2023 (4) TMI 4 - HC - VAT and Sales Tax

Court Orders 6% Interest on Tax Refund; No Need for Fresh Claim; Revenue Appeal Dismissed; Payment Due in 4 Weeks.

Commissioner Of Trade And Taxes Versus Corsan Corviam Construction S.A. -Sadbhav Engineering Ltd. JV

The court upheld the Tribunal's decision, granting the assessee interest at 6% per annum on a refunded amount of Rs. 1,25,60,785/- from 11.09.2015 to ... Interest on refund - relevant period - interest for the period commencing from the date when two months elapsed [which in turn would commence from the date when the return was filed], and running till the date when the refund was paid, or not - whether the assessee's right to interest fructifies immediately, upon the expiry of the period prescribed under Section 38(3)(a)(ii) of the 2004 Act? HELD THAT:- It is crystal clear that strict timelines have been set forth in the 2004 Act for the grant of refund. In the instant matter, since the revised return was filed on 10.07.2015, the refund in terms of Section 38(3)(a)(ii) of the 2004 Act accrued in favour of the assessee on 10.09.2015. Admittedly, the notice under Section 59(2) of the 2004 Act seeking additional information was issued only thereafter, i.e., 11.09.2015. This notice led to the issuance of the notice of default assessment dated 02.08.2017, giving rise to a demand amounting to Rs.1,25,60,785/- via order dated 02.08.2017; which was, ultimately, set aside by the OHA via order dated 26.08.2019. Rule 34(4), which is invoked by the revenue, has no application to the instant case, as is evident upon a plain reading of Sub-rule (1) and (4) of the said Rule. The OHA, in a brief order, concluded that ITC was wrongly denied to the assessee, i.e., the objector, since it had in its possession valid tax invoices and there was no dissonance in the 2A-2B mismatch report of the purchasing and selling dealer. OHA noted that the “Assessing authority in the assessment order has not brought any material to prove collusion between purchasing dealer and selling dealer and also [did] not invoked Section 40A of the DVAT Act'. Accordingly, the assessee's objections were accepted and the impugned order dated 02.08.2017 passed under Section 32 of the 2004 Act was set aside - while the OHA ruled on the legal tenability of the order dated 02.08.2017, concerning objections filed under Section 74 of the 2004 Act, it could not have stymied the accrual of interest which was based on a claim lodged by the assessee via its revised return. The assessee's right to refund accrued on completion of the timeframe given in Section 38(3)(a)(ii) of the 2004 Act, i.e., on 10.09.2015. The proceedings taken out thereafter, i.e., issuance of notice under Section 59(2) of the 2004 Act on 11.09.2015 followed by a default assessment order dated 02.08.2017 and the adjustment order dated 25.08.2017, were non-est in the eyes of law. Sub-rule 34(4) of the 2005 Rules had no applicability in the present case. The provision which did apply was Section 38(3)(a)(ii) of the 2004 Act insofar as the assessee is concerned - Since the claim for a refund made by the assessee was embedded in its return, it did not arise out of an order passed by the Court or an authority constituted under the 2004 Act, the assessee was not required to file a fresh claim as contended by the revenue under DVAT 21. Thus, the assessee will be entitled to interest at the rate of 6% (simple) per annum for the period spanning between 11.09.2015 and 14.08.2020. Interest for the said period will be quantified on the principal amount refunded to the assessee i.e., Rs.1,25,60,785/- - appeal of Revenue dismissed. Issues Involved:1. Entitlement to interest on refunded amount under the Delhi Value Added Tax Act, 2004.2. Applicability of Rule 34(4) of the Delhi Value Added Tax Rules, 2005.3. Requirement to file a fresh claim for refund in Form DVAT-21.4. Compliance with statutory provisions for claiming refunds.Summary:Entitlement to Interest on Refunded Amount:The core issue revolves around the assessee's claim for interest on an amount already refunded. The assessee sought interest from the date when two months elapsed after filing the return until the refund was paid, as per Section 38(3)(a)(ii) read with Section 42 of the Delhi Value Added Tax Act, 2004. The Tribunal ruled in favor of the assessee, granting interest from 11.09.2015 to 14.08.2020.Applicability of Rule 34(4):The revenue argued that interest should accrue from the date the claim for refund was lodged in Form DVAT-21, following the OHA's order dated 26.08.2019. However, the court concluded that Rule 34(4) did not apply since the refund claim was embedded in the revised return filed on 10.07.2015, and not arising out of a judgment or order. The court emphasized that the refund accrued on 10.09.2015, as per Section 38(3)(a)(ii), and subsequent notices and orders were non-est in law.Requirement to File Fresh Claim in Form DVAT-21:The court held that the assessee was not required to file a fresh claim for refund in Form DVAT-21, as the claim was already made in the revised return. The Tribunal's decision was upheld, confirming that the refund did not arise from an order but from the return itself.Compliance with Statutory Provisions:The court addressed the statutory timelines and conditions for granting refunds under Section 38. It highlighted that the Commissioner must refund excess tax within two months of filing the return for quarterly tax periods unless notices under Sections 58 or 59 are issued. The court found that the assessee's right to interest accrued from 10.09.2015, and the subsequent proceedings did not affect this right.Conclusion:The court sustained the Tribunal's order, entitling the assessee to interest at 6% per annum from 11.09.2015 to 14.08.2020 on the refunded amount of Rs. 1,25,60,785/-. The revenue was directed to pay the interest within four weeks. The assessee's writ petition was allowed, and the revenue's appeal was dismissed.