TaxTMI 
TaxTMI 
2025 (9) TMI 867
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....or directions, directing the Respondent No. 1 to release interest on the refund of Rs. 6,90,51,900/- and Rs. 16,11,19,226/- from the date of deposit till the date of payment; and for such further and other reliefs, as this Hon'ble Court may deem fit and proper in the nature and circumstances of the case. (c) Pass such other orders as may be deemed fit by this Hon'ble court, in the interest of justice." 2. The brief facts giving rise to the present petition are as under:- The petitioner is a dealer registered with the Respondent Commercial Tax Department and is engaged, inter alia, in the business of B2B trading across a wide gamut of products including Mobiles, Electronic items, Apparels, Footwear, etc., For the tax period 2011-12 to 2014-15, re-assessment orders were passed against the petitioner raising a total demand of Rs. 23,01,70,324/- by way of Orders dated 29.07.2016, 11.09.2017, 11.09.2017 and 23.11.2017 respectively under the Karnataka Value Added Tax Act, 2003("KVAT Act") inter alia, treating mobile phone charger as unscheduled commodity and taxing them separately at a higher rate. Against the said re-assessment orders, petitioner preferred appeals before ....
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....,23,975 Total 6,90,51,099/- 16,11,19,226/- 23,01,70,324/- 2.4 It is the grievance of the petitioner that while 30% of the pre-deposit paid by the petitioner through cash at the time of filing the appeal before the first appellate authority was refunded by the respondents back to the petitioner, the remaining balance of 70% pre-deposit paid by the petitioner at the time of filing the appeal by utilizing the Input Tax Credit (ITC) available in its Electronic Credit Ledger (ECL) was not refunded back to the petitioner by the respondents. Pursuant to which, petitioner submitted representations dated 29.02.2024, 15.03.2024, 09.05.2024, 23.05.2024, 30.07.2024 and 09.12.2024 calling upon the respondents to refund/release/sanction the balance 70% of the pre-deposit amounting to Rs. 16,11,19,226/- together with the applicable interest back to the petitioner in cash and since the said request was not complied with by the respondents, who did not refund as claimed by the petitioner in cash, petitioner is before this Court by way of the present petition. 3. Heard learned Senior counsel for the petitioner and learned AGA for the respondents - revenue and perused the material o....
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....st and penalty only can be discharged through cash ledger and not 70% of VAT arrears which included interest and penalty which was discharged by way of pre-deposit by the petitioner through its ECL and petitioner would be entitled to recover the same through the credit ledger alone and not by way of cash refund. It was submitted that since the petitioner had voluntarily discharged balance 70% VAT liability by utilizing its ITC, refund in cash was not permissible since only arrears are recoverable by reversing ITC and the same does not apply to voluntary payment by the petitioner. It was also submitted that since the petitioner did not submit any details of ITC reversal nor file an application for re-credit of the ITC utilized by him for 70% pre-deposit, the petitioner was not entitled to seek refund in cash as claimed in the present petition, which is liable to be dismissed. 6. Before adverting to the rival submissions, it would be apposite to refer to the relevant provisions contained in Section 142 of the KGST Act, 2017, which reads as under;- 142. Miscellaneous transitional provisions.- (1) xxxxxxxxxxxxxxxxx (2) xxxxxxxxxxxxxxxxx (3) Every ....
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....ere the balance of the said amount as on the appointed day has been carried forward under this Act. (b) every proceeding of appeal, revision, review or reference relating to recovery of input tax credit initiated whether before, on or after the appointed day under the existing law shall be disposed of in accordance with the provisions of the existing law, and if any amount of credit becomes recoverable as a result of such appeal, revision, review or reference, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act. (7) (a) every proceeding of appeal, revision, review or reference relating to any output tax liability initiated whether before, on or after the appointed day under the existing law, shall be disposed of in accordance with the provisions of the existing law, and if any amount becomes recoverable as a result of such appeal, revision, review or reference, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input ta....
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....rlier legislations to GST; it covers scenarios like the return of goods, price revisions in contracts and refund claims under existing laws; refunds and recoveries of taxes, duties, and CENVAT credits are addressed, specifying conditions under which they are admissible or lapse; it also details tax liabilities for goods and services supplied post-transition and clarifies that no tax is payable on goods/services already taxed under previous laws; additionally, it provides guidelines for goods sent on approval and Tax Deductions at Source (TDS) . It must be noted that by virtue of Section 174, the rights and obligations of assesses incurred under the earlier legislations are kept intact and there is a need to have a mechanism to exercise those rights and obligations which are found in the transitional provisions. 8. A plain reading of the aforesaid Miscellaneous Transitional provisions contemplated in Section 142 of the KGST Act, will indicate that for the purpose of the present petition, the 'existing law' referred to therein is the Karnataka Value Added Tax Act, 2003 (KVAT Act) and the 'appointed day' is 01.07.2017 i.e., the day on which the KGST Act, 2017 came into force; so al....
