Statutory appropriation of tax payments under sales tax law barred re-credit of prior payment toward principal dues.

A petitioner sought refund or re-credit of an amount paid before its registration as a sick unit, contending it should have been adjusted against principal sales tax dues under a settlement scheme. The Gujarat HC noted that the payment was made before registration and that the later settlement had to be computed with reference to outstanding dues as on 31.03.2010. Applying Section 47(4B) of the Gujarat Sales Tax Act, 1969, the Court referred to the statutory appropriation order of interest first, then penalty, and only thereafter tax. As the prior payments had already been adjusted in that manner, the amount could not be treated as excess payment or a pipeline payment towards principal dues. The petitioner was therefore not entitled to refund or re-credit.

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Issues: Whether the petitioner was entitled to refund or credit of the amount of Rs. 79.79 lakhs paid before its registration as a sick unit, on the footing that the amount ought to have been adjusted towards principal sales tax dues under the settlement scheme.

Analysis: The amount was paid before the petitioner was registered as a sick unit under the earlier scheme and, in any event, the later settlement had to be worked out with reference to the outstanding dues as on 31.03.2010. Under Section 47(4B) of the Gujarat Sales Tax Act, 1969, where the payment made is less than the aggregate of tax, penalty and interest, appropriation must first be towards interest, then penalty, and only thereafter towards tax. Since the petitioner's prior payments had already been adjusted in accordance with the statutory scheme, the claim that the amount should be treated as excess payment or as a pipeline payment towards principal dues could not be accepted.

Conclusion: The petitioner was not entitled to refund or re-credit of Rs. 79.79 lakhs.

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