2019 (8) TMI 573 - HC - VAT and Sales Tax

Court orders refund of Rs. 6,26,56,549 under DVAT Act, imposes deadline and penalty

The Court ruled in favor of the Petitioner, a joint venture group seeking a refund of Rs. 6,26,56,549/- for the fourth quarter of 2013-2014 under the DVAT ... Refund claim - Section 11 (2) (b) of the DVAT Act - refund claim enhanced - case of the Petitioner is that at the time when the return for the fourth quarter of 2013-2014 was filed no proceedings were pending since no notice either under Sections 58 or 59 of the DVAT Act were issued to the Petitioners within the time period specified under the DVAT Act - extended period of limitation - penalty - HELD THAT:- Under Section 38 (3) (a) (ii) the refund has to be processed within two months from the date of filing of the return if the claim is made in the return. In terms of Section 38 (4) if a notice of audit, investigation or inquiry has been issued under Sections 58 and 59 of the DVAT Act, then the amount shall be carried forward to the next tax period. In the Petitioner’s case when the return for the fourth quarter 2013-2014 was filed claiming the above refund amount, no such proceedings were pending. There was no notice either under Section 58 and 59 of the DVAT Act had been issued to the Petitioner within two months from the date of filing of such return claiming the refund. This was true even of the revised return filed in January, 2015. Consequently, the Respondent did not pass any order under Section 38 (4) carrying forward the refund amount. Resultantly, as far as the fourth quarter of 2013-2014 is concerned, the two-month period under Section 38 (3) (a) (ii) of the Act mandatorily applied. The Respondent was under a statutory obligation to grant refund to the Petitioner within that time period. The Court agrees with learned counsel for the Petitioner therefore that in the present case there is breach of Section 38 of the DVAT Act - the argument of the counsel for the Respondent is that on account of the pendency before the OHA of the proceedings pertaining to the demand for 2010-2011 the refund claim for the fourth quarter of 2013-2014 cannot be processed, is not a legally acceptable proposition. The proceedings contemplated under Section 38(4) were that pending prior to the expiry of the two month period within which the refund had to be granted. Where a demand is sought to be created much later than the two-month period, that cannot come in the way of the refund being granted. A direction is issued to the Respondent to issue the order granting refund to the Petitioner for the fourth quarter of 2013-14 as climed together with interest due and ensuring that the refund amount together with interest is credited to the account of the Petitioner on or before 31st August, 2019 - failure to make the payment of refund together with interest on or before 31st August, 2019 will make Respondent liable to pay to the Petitioner costs of ₹ 50,000/- - Petition disposed off. Issues Involved:1. Refund of Rs. 6,26,56,549/- for the fourth quarter of 2013-2014.2. Validity of default assessment notices and demands for tax, interest, and penalties.3. Applicability of Section 38 of the DVAT Act regarding the refund process.4. Entitlement to interest on the delayed refund.Detailed Analysis:1. Refund of Rs. 6,26,56,549/- for the fourth quarter of 2013-2014:The Petitioner, a joint venture group registered under the DVAT Act since 2007, sought a refund of Rs. 6,26,56,549/- for the fourth quarter of 2013-2014. The refund claim was initially filed on 9th May 2014 and revised on 2nd January 2015 due to the adoption of Accounting Standard-7 applicable to Engineering Construction Contracts (ECC).2. Validity of default assessment notices and demands for tax, interest, and penalties:The Value Added Tax Officer (VATO) issued notices of default assessment of tax, interest, and penalty under Sections 32 and 33 of the DVAT Act for the years 2010-2011 and 2013-2014. These notices led to demands totaling Rs. 20,12,98,460/-. The Petitioner filed objections against these notices, which stayed the demand until resolution by the Objection Hearing Authority (OHA).3. Applicability of Section 38 of the DVAT Act regarding the refund process:The Petitioner argued that the non-grant of the refund violated Section 38 of the DVAT Act, which mandates a refund within two months if no audit or inquiry notice is issued. The Petitioner contended that no such notices were issued within the specified period, making the two-month refund period mandatory. The Court agreed, stating that the Respondent was under a statutory obligation to grant the refund within the stipulated time.4. Entitlement to interest on the delayed refund:The Petitioner claimed entitlement to interest on the delayed refund under Section 42(1) of the DVAT Act. The Court acknowledged this claim, directing the Respondent to calculate and pay interest up to the date of payment or 31st August 2019, whichever is later.Conclusion:The Court found no legal impediment to the Petitioner’s refund claim for the fourth quarter of 2013-2014. The Respondent's argument that pending demands for earlier periods could delay the refund was rejected. The Court directed the Respondent to process the refund with interest by 31st August 2019, failing which a cost of Rs. 50,000/- would be imposed. The writ petition was disposed of accordingly.