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....42(7)(a) stipulates recovery of output duty or tax liability by the department-revenue as a result of aforesaid appeal/review/reference proceedings; • Section 142(7)(b) provides for refund admissible to the claimant as a result of aforesaid appeal/review/reference proceedings to be refunded back in 'CASH'; even this provision contains a non-obstante clause and the expression 'refunded to him in cash' is specifically found in this provision; • Section 142(8)(a) contemplates recovery pursuant to result of assessment/adjudication proceedings in relation to tax/interest/fine/penalty; • Section 142(8)(b) contemplates that if any of the aforesaid amounts becomes refundable to the taxable person in pursuance assessment or adjudication proceedings, the said amount shall be refunded back in 'CASH'; even this provision not only contains a non-obstante clause but also uses the specific/categorical expression the same shall be 'refunded to him in cash'; • Section 142(9)(a) stipulates that if a person files returns under the KVAT Act and after 01.07.2017, such returns are revised, any recoverable amount or inadmissible CENVAT credit shall be r....
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....ay of CASH as is clear from the said provisions. 11. In other words, in the light of the aforesaid Circular dated 16.04.2018 which permits a recovery / payment both by way of cash or through Electronic Credit Ledger, any refund relating to such deposit made either by cash or through ECL shall necessarily have to be refunded only by way of cash in terms of the aforesaid provisions; in the instant case, it is an undisputed fact borne out from the material on record and categorically admitted by the respondents that the petitioner became entitled to refund of the entire 100% deposited by it viz., 30% by cash and 70% through ITC/ECL by virtue of the sales tax revision petitions filed by the respondents - revenue being dismissed by this Court and having become conclusive and binding upon the respondents; as a consequence / result of the said proceedings culminating in favour of the petitioner, pursuant to which, refund became admissible / payable in favour of the petitioner, the respondents would clearly become liable to refund the entire pre-deposit amount including the 70% pre-deposit through ITC/ECL back to the petitioner by way of cash only, in terms of Section 142(7)(b) and 142(....
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....er without any demur and without raising any objections to the effect that the said 70% pre-deposit cannot be accepted through ITC/ECL and that it ought to have been made by the petitioner only through cash; it is an undisputed fact that the said 70% pre-deposit through ITC/ECL having been accepted by the petitioner without raising any objections, the KAT proceeded to dispose off the appeals in favour of the petitioner and was confirmed by this Court as stated supra as a consequence/result of which petitioner became entitled to refund of the entire 100% pre-deposit including 70% pre-deposit made through ITC/ECL by way of refund back in CASH in terms of in terms of Section 142(7)(b) and 142(8)(b) of the KGST Act; it follows there from that having accepted the 70% pre-deposit through ITC/ECL, respondents are estopped and not entitled to place reliance upon the aforesaid Circular dated 16.04.2018 to contend that the same cannot be refunded back in Cash, particularly in the light of the provisions contained in Section 142(7)(b) and 142(8)(b) of the KGST Act, which clearly contemplate that all types / kinds of amounts refundable/admissible are to be refunded back in CASH without there b....
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....ntitled to refund by CASH, especially in the light of the provisions contained in Section 142(7)(b) and 142(8)(b) of the KGST Act, which clearly contemplate that all types/kinds of amounts refundable/admissible are to be refunded back in CASH without there being any distinction drawn/made between cash deposit or ITC/ECL deposit and the claim of the petitioner deserves to be upheld on this score also. 16. Insofar as the contention urged by the respondents that since the petitioner did not reclaim / refund of the 70% pre-deposit by filing an application in this regard, the petitioner is not entitled to cash refund is concerned, it is relevant to note that the petitioner had not applied for reclaiming / re-crediting of ITC utilised by him from his ECL towards 70% pre-deposit; on the other hand, petitioner specifically / consistently sought for refund by way of Cash in terms of Section 142(7)(b) and 142(8)(b), which is applicable to the claim of the petitioner who is accordingly, entitled to refund of the entire pre-deposit by way of cash as claimed by him and consequently, even this contention urged by the respondents cannot be accepted. 17. As stated supra, the refund by way of....
