2019 (4) TMI 1916 - SC - VAT and Sales Tax

High Court rules on deposit refund under KGSTA, clarifies adjustment against future tax liabilities

The court directed that the amount deposited by the applicant would remain with the Department until the High Court's decision. Upon favorable ... Refund of amount deposited by the applicant alongwith Interest - Section 44(4) of the Kerala General Sales Tax Act, 1963 - HELD THAT:- It is not in dispute that the remanded proceedings have now attained finality and decided in favour of the applicant. As a result of which, the amount deposited by the applicant was required to be returned to the applicant. The Department has provided refund of the principal amount along with interest from 10-8-2017 @ 10% in terms of Section 44(4) of the Kerala General Sales Tax Act, 1963. On bare reading of the order dated 27-1-2009, the applicant was directed to pay the amount equivalent to tax payable but that was to be treated as “deposit” with the Department and not payment (of tax dues). The expression used ‘will be treated as deposit not payment’; is quite significant. That position is restated in the final order passed by this Court on 28-4-2011 - The stand of the Department that the refund process ought to be governed by the provisions of the KGSTA, in our opinion, is inapposite. The amount deposited by the applicant was not towards tax dues as such, but to be treated as “deposit” in terms of order of the Court. That deposit would continue to remain with the Department until the final decision of the High Court and to abide by such orders as may be passed by this Court regarding its refund alongwith interest or otherwise, in terms of the final judgment of this Court dated 28-4-2011. Application allowed. Issues:1. Direction for amount deposited by the applicant.2. Refund of deposited amount along with interest.3. Applicability of interest rate on the deposited amount.4. Interpretation of the order regarding the nature of the deposit.5. Dispute over the refund process governed by the KGSTA.Analysis:1. The appellant filed an application seeking directions regarding the amount deposited as per the court's order. The court reiterated that the deposited amount shall remain with the Department as a deposit until the matter is decided by the High Court, granting liberty to parties to seek appropriate orders if necessary.2. The remanded proceedings were decided in favor of the applicant, necessitating the return of the deposited amount. The Department refunded the principal amount with interest as per Section 44(4) of the KGSTA. However, the applicant claimed interest at 9% from the date of deposit until the refund by the Department.3. The court observed that the order specified the amount to be treated as a deposit, not payment of tax dues. The applicant contended that the refund process should not be governed by the KGSTA, as the deposit was made based on the court's order and was not towards tax dues. The court emphasized that the deposit would remain with the Department until the final decision of the High Court.4. Considering the nature of the deposit and the court's orders, the application was allowed, directing the adjustment of the remaining interest against the applicant's future tax liabilities under the Kerala Value Added Tax Act, 2003. The court clarified that the net interest due and payable would be adjusted accordingly.5. Ultimately, the court allowed the application in terms of the prayer clause, settling the dispute over the interest rate and the nature of the deposit. The court's decision ensured that the deposited amount would be adjusted against the applicant's future tax liabilities, in line with the final judgment and orders passed in the case.