TaxTMI 
TaxTMI 
2016 (10) TMI 941
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.... been paid for the reason that it may be adjusted towards the possible dues. 3. Brief facts of the petition are as under. Petitioner no.2 is a company duly incorporated and registered under the provisions of the Companies Act. The petitioner is also a registered dealer under the provisions of the Gujarat Value Added Tax Act ("the Act" for short) as well as under the the Central Sales Tax Act 1956. The petitioner no.2 company is being represented by petitioner no.1 and is in the business of ginning and processing of rawcotton and manufacturing of cotton seeds, cake and cotton seed oil. The case of the petitioners is that it was entitled to input tax credit for a period commencing from 1.7.2015 to 31.7.2015 to the extent of Rs. 45,23,230/. However, since the same was not made available, an application came to be filed on 14.12.2015 seeking refund. According to the petitioner, the reason for such accumulation of input tax credit was due to the fact that the rate of tax attracted towards inputs is higher than the rate of tax paid towards the finished goods belonging to petitioner no.2 and also because they were not in a position to utilise the input tax credit to the fullest extent. ....
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....inted out by the counsel that Rs. 10 lacs which are ordered to be paid by the appellate authority while granting stay, has already been deposited and hence there is no default made by the petitioners in any manner. In this context, learned counsel submitted that if the amount of refund which has already been sanctioned by the authority, is allowed to be withheld, same would frustrate and would have adverse effect on the orders which are passed by the appellate authority. The same would tantamount to overreaching the process of appeal which is pending in substantive form and, therefore, authority is not justified in withholding the amount of refund sanctioned by the authority. Counsel in support of his contention has drawn our attention to section 39 of the Gujarat Value Added Tax Act by virtue of the which the authority can withhold the refund in certain cases. It was contended that conditions precedent which are reflected in the said statutory provision since are not prevailing or establishing on record, it is not open for the respondent authority to make any resort to such statutory powers. Counsel for the petitioner relied on the decision of a Division Bench of this Court in cas....
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....d at page65 of the compilation to the petition, that an interim order has also been passed in favour of the petitioners by the appellate authority and in response to said interim order, the condition is imposed upon the petitioners to deposit an amount of Rs. 10 lacs which amount has been deposited in the treasury by the petitioners and challans for the same is annexed with the compilation to the petition at page66. Upon the petitioner fulfilling the condition of depositing Rs. 10 lacs, remaining demand stands stayed. d) It also appears from the record that the petitioners have cogently explained as to under which circumstances, the input tax credit has not been possible to be exhausted and, therefore, while determining the amount of provisional refund, the authority appears to have considered this aspect also and only thereafter, the amount is ascertained. 9. As we notice from the aforesaid circumstances, that against the assessment order, substantive appeals are pending at the appellate forum wherein interim orders are also granted to which the conditions contained in the same have also been complied with by the petitioner and, therefore, the appeal being continuous proceedings....
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....is of the opinion that grant of refund is likely to adversely affect the Revenue. It is true, that in the present case, for other period, the assessing authority has passed orders against the petitioners raising tax demands. However, such orders are challenged by the petitioner in appeal in which upon depositing Rs. 10 lacs, rest of the tax demand is stayed. When these tax demands are thus stayed, allowing the Commissioner to withhold the refund for such tax demand would frustrate the stay order. In effect the department would be recovering the amount in respect of which stay has been granted by the appellate authority against the recovery. Such indirect recovery in the guise of withholding of refund cannot be permitted. Power under section 39(1) of the Act would not empower the authority to frustrate stay order granted by the competent authority or Court. 13. At this juncture, we may refer the proposition of law propounded in almost similar background in decision in case of Ganesh Sales Corporation and ors.(supra), wherein Division Bench of this Court upon analysis of and interpretation of section 39 has stipulated that if conditions precedent, as referred to above, are not satis....
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....mpowered to withhold the refund provided he is of the opinion that such refund is likely to adversely affect the revenue. Thus, before withholding the refund, the Commissioner is required to form an opinion that the grant of refund is likely to adversely affect the revenue. The fact regarding formation of such opinion, therefore, should be reflected in the order passed under section 39 of the GVAT Act withholding the refund. In this regard, a perusal of the impugned order clearly shows that there is not even a whisper therein as regards any opinion as envisaged in the section being formed. Consequently, in the absence of formation of any opinion that the refund is likely to adversely affect the revenue, the question of withholding the refund would not arise. Thus, none of the requirements for resorting to the power conferred by section 39 of the GVAT Act are satisfied in the present case. The impugned order, therefore, suffers from lack of jurisdiction and hence, cannot be sustained." 14. Thus it may be seen from the above situation that the authority has made an attempt to withhold sizeable amount of refund lawfully made available to the petitioner under the wrong premise that co....