TaxTMI 
TaxTMI 
2015 (4) TMI 528
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....referred the appeal mainly on the following question of law:- Whether the Honble Tribunal has erred in holding that the dealer is entitled to interest under Section 54(1)(aa) on the refund arising from the appellate order? 3. We have heard Mr.Dave, learned A.G.P. appearing in all the appeals. 4. The common facts in the appeals are that the Assessee has succeeded in the proceedings of the first appeal before the Appellate Authority and the Appellate Authority has ordered for refund of the tax amount. However, as the interest was not awarded on such refund of the tax amount, the Assessee preferred second appeal before the Tribunal. The Tribunal, after considering the aspect of reasonable construction of the provisions of Section 41 of the Gujarat Sales Tax Act (hereinafter referred to as the Act) and after taking into consideration the principles of doctrine of merger, found that when the interest on the amount of refund of tax upon the assessment is available, such interest should be made available on the refund of the tax which has accrued on account of the order passed in appeal against the assessment orders. We may, for the ready reference, record that the Tribunal relied upon....
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....u/s 41 and the modified assessment order passed in appeal is also covered under the clause (aa). The close scrutiny of clause (aa) reveals that the dealer is eligible for interest on refund arises in the assessment proceedings carried out u/s 41 of the Act. It is further held that the appeal is continuing proceedings of assessment and therefore the provisions applicable to the original order of assessment are also applicable to the modified order of assessment. The restricted meaning of the word an order of assessment u/s 41 will create discrimination between the situations of the matters of similar facts, one gets refund in original stage of assessment and another gets refund in appeal. The Honble Supreme Court held that the interpretation, which leads discrimination, must be avoided. The restricted interpretation will give discretion to the first assessing authority to make available the interest to the assesses. Similar situation will take place in appeal, if the appeal is decided by remand to the first assessing authority who passes the order of assessment in form 39 following the direction and refund arises, the dealer is entitled to interest. However, instead of remanding the....
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....) as was done earlier by this Tribunal leads to manifest unjust result which could never have been intended by the State Legislature and therefore, it is necessary to put a construction which modifies the meaning of the words used in section 54(1)(aa) of the Act so as to grant interest even if, refund becomes due to a dealer as a result of order passed in appeal or revision. 24) We are mindful of the fact that the department has heavily relied on the decision of this Tribunal in the case of M/s Gayatri Tiles vs State of Gujarat wherein this Tribunal has given strict meaning to the words by virtue of an order of assessment u/s 41 and held that the said clause u/s 54 was inserted by Gujarat II Act of 1993, so, when the refund has arisen in appeal then the appellant is not entitled to interest as seen from the wording of section 54 of the Act. With respect, the said ratio laid down by this Tribunal does not seem to be correct in view of the above discussion and also in view of the fact that the provisions relating to interest on delayed payment of refund have been consistently held as beneficial and nondiscriminatory. It is, therefore, held that the appellant is entitled to the inter....
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....l, we may further examine the aspect as to whether the subsequent view taken by the Tribunal in case of M/s.Saurashtra Chamical Ltd.(supra) or the earlier view taken in case of M/s.Gayatri Tiles (supra) is appropriate or not?. 9. The learned A.G.P. contended that as per the provisions of Section 54(1)(aa) of the Act, there is reference upon the assessment order and, therefore, it cannot be interpreted to mean that the refund on account of the appellate order is arising from the assessment order and he submitted that in view of the clear language of the statute, the Tribunal ought not to have departured from the earlier view taken by it in case of M/s.Gayatri Tiles (supra). The learned A.G.P. further contended that unless there is a specific provision providing for entitlement of interest on refund on account of the appellate order, no interest would be available since equity has no role to play in taxation matter. He submitted that there is no express provision made for entitlement to the interest to the Assessee on account of refund due to appellate order passed by the appellate Authority and, therefore, even otherwise also, the Tribunal has committed error in awarding interest o....
