Petitioner entitled to refund without filing Form DVAT-21 under Rule 34; Section 38 violation led to Rs 6.62 crore refund order

The HC held that the petitioner was entitled to the refund claim made in the return for the quarter ending March 2014 without the need to file Form DVAT-21, as per Rule 34 and consistent with prior HC rulings. The respondents erred in adjusting Rs. 10,74,67,218 before disposal of objections by the OHA, violating Section 38 of the DVAT Act. The impugned order dated 31 May 2022 was quashed, and the respondents were directed to refund Rs. 6,62,74,405 with interest from the due date. The petition was allowed.

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Issues Involved:

1. Processing of Refund Application
2. Validity of the Impugned Order
3. Statutory Timeframe for Refund
4. Adjustment of Refund Against Tax Demands
5. Requirement to Submit Form DVAT-21
6. Pre-deposit as Tax or Duty
7. Online vs. Physical Filing of Objections

Summary:

1. Processing of Refund Application:
The petitioner sought a direction to process a refund application dated 24 August 2020 for Rs. 6,62,74,405/- under Section 38 of the DVAT Act, including interest under Section 42. Initially, the court directed the respondents to process the refund within two weeks. However, the respondents passed an order dated 31 May 2022, negating the refund claim, leading the petitioner to amend the writ petition to question this order's validity.

2. Validity of the Impugned Order:
The petitioner argued that the refund application dated 31 March 2015 was to be decided within the statutory timeframe of two months as per Section 38(3)(a)(ii) of the DVAT Act. The petitioner contended that any tax demand arising after this period could not nullify the refund claim. The court found that the respondents acted arbitrarily by making adjustments post 31 May 2015, thus illegally depriving the petitioner of the refund.

3. Statutory Timeframe for Refund:
The court emphasized the mandatory nature of the time limits under Section 38 of the DVAT Act for processing and issuing refunds. The refund claim, embedded in the return filed on 31 March 2015, was to be granted within two months, i.e., by 31 May 2015. The court reiterated that the respondents failed to act within this statutory timeframe.

4. Adjustment of Refund Against Tax Demands:
The court held that the respondents could not adjust the refund against tax demands that were not enforceable at the time the refund became due. Section 35(2) of the DVAT Act restrains the enforcement of tax demands under contestation before the Objection Hearing Authority (OHA). The court noted that adjustments made by the respondents were illegal as the objections were pending.

5. Requirement to Submit Form DVAT-21:
The court clarified that there was no legal obligation for the petitioner to submit Form DVAT-21 if the refund was claimed in the return itself. The court cited previous judgments to support this position, stating that the statute does not require a separate form for refunds claimed in the return.

6. Pre-deposit as Tax or Duty:
The court held that a pre-deposit made for pursuing an appeal does not constitute a tax or duty and cannot be utilized for adjustment purposes. The court cited the judgment in MRF Ltd., which established that pre-deposits are not payments of duty but are made to avail the right of appeal.

7. Online vs. Physical Filing of Objections:
The court found that the online submission of objections was sufficient compliance with the DVAT Act's requirements. The respondents' inability to trace physical objections did not detract from the petitioner's right to claim a refund. The court noted that the objections for FY 2012-13 and April 2013 to December 2013 had been disposed of, and there was no justification for retaining the refund amount.

Conclusion:
The court quashed the impugned order dated 31 May 2022 and directed the respondents to refund Rs. 6,62,74,405/- along with interest from the due date. The refund was to be effected within three weeks from the date of the decision.

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