Refund of excess tax under the contractors' compliance scheme upheld after clause barring repayment was found unconstitutional.

Clause 4(2) of the Haryana Alternative Tax Compliance Scheme for Contractors, 2016 was found invalid to the extent it barred refund of excess tax remaining after adjustment, because the State could not retain money collected beyond lawful liability and the restriction offended Article 265. The excess amount deposited under the Scheme was therefore refundable, and the petitioners were also entitled to consequential interest under the applicable rules, including further interest for delay. The refund-rejection orders were quashed and repayment of the excess tax with interest was directed.

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Issues: (i) whether the condition in Clause 4(2) of the Haryana Alternative Tax Compliance Scheme for Contractors, 2016, which denied refund of excess amount after adjustment, was valid; (ii) whether the petitioners were entitled to refund and consequential interest on the excess tax paid under the Scheme.

Issue (i): whether the condition in Clause 4(2) of the Haryana Alternative Tax Compliance Scheme for Contractors, 2016, which denied refund of excess amount after adjustment, was valid.

Analysis: The Scheme was made applicable retrospectively to all contractors, including those already paying tax under Rule 49 of the Haryana Value Added Tax Rules, 2003. By reducing the effective liability and then permitting the State to retain any excess amount without refund, Clause 4(2) created an unequal and arbitrary distinction between compliant contractors and those who had not earlier paid under the lump sum scheme. The provision also enabled retention of money collected beyond the tax lawfully payable, which offended the mandate that tax can be levied or retained only by authority of law.

Conclusion: Clause 4(2), to the extent it barred refund of the excess amount remaining after adjustment, was held invalid and ultra vires Article 265 of the Constitution of India.

Issue (ii): whether the petitioners were entitled to refund and consequential interest on the excess tax paid under the Scheme.

Analysis: Once the offending portion of Clause 4(2) was read down, the excess amount deposited by the petitioners could not be retained by the State. The denial of refund was therefore unsustainable, and the refund claim had to be allowed. Consequential interest was also warranted on the refunded amount in accordance with the applicable rules, with further interest payable for delay in payment.

Conclusion: The petitioners were held entitled to refund of the excess tax amount along with interest as provided under the rules.

Final Conclusion: The writ petitions succeeded, the impugned refund-rejection orders were quashed, and the excess tax collected under the Scheme was directed to be repaid with consequential interest.

Ratio Decidendi: A scheme governing tax liability cannot validly permit the State to retain excess tax collected beyond the lawful liability, and a clause barring refund of such excess is unenforceable when it violates the constitutional mandate that tax be levied or retained only by authority of law.

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