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.... said aspect. The Legislature may control quantification of interest or the entitlement of interest on refund subject to meeting with the test of constitutional provision. But, when the legislature is silent about entitlement of interest on refund of the tax amount already paid by the citizen, the interest can be considered by way of a compensatory measure. The reference may be made to the decision of the Apex Court in case of Sandvik Asia Ltd. V/s. Commissioner of Income Tax and others reported in (2006) 280 ITR 643 (SC) read with the subsequent decision of the Apex Court in case of Commissioner of Income Tax V/s. Gujarat Fluoro Chemicals reported in (2014) 1 SCC 126 wherein, the Apex Court did maintain the aspect of interest by way of compensatory measure but did not approve the interest on such interest while considering the aspect of compensatory measure. At this stage, we may refer to the recent decision of this Court in case of Gujarat Flouro Chemicals Ltd. V/s. Commissioner of Income Tax and others in Special Civil Application No.12855 of 1994 decided on 30.01.2015 wherein, the matter was remanded by the Apex Court in view of its Larger Bench judgment in case of Gujarat Flou....
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....is upheld it would mean that there can never be any wrongful retention by an authority until this Court holds that their stand is not in accordance with law. Therefore, that on this issue as well, the impugned judgment cannot be sustained and ought to be reversed. In the present context, it is pertinent to refer to the Circular on Trade Notice issued by the Central Excise Department on the subject of refund of deposits made in terms of Section 35F of the Central Excise Act, 1944 and 129E of the Customs Act, 1962. The Circular is reproduced hereunder: "Refund/Return of deposits made under Section 35F of CEA, 1944 and Section 129E of Customs Act, 1962 Clarifications The issue relating to refund of predeposit made during the pendency of appeal was discussed in the Board Meeting. It was decided that since the practice in the Department had all along been to consider such deposits as other than duty, such deposits should be returned in the event the appellant succeeds in appeal or the matter is remanded for fresh adjudication. 2. It would be pertinent to mention that the Revenue had recently filed a Special Leave Petition against Mumbai High Court's order in the matter of NELCO L....
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....nowledge receipt. [Source : M.F. (D.R.) F.No. 275/37/2KCX. 8A, dated 2.1.2002]" A close scrutiny of the contents of the Circular dated 2.1.2002 would disclose as to the modalities for return of predeposits. It again reiterated that in terms of the Supreme Court order such predeposit must be returned within 3 months from the date of the order passed by the Tribunal, Court or other fiscal authority unless there is a stay on the order of the fiscal authority, tribunal, court by a superior court. The Department has very clearly stated in the above circular that the delay beyond the period of 3 months in such cases will be viewed adversely and appropriate disciplinary action will be initiated against the concerned defaulting officers, a direction was also issued to all concerned to note that defaulter will entail a interest liability if such liability accrue by reason of any orders of the Tribunal/Court such orders will have to be complied with and it may be recoverable from the concerned officers. All the Commissioners were advised implementation of these instructions and ensure their implementation through a suitable monitoring mechanism. It is also specifically mentioned that the Com....
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....s own and exclusively because of the admittedly unlawful actions of the Income Tax Department for periods ranging up to 17 years without any compensation whatsoever from the Department. Such actions and consequences, in our opinion, seriously affected the administration of justice and the rule of law. COMPENSATION: The word 'Compensation' has been defined in P. Ramanatha Aiyar's Advanced Law Lexicon 3rd Edition 2005 page 918 as follows: "An act which a Court orders to be done, or money which a Court orders to be paid, by a person whose acts or omissions have caused loss or injury to another in order that thereby the person damnified may receive equal value for his loss, or be made whole in respect of his injury; the consideration or price of a privilege purchased; some thing given or obtained as an equivalent; the rendering of an equivalent in value or amount; an equivalent given for property taken or for an injury done to another; the giving back an equivalent in either money which is but the measure of value, or in actual value otherwise conferred; a recompense in value; a recompense given for a thing received recompense for the whole injury suffered; remuneration ....
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.... As we have already noticed, in Sandvik case (supra) this Court was considering the issue whether an assessee who is made to wait for refund of interest for decades be compensated for the great prejudice caused to it due to the delay in its payment after the lapse of statutory period. In the facts of that case, this Court had come to the conclusion that there was an inordinate delay on the part of the Revenue in refunding certain amount which included the statutory interest and therefore, directed the Revenue to pay compensation for the same not an interest on interest. 14. The aforesaid shows that in the latter decision of the Larger Bench, it was held that the decision in the case of Sandvik Asia Limited Vs. Commissioner of Income Tax & Others (supra) cannot be read to mean that Revenue is obliged to pay interest on interest in the event of its failure to refund the interest payable within the statutory period. The Apex Court further held that in the peculiar facts and circumstances of the case of Sandvik Asia Limited Vs. Commissioner of Income Tax & Others (supra) the Court had come to the conclusion that there was inordinate delay on the part of the Government to refund certai....