2024 (7) TMI 375 - HC - VAT and Sales Tax

Petitioner entitled to refund of excess tax paid due to non-issuance of C-Form declarations

Tetra Pak India Pvt. Ltd. Versus State of Gujarat & Anr.

Gujarat HC held that petitioner was entitled to refund of excess tax paid due to non-issuance of C-Form declarations. Following precedent in J.K. Cement ... Refund of excess tax paid - non-issuance of C-Form declarations - belated issuance of C-Form declarations - HELD THAT:- This Court in case of J.K. CEMENT LTD. VERSUS STATE OF GUJARAT [2020 (3) TMI 140 - GUJARAT HIGH COURT] has held 'The respondents are directed to forthwith process the refund claims of the respective petitioners and grant refund of the tax amount collected from the petitioners and deposited by the seller in accordance with law within a period of twelve weeks of the receipt of a copy of this judgment.' The aforesaid decision of this Court was upheld by the Hon’ble Supreme Court in STATE OF GUJARAT & ANR. VERSUS J.K. CEMENT LTD. [2021 (2) TMI 1228 - SC ORDER]. It is held that the petitioner is entitled to the refund of the excess payment of tax i.e. difference between 15% tax paid by the petitioner and 2% tax liable to be paid by the petitioner on furnishing of C-Form by the petitioner for purchase of natural gas from the Bharat Petroleum Corporation together with interest of Rs. 1,13,86,862/- paid by the Bharat Petroleum Corporation on behalf of the petitioner on the delayed payment of tax in view of the decision of this Court in case of J.K. Cement Limited which is upheld by the Hon'ble Supreme Court. The respondents are therefore, directed to consider the refund application filed by the petitioner for the period 2017-18 and 2018-19 filed on 11.09.2023 to pass an order for amount of refund and interest claimed by the petitioner after verification of the C-Forms submitted by the petitioners with statutory interest payable under the provisions of the CST Act - Petition allowed. Issues Involved:1. Entitlement to refund of excess tax paid due to non-issuance of C-Form declarations.2. Legality of charging higher tax rates during the GST regime transition.3. Liability for interest paid on differential tax due to delayed C-Form issuance.4. Validity of arbitration award regarding interest reimbursement.5. Compliance with judicial precedents and statutory provisions for refund processing.Issue-wise Detailed Analysis:1. Entitlement to Refund of Excess Tax Paid Due to Non-issuance of C-Form Declarations:The petitioner, a multinational company, faced issues with the issuance of C-Form declarations for interstate purchases of natural gas, resulting in being charged a higher tax rate of 15% instead of the concessional 2% under the CST Act. The confusion arose post-GST implementation, during which the commercial tax department of Maharashtra canceled the petitioner’s CST registration without notice, preventing timely C-Form issuance. The Supreme Court and various High Courts, including the Gujarat High Court in J.K. Cement Ltd. v/s State of Gujarat, affirmed that buyers are entitled to refunds for excess tax paid due to non-issuance of C-Forms. The petitioner’s claim aligns with these judicial precedents, establishing their right to a refund.2. Legality of Charging Higher Tax Rates During the GST Regime Transition:During the transition to the GST regime, there was ambiguity regarding the applicability of concessional tax rates for interstate purchases. The seller initially charged the full tax rate of 15% from 01.07.2017 to 15.03.2018, later reverting to 2% in anticipation of C-Forms. The Supreme Court upheld the view that C-Form declarations were valid post-GST, as seen in Commissioner of Commercial Taxes vs. Ramco Cement Limited. This legal position supports the petitioner’s claim that charging 15% was incorrect and warrants a refund.3. Liability for Interest Paid on Differential Tax Due to Delayed C-Form Issuance:The seller encashed the petitioner’s bank guarantee for differential tax due to delayed C-Form issuance and later raised debit notes for interest paid on this differential tax. The arbitration award held the petitioner liable for reimbursing the interest amount paid by the seller. However, the Gujarat High Court in J.K. Cement Ltd. established that the ultimate tax burden borne by the buyer entitles them to refunds, including interest paid. Thus, the petitioner’s claim for refunding the interest amount aligns with this legal principle.4. Validity of Arbitration Award Regarding Interest Reimbursement:The arbitration award between the petitioner and the seller (Bharat Petroleum Corporation Limited) concluded that the petitioner was not entitled to the interest amount reimbursed by the seller. Despite this, the judicial precedent in J.K. Cement Ltd. supports the petitioner’s entitlement to refunds, including interest, as the tax burden was ultimately borne by them. The court’s directive to process the refund application, including interest, reaffirms this entitlement.5. Compliance with Judicial Precedents and Statutory Provisions for Refund Processing:The Gujarat High Court directed the respondents to process the petitioner’s refund application for 2017-18 and 2018-19 within twelve weeks, considering the C-Forms submitted. This directive aligns with the Supreme Court’s dismissal of the SLP against the Gujarat High Court’s decision in J.K. Cement Ltd., which emphasized refund entitlement for buyers who bore the ultimate tax burden. The court mandated compliance with statutory provisions under the CST Act for refund processing, ensuring adherence to legal precedents.Conclusion:The petitioner is entitled to a refund of the excess tax paid due to the non-issuance of C-Forms, including the interest amount reimbursed by the seller. The court’s directive to process the refund application within twelve weeks underscores the legal obligation to comply with judicial precedents and statutory provisions, ensuring the petitioner’s rightful claim is honored.