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

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 Petitioner was not permissible. It emphasized the need for express provisions allowing such adjustments and ruled that the refund under the CST Act should not be unilaterally recovered without notice. The Court set aside the office order of adjustment and directed the lawful recovery of the admitted amount towards interest under the OET Act. The petitioner was granted entitlement to the refund of the excess CST amount determined, to be paid within four weeks.

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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.

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