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....o the Legislature and consequently, the express provisions in the transitional provisions providing for refund in cash have to be given effect to and as such, the petitioner would be entitled to reclaim the remaining 70% pre-deposit also to be refunded back to him in Cash. 19. In Rane Brake Lining's case supra, the Madras High Court held that the amount which is liable to be refunded after adjudication and appropriation, should be refunded in cash in terms of Section 142(8)(b) of the CGST Act, as under:- "7. Having considered the submissions made by the learned counsel for the Petitioner and the learned Additional Government Pleader (Pondicherry) for the Respondent, I am of the view that the challenge to the Impugned Order is unsustainable. However, the appropriation made in the Impugned Order is unsustainable. If the amounts are due and payable to the Petitioner after adjustment of the tax they have to be refunded back to the Petitioner. 8. There is no question of lapsing of the aforesaid amount so as to enable the Government to appropriate the amounts of refund that is/was due and payable to the Petitioner under the provisions of the PVAT Act, 2007 and CST Ac....
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....bit in the VAT Returns and having considered the Revision Orders passed on 14.09.2021, it is not open for the Commercial Tax Department now to turn around and deny the refund stating that the petitioner had not complied with the Order dated 25.03.2015 passed by this Court in W.P.Nos.8584, 8585 and 8586 of 2015. 35. As per Section 142(6)(a) and (b) of the Tamil Nadu Goods and Services Tax (TNGST) Act, 2017, the amounts paid as pre-deposit has to be refunded back. Section 142(6)(a) and (b) of the Tamil Nadu Goods and Services Tax (TNGST) Act, 2017 read as under:- "142. Miscellaneous Transitional Provisions: (6) (a) Every proceeding of appeal, revision, review or reference relating to a claim for input tax credit initiated whether before, on or after the appointed day under the existing law shall be disposed of in accordance with the provisions of the existing law, and any amount of credit found to be admissible to the claimant shall be refunded to him in cash in accordance with the provisions of the existing law, and the amount rejected, if any, shall not be admissible as input tax credit under this Act: Provided that no refund shall be allowed of ....
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....e, of the considered view that the Respondent No. 2 ought to have directed the sanctioning Authority to refund the duty of the amount in cash instead of credit in the Cenvat account. 13. For the foregoing reasons, the petition succeeds and is hereby allowed. The impugned order passed by the Respondent No. 2 in No. 24/2017-CX(WZ)/ASRA/Mumbai, dated 27-12-2017 is partly modified to the extent that instead of crediting the duty in the Cenvat account of the petitioner, the sanctioning Authority is directed to refund the amount in cash to the petitioner." 22. Therefore, the refund of the balance amount of pre-deposit Rs. 16,11,19,226/- should be done in cash as per the clear mandate of the provisions contained in Sections 142(7)(b) and 142(8)(b) of the KGST Act. 23. In Eicher Motors's case supra, the Apex Court held that facility of credit is as good as tax paid till tax is adjusted on future goods on the basis of the several commitments which would have been made by the assessees concerned as under:- "5. Rule 57-F(4-A) was introduced into the Rules pursuant to the Budget for 1995-96 providing for lapsing of credit lying unutilised on 16-3-1995 with a manufacture....
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....t is received in the factory on the basis of the existing Scheme. Now by application of Rule 57-F(4-A), the credit attributable to inputs already used in the manufacture of the final products and the final products which have already been cleared from the factory alone is sought to be lapsed, that is, the amount that is sought to be lapsed relates to the inputs already used in the manufacture of the final products but the final products have already been cleared from the factory before 16-3-1995. Thus the right to the credit has become absolute at any rate when the input is used in the manufacture of the final product. The basic postulate that the Scheme is merely being altered and, therefore, does not have any retrospective or retroactive effect, submitted on behalf of the State, does not appeal to us. As pointed out by us that when on the strength of the Rules available, certain acts have been done by the parties concerned, incidents following thereto must take place in accordance with the Scheme under which the duty had been paid on the manufactured products and if such a situation is sought to be altered, necessarily it follows that the right, which had accrued to a pa....
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....es they are liable to pay interest only up to the date of refund of tax while they take the benefit of assesses' funds by delaying the payment of interest on refunds without incurring any further liability to pay interest. This stand taken by the respondents is discriminatory in nature and thereby causing great prejudice to lakhs and lakhs of assesses. Very large number of assesses are adversely affected inasmuch as the Income Tax Department can now simply refuse to pay to the assesses amounts of interest lawfully and admittedly due to them as has happened in the instant case. It is a case of the appellant as set out above in the instant case for Assessment Year 1978-79, it has been deprived of an amount of Rs 40 lakhs for no fault of its 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 47. The word "compensation" has been defined in P. Ramanatha Aiyar's Advanced Law Lexicon, 3rd Edn., 2005, p. 9....
