1981 (8) TMI 205 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the Sales Tax Officer's order rejecting the refund application.
2. Interpretation of Section 14 and Section 14-D of the Orissa Sales Tax Act.
3. Applicability of Rule 39 of the Orissa Sales Tax Rules.
4. Determination of the right to refund and the timing of such refund.

Issue-wise Detailed Analysis:

1. Validity of the Sales Tax Officer's Order Rejecting the Refund Application:
The assessee, a company manufacturing paper and board, challenged the Sales Tax Officer's order dated 18th August 1980, which rejected their refund application on the grounds that the