2016 (6) TMI 1062 - HC - VAT and Sales Tax

Court rules on OVAT Act violation, directs personal hearing for refund delay, decision within 2 weeks

M/s. Hindalco Industries Ltd. Versus The Deputy Commissioner of Sales Tax & Another

M/s. Hindalco Industries Ltd. Versus The Deputy Commissioner of Sales Tax & Another - TMI Issues Involved:1. Compliance with OVAT Act provisions by the opposite parties.2. Entitlement of the petitioner to the reliefs asked for.Issue-wise Detailed Analysis:1. Compliance with OVAT Act provisions by the opposite parties:The petitioner, a registered dealer under the OVAT and CST Acts, challenged the arbitrary action of the opposite parties in not granting a refund of tax demand arising from the first appellate order. The petitioner was assessed by the Assistant Commissioner of Sales Tax, who made an assessment without providing sufficient opportunity to produce necessary forms, resulting in a demand of Rs. 3,74,26,551/-. The petitioner appealed, and the First Appellate Authority reduced the demand to Rs. 99,851/-. Despite this reduction, the opposite party No.1 did not refund the excess tax paid by the petitioner. Instead, a notice was issued under Section 60 of the OVAT Act, proposing to withhold the refund due to a pending Second Appeal by the Revenue.Section 57(1) of the OVAT Act mandates that the assessing authority must refund excess tax within sixty days of the order giving rise to such refund. However, Section 60 allows the Commissioner to withhold the refund if it is likely to adversely affect the revenue and may not be recoverable later. The notice issued to the petitioner proposed withholding the refund on the grounds of the pending appeal but did not record the Commissioner’s opinion as required by Section 60. The court referenced previous judgments emphasizing the need for reasons in administrative decisions to ensure fairness and prevent arbitrariness.The court found that while the notice proposed withholding the refund, no final decision had been made, and thus, natural justice had not been violated. The notice was considered a stage before a final decision under Section 60, indicating that the provisions of the OVAT Act had not been fully complied with yet.2. Entitlement of the petitioner to the reliefs asked for:The petitioner sought a direction for the refund of tax with statutory interest and the quashing of the notice dated 7.11.2015. The court noted that since no final order to withhold the refund had been passed, it was premature to quash the notice. The court directed the petitioner to attend a personal hearing before the Commissioner of Sales Tax and instructed the opposite party No.2 to pass an order within two weeks from the hearing date, either to withhold the refund or to make the payment according to law.Conclusion:The court concluded that Section 57 of the OVAT Act had been violated due to the delay in refunding the tax, but the violation of Section 60 was yet to be determined. The court directed the petitioner to attend a personal hearing and for the opposite party No.2 to make a decision on the refund within two weeks from the hearing date. The writ petition was disposed of accordingly.