2022 (4) TMI 1250 - HC - VAT and Sales Tax

High Court allows revisions, directs refund of pre-deposit amounts, prevents unjust enrichment

M/s. Ultratech Nathdwara Cement Limited, Versus The Assistant Commissioner, Commercial Tax Department, Special Circle, Pali, The Appellate Authority-II, Commercial Taxes Department, Jodhpur, The Commercial Taxes Officer, Anti Evasion, Anti Evasion Rajasthan Circle-Ii, Jodhpur

The High Court allowed the revisions, setting aside the Tax Board's order that rejected refund applications for pre-deposit amounts. The Court directed ... Rejection of application for refund of mandatory statutory obligation pre-deposit with interest - Excess amount then as accepted in the Resolution plant during CIRP proceedings under IBC - Section 82 (3) of the Rajasthan Value Added Tax Act, 2003 - HELD THAT:- Section 82(3) of the Act of 2003 imposes a mandatory statutory obligation of making a pre-deposit for entertaining an appeal. In appeals against ex parte assessment orders, the mandatory statutory pre-deposit would be 5% of the Value Added Tax and 10% of the Value Added Tax amount in other cases. As per Section 53 (4) of the Act of 2003, where refund of any amount becomes due to a dealer, he shall be entitled to receive simple interest at such rate as may be notified by the State Government - The Act of 2003 has further been supplemented by the Rajasthan Value Added Tax Rules, 2006 (the Rules of 2006). Rule 27 of the Rules of 2006 also deals with refund of excess tax/penalty/interest/other sum due, as a result of an assessment made or in pursuance of an order passed by any competent officer, authority or court. Once the tax liability raised by the Department had been fixed by effect of acceptance of Resolution Plan, manifestly, the Department could not hold on to any payment made by the assessee in excess of what has been approved under the Resolution Plan, i.e. ₹ 61.05 crores. The reasoning given by the Tax Board in the impugned orders that the amount deposited by the assessee by way of statutory pre-deposit was not a part of the Resolution Plan is absolutely without foundation for the simple reason that this amount was a proportion of the tax liability fixed on the assessee and once the total tax liability has been quantified by the NCLAT, any amount paid by the assessee over and above such amount would have to be reimbursed as per Section 53 (3) (3A) of the Act of 2003 read with Rule 27 of the Rules of 2006. In the case of STATE OF GUJARAT VERSUS ESSAR STEEL LTD [2016 (5) TMI 221 - GUJARAT HIGH COURT], Hon’ble Gujarat High Court directed refund of pre-deposit on acceptance of the appeals and decided the issue in favour of the assessee. In the present case, though the appeals have not been accepted, but an analogous situation has been created with acceptance of the Resolution Plan and extinguishment of all debts/liabilities of the sick unit towards the statutory creditor, i.e. the State Government/Commercial Taxes Department. The consolidated impugned order dated 28.12.2020 passed by the Rajasthan Tax Board, Ajmer in the appeals filed by the petitioner is set aside to the extent the applications filed by the petitioner for refund of pre-deposit amounts with interest were rejected - revision allowed. Issues Involved:1. Excessive exercise of jurisdiction by the Rajasthan Tax Board.2. Wrongful rejection of refund of pre-deposit amounts by the Rajasthan Tax Board.3. Legal implications of the approved Resolution Plan on pre-existing tax liabilities.4. Entitlement to refund of mandatory statutory pre-deposit amounts.Issue-wise Detailed Analysis:1. Excessive Exercise of Jurisdiction by the Rajasthan Tax Board:The petitioner, M/s. UltraTech Nathdwara Cement Limited, challenged the Rajasthan Tax Board's order dated 28.12.2020, which rejected their applications for a refund of mandatory statutory pre-deposit with interest. The petitioner argued that the Board ignored the NCLAT's order dated 14.11.2018, the Supreme Court's orders dated 26.07.2019, 19.05.2020, and 24.01.2020, and the judgment dated 07.04.2020 of the Division Bench of Rajasthan High Court. The petitioner claimed that these orders and the resolution plan should have been adhered to, as they extinguished all liabilities beyond Rs. 61.05 crores, making the pre-deposit refundable.2. Wrongful Rejection of Refund of Pre-deposit Amounts by the Rajasthan Tax Board:The petitioner contended that the Tax Board's decision to reject the refund of pre-deposit amounts was materially irregular. The Board held that the maximum amount recoverable from the petitioner was Rs. 61.05 crores, yet it denied the refund of pre-deposit amounts exceeding this sum. The petitioner argued that retaining these amounts would result in unjust enrichment of the Department, contrary to the principles established by the Supreme Court in various judgments.3. Legal Implications of the Approved Resolution Plan on Pre-existing Tax Liabilities:The petitioner stepped into the shoes of M/s. Binani Cement Ltd. after their Resolution Plan was approved by the NCLAT. The Commercial Taxes Department had claimed Rs. 479,73,13,819/- towards VAT, but the NCLAT admitted only Rs. 61.05 crores. The Supreme Court upheld this decision, fixing the petitioner's liability at Rs. 61.05 crores. Consequently, any demand or retention of amounts beyond this sum was deemed invalid. The High Court emphasized that the acceptance of the Resolution Plan extinguished all liabilities exceeding Rs. 61.05 crores, and the Department could not claim or retain any amount beyond this.4. Entitlement to Refund of Mandatory Statutory Pre-deposit Amounts:The High Court concluded that the Tax Board's reasoning—that the pre-deposit amounts were not part of the Resolution Plan—was unfounded. The pre-deposit was a proportion of the VAT liability, and once the total liability was fixed by the NCLAT, any excess amount had to be refunded. The High Court referred to Section 53(3) and (3A) of the Rajasthan Value Added Tax Act, 2003, and Rule 27 of the Rajasthan Value Added Tax Rules, 2006, which mandate the refund of excess amounts. The court also drew an analogy from its earlier judgment dated 07.04.2020, which quashed demands made by the GST Department for periods prior to the acceptance of the Resolution Plan.Conclusion:The High Court allowed the revisions, setting aside the Tax Board's order dated 28.12.2020 to the extent it rejected the refund applications. The court directed that the pre-deposit amounts be reimbursed to the petitioner within three months, with applicable interest. The court's decision was based on the principle that the acceptance of the Resolution Plan extinguished all liabilities beyond Rs. 61.05 crores, and any excess amounts paid had to be refunded to prevent unjust enrichment of the Department.