2021 (9) TMI 1153 - HC - VAT and Sales Tax

Court rules adjustment of refund against interest without notice not permissible. Refund should not be unilaterally recovered.

M/s. Birla Tyres Versus Commissioner of Sales Tax CT and GST, Odisha and another

The Court held that the adjustment of the refundable amount under the CST Act against the interest payable under the OET Act without notice to the ... Validity of adjustment of refundable amount against an admitted liability payable by the Petitioner towards interest levied - Orissa Entry Tax Act (OET Act) - exercising powers both under the CST Act as well as the OET Act - HELD THAT:- While it may be correct that it is the same person who exercises powers under both the Acts, but the functions performed as an Assessing Officer under the CST Act is distinguishable from the functions performed under the OET Act. Theoretically, it is possible that two different persons could be exercising these functions under the respective enactments. That by itself does not permit, in the absence of any express provision under the CST Act or corresponding provisions under the OET Act to permit the refund payable under the one Act to be adjusted against the liability under the other Act. Secondly, as rightly pointed out this cannot be treated as “garnishee proceedings” unless there is an express provision under the statute that permits this kind of an adjustment. The Court would like to clarify that it should not be understood as holding that the Petitioner does not owe the Department ₹ 79,44,056/- as admitted by it towards interest under the OET Act for the period from 1st April, 2009 to 31st May, 2017. At the same time, as clarified by Mr. Mishra, the Department also does not question that ₹ 65,34,213/- is payable as refund to the Petitioner under the CST Act as a result of the order of the ACST (Appeal), Balasore - it is an admitted position that the above adjustment was sought to be done unilaterally without any notice whatsoever to the Petitioner. Even on that ground the office order dated 16th July, 2020 is unsustainable in the eye of law. The Court sets aside the office order dated 16th July, 2020 but clarifies that it would be open to the department to proceed to recover the sum of ₹ 79,44,056/- admitted by the Petitioner to be payable towards interest under the OET Act, in accordance with law - the refund of the excess CST amount as already determined will now be made to the Petitioner not later than four weeks from today - petition allowed. Issues:Adjustment of refundable amount under CST Act against interest payable under OET Act without notice to the Petitioner.Analysis:The petitioner, a unit of Kesoram Industries, challenged the Deputy Commissioner of Sales Tax's action in adjusting the refundable amount of Rs. 65,34,213 owed to the petitioner under the CST Act against an admitted liability of Rs. 79,44,056 payable towards interest under the Orissa Entry Tax Act (OET Act). The petitioner contended that such adjustment was without jurisdiction and unilateral, emphasizing the lack of provision permitting such action under the OET Act. The Department justified the adjustment under Section 11(2) of the OET Act, claiming it as permissible. However, the Court noted that the refundable amount under the CST Act should not be unilaterally recovered without notice, distinguishing between a 'charge' and direct recovery.The Court clarified that while the petitioner admitted the liability towards interest under the OET Act, the refund under the CST Act was not meant for unilateral adjustment against the OET Act liability. The Court highlighted the distinction between the functions performed under the CST Act and the OET Act, emphasizing the need for express provisions permitting such adjustments. The Court set aside the office order of adjustment dated 16th July, 2020, stating that recovery of the admitted amount towards interest under the OET Act should proceed lawfully.The Court acknowledged the petitioner's entitlement to the refund of the excess CST amount determined, directing its payment within four weeks. The writ petition was allowed without costs, and an urgent certified copy of the order was to be issued.