2026 (3) TMI 647 - HC - VAT / Sales Tax

Interest on tax refunds accrues from refund application date where Rule 42 approval delays payment, producing entitlement.

Entitlement to statutory interest on tax refunds hinges on interplay between refund entitlement and the approval timeline under Rule 42; where the ... Entitlement to simple interest under Section 20 - refund with interest - statutory time limit for refund - approval by prescribed authority. Refund with interest under Section 20 of the Haryana Value Added Tax Act, 2003 - HELD THAT: - The Court held that once the Assessing Officer, by order dated 14.08.2015, declared the petitioner entitled to a refund, the petitioner was entitled to interest in terms of Section 20 of the 2003 Act. The decision in M/s Raghav Industries [2022 (7) TMI 1619 - PUNJAB AND HARYANA HIGH COURT] - upheld as final - and the conjoint reading of Section 20 with Rule 42 establishes that the approval procedure must be finalised within the time contemplated for interest computation so as not to render Section 20(9) otiose; accordingly interest is payable from the date of the petitioner's refund application until the date of payment. Applying that principle, the Court held the petitioner entitled to interest from the date of application (22.04.2016) until the date the refund was released (28.08.2019). [Paras 8, 9, 10] Petitioner entitled to interest on the refund from 22.04.2016 to 28.08.2019 in terms of Section 20 of the 2003 Act. Approval period under Rule 42 to be counted within sixty days for interest computation - HELD THAT:- The Court held that the fact the refund was not granted in the original assessment of 01.06.2006 is immaterial where the appellate authority remitted the matter and the assessing authority subsequently, by order dated 14.08.2015, allowed the refund. The statutory scheme and Rule 42 require the approval process to be completed in time so that interest periods under Section 20(9) and (10) operate as intended; the petitioner's case is squarely covered by the reasoning in M/s Raghav Industries and entitles the petitioner to interest despite the refund not having been allowed in the original assessment. [Paras 9] Refund allowed by the assessing authority on remand attracts interest under Section 20 notwithstanding that no refund was granted in the original assessment. Final Conclusion: Writ petition disposed holding the petitioner entitled to interest on the refund in terms of Section 20 of the 2003 Act for the period from 22.04.2016 to 28.08.2019; the decision in M/s Raghav Industries was applied as final authority. Issues: Whether the petitioner is entitled to simple interest under Section 20 of the Haryana Value Added Tax Act, 2003 on the refund of Rs. 62,01,371/- from the date of application (22.04.2016) until the date of payment (28.08.2019), having regard to the approval procedure under Rule 42 of the Haryana Value Added Tax Rules, 2003 and the decision in M/s Raghav Industries.Analysis: The Assessing Officer by order dated 14.08.2015 held the petitioner entitled to refund. Section 20 of the Haryana Value Added Tax Act, 2003 provides for refund and interest where amounts are found payable, and subsections (8)-(11) specify interest entitlement and timing. Rule 42 of the Haryana Value Added Tax Rules, 2003 prescribes the approval process by the prescribed authority and requires initiation of approval at least thirty days before expiry of the period for refund without interest, obliging the competent authority to decide in time. The Division Bench decision in M/s Raghav Industries interpreted Section 20 together with Rule 42 to require that the approval process be completed within the time contemplated under Section 20(9) so that the period for computing interest under Section 20(10) commences thereafter. The present matter is covered by that decision which has attained finality; the fact that refund was not allowed in the original 2006 assessment is immaterial given the appellate remand and subsequent order of 14.08.2015 allowing the refund. Applying Section 20 read with Rule 42 and the settled precedent, interest is payable from the date the refund application was made until the date the refund was released.Conclusion: The petitioner is entitled to interest at the prescribed rate under Section 20 of the Haryana Value Added Tax Act, 2003 on the refund of Rs. 62,01,371/- for the period from 22.04.2016 (date of application) to 28.08.2019 (date of release of refund); writ petition disposed accordingly in favour of the petitioner.