Post-repeal VAT adjustment and GST reimbursement claims cannot be withheld where tax was collected without authority of law.

Once the VAT regime had been repealed and the work was executed in the GST period, there was no legal basis to continue deducting VAT from running bills or to withhold GST reimbursement under the agreement. The contractor was liable for GST, and adjustment of VAT against the final bill, including TDS deduction from GST payable, was unjustified. Money remitted to VAT authorities for work done after GST came into force could not be retained merely because the refund request was filed beyond the limitation period under the repealed Act; collection without authority of law could be corrected in writ jurisdiction. The petitioner succeeded, and refund processing was directed.

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Issues: (i) Whether the respondents were justified in adjusting and deducting VAT from the bills and denying reimbursement of GST payable under the agreement executed after the repeal of the VAT regime; (ii) whether the amount remitted as VAT after the introduction of GST could be withheld on the ground of limitation and whether the refund application ought to be processed.

Issue (i): Whether the respondents were justified in adjusting and deducting VAT from the bills and denying reimbursement of GST payable under the agreement executed after the repeal of the VAT regime

Analysis: The work was executed after GST came into force and after the Telangana VAT Act, 2005 stood repealed. Once the earlier VAT regime ceased to operate, there was no legal basis to continue adding and deducting VAT from the running bills. The contractor was liable to discharge GST, and the contractual arrangement for additional tax payment could not be enforced through a repealed levy. The respondents' attempt to adjust the VAT amount and deduct TDS from the GST payable was found to be unjustified.

Conclusion: The issue is answered in favour of the petitioner. The respondents were not justified in deducting VAT or withholding GST reimbursement from the final bill.

Issue (ii): Whether the amount remitted as VAT after the introduction of GST could be withheld on the ground of limitation and whether the refund application ought to be processed

Analysis: The amount remitted to the VAT authorities did not retain the character of tax under the repealed VAT regime, since the remittance related to work executed in the GST period. Collection and retention of such amount without authority of law could not be sustained merely because the refund application was filed beyond the period prescribed under the repealed Act. A refund of money collected without authority of law could be directed in writ jurisdiction, and the statutory limitation under the repealed regime was held inapplicable to defeat that relief.

Conclusion: The issue is answered in favour of the petitioner. The refund application was directed to be processed and the limitation objection was rejected.

Final Conclusion: The writ petition was allowed, GST reimbursement was directed without VAT adjustment or improper TDS deduction, and the refund machinery was set in motion for the amount wrongly remitted under the repealed VAT regime.

Ratio Decidendi: A levy or collection made after repeal of the governing tax statute, and retained without authority of law, cannot be sustained on the basis of contractual accounting or a limitation period under the repealed enactment, and refund of such amount can be directed in writ jurisdiction.

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