Transitional refund of pre-deposit through input tax credit cannot be denied after the tax dispute ends in assessee's favour

Where a pre-deposit was made through input tax credit and the substantive tax dispute was later decided in the assessee's favour, refund could not be denied by relying on an earlier circular. The court noted that the department had accepted the debit through the VAT return mechanism and had itself passed fresh revision orders dropping the demand and issuing refund forms. It further treated the amount as falling within the transitional and refund scheme after repeal of the VAT regime, which required admissible credit to be refunded rather than withheld for alleged non-compliance with the earlier order.

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Issues: Whether the amounts debited as pre-deposit from input tax credit could be denied refund through the impugned intimations, and whether the assessee was entitled to refund under the transitional and refund provisions governing the pre-GST and post-GST regimes.

Analysis: The dispute concerned inclusion of freight and pumping charges in the taxable value of ready mix concrete and the consequential refund of the amount deposited pursuant to the earlier writ order. The substantive levy issue had already been answered in favour of the assessee in the later revision proceedings, and the assessing authority itself had passed fresh revision orders dropping the demand and issuing refund forms. In that backdrop, the department could not rely on the earlier circular to deny refund after having accepted the pre-deposit through debit in the VAT returns. The Court also noted the transitional effect of the repeal of the VAT regime and held that the amount paid as pre-deposit had to be dealt with in accordance with the statutory transitional scheme, which contemplated refund of admissible credit and did not justify refusal of refund on the ground of alleged non-compliance with the earlier order.

Conclusion: The assessee was entitled to refund of the pre-deposit amount, and the impugned intimations denying refund were unsustainable.

Final Conclusion: The writ petitions were allowed with consequential relief, and the respondents were directed to refund the amount within the time granted by the Court.

Ratio Decidendi: Where the substantive tax dispute is finally decided in favour of the assessee and the department has accepted a statutory pre-deposit through the tax return mechanism, refund cannot be withheld by invoking an earlier administrative circular contrary to the governing transitional and refund provisions.

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