysis:1. The High Court addressed the issue of the validity of a notice of default assessment of tax and interest under Section 32 of the DVAT Act issued by the VATO of Ward No. 71. The notice pertained to alleged mismatches in 2A/2B for a specific month. The Court found that the demand created through this notice was an attempt to delay or defeat the refund claim pending since a previous date. The Court deemed this action as an abuse of statutory powers and set aside the notice of default assessment.2. The Court emphasized that the pendency of a refund claim should not allow the Department to reopen assessments long after the refund claim became due. Citing precedents like Prime Papers & Packers v. Commissioner of VAT, the Court condemned such actions as a misuse of statutory powers under the DVAT Act. The judgment aimed to prevent such abuse and ensure fairness in dealing with refund claims and assessments.3. In light of setting aside the notice of default assessment, the Court directed the Department to credit the refund due to the Petitioner, along with any interest, to the Petitioner's account by a specified date. Additionally, any remaining refund amount that may have been denied due to the now-overturned notice was also ordered to be paid to the Petitioner promptly. The Court's decision aimed to rectify the unjust delay caused by the improper default assessment notice.4. The judgment concluded by granting the Petitioner the right to seek appropriate legal remedies in case of non-compliance with the Court's directives. This provision ensured that the Petitioner had recourse in case the Department failed to adhere to the Court's orders regarding the refund and related matters. Overall, the Court's decision sought to uphold the principles of fairness and prevent abuse of legal processes in matters concerning tax assessments and refunds under the DVAT Act.