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....y responsible for the delayed payment, we feel that the interest of justice would be amply met if we order payment of simple interest @ 9% p.a. from the date it became payable till the date it is actually paid. Even though the appellant is entitled to interest prior to 31-3-1986, learned counsel for the appellant fairly restricted his claim towards interest from 31-3-1986 to 27-3-1998 on which date a sum of Rs 40,84,906 was refunded. 51. The assessment years in question in the four appeals are Assessment Years 1977-78, 1978-79, 1981-82 and 1982-83. Already the matter was pending for more than two decades. We, therefore, direct the respondents herein to pay the interest on Rs 40,84,906 (rounded off to Rs 40,84,900) simple interest @ 9% p.a. from 31-3-1986 to 27-3-1998 within one month from today, failing which the Department shall pay the penal interest @ 15% p.a. for the abovesaid period." 25. In Wig Brothers's case supra, the Apex Court held as under:- "28. It may be mentioned that there is misconception about interest. Interest is not a penalty or punishment at all but is the normal accretion on capital. Had the petitioner paid the amount in question in July,....
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....ment is less than 10 per cent of tax determined under Section 143(1) or on regular assessment. No interest is payable for the period for which the proceedings resulting in the refund are delayed for the reasons attributable to the assessee (wholly or partly). The rate of interest and entitlement to interest on excess tax are determined by the statutory provisions of the Act. Interest payment is a statutory obligation and non-discretionary in nature to the assessee. In tune with the aforesaid general principle, Section 244-A is drafted and enacted. The language employed in Section 244-A of the Act is clear and plain. It grants substantive right of interest and is not procedural. The principles for grant of interest are the same as under the provisions of Section 244 applicable to assessments before 1-4-1989, albeit with clarity of application as contained in Section 244-A. 31. The Department has also issued circular clarifying the purpose and object of introducing Section 244-A of the Act to replace Sections 214, 243 and 244 of the Act. It is clarified therein, that, since there was some lacunae in the earlier provisions with regard to non-payment of interest by the Revenue....
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....he Tribunal and the High Court, have granted interest on the amount of tax deposited by the resident/deductor from the date of payment on the ground, firstly, the refund of tax is directed by the first appellate authority in the appeal filed by the deductor/resident under Section 240 of the Act and secondly, the Revenue for having retained the sum by way of tax has to compensate the person who had deposited the tax. 36. Section 240 of the Act provides for refund of any amount that becomes due to an assessee as a result of an order in appeal or any other proceedings under the Act. The phrase "other proceedings under the Act" is of wide amplitude. This Court has observed that, the other proceedings under the Act would include orders passed under Section 154 (rectification proceedings), orders passed by the High Court or Supreme Court under Section 260 (in reference), or order passed by the Commissioner in revision applications under Section 263 or in an application under Section 273-A. 37. A "tax refund" is a refund of taxes when the tax liability is less than the tax paid. As per the old section an assessee was entitled for payment of interest on the amount of taxe....
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....es with it the right to interest. Whenever money has been received by a party which ex ae quo et bono ought to be refunded, the right to interest follows, as a matter of course. 39. In the present case, it is not in doubt that the payment of tax made by the resident/depositor is in excess and the department chooses to refund the excess payment of tax to the depositor. We have held that the interest requires to be paid on such refunds. The catechise is from what date interest is payable, since the present case does not fall either under clause (a) or (b) of Section 244-A of the Act. In the absence of an express provision as contained in clause (a), it cannot be said that the interest is payable from the 1st of April of the assessment year. Simultaneously, since the said payment is not made pursuant to a notice issued under Section 156 of the Act, Explanation to clause (b) has no application. In such cases, as the opening words of clause (b) specifically referred to as "in any other case", the interest is payable from the date of payment of tax. The sequel of our discussion is the resident/deductor is entitled not only to the refund of tax deposited under Section 195(2) of t....
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....amount with interest for want of no provision to that effect. Under the circumstances, the respondent-Company is entitled to receive interest on the payment of pre-deposit amount." 29. In Shiv Kumar Jain's case supra, the Calcutta High Court held as under:- "5. In my view, the time taken for refund of the money in terms of the CEGAT's order is unreasonable. CEGAT's order was passed on 21st June, 2001 so one could expect either the matter to be taken to higher up, and for this, under law ninety days time is given and on expiry of this time the department was expected to refund this money, since it is a Government Department. So, unlike the ordinary citizen another three months of grace time may be given for taking action. So, the department should have released this amount within the reasonable time of six months, namely by 31st December, 2001. Unfortunately this has not been done. So, I think after expiry of 31st December, 2001 the Government has no justification for withholding this money, and I hold this is an negligent inaction on the part of the Government. The Government cannot deprive the enjoyment of the property without due recourse to law and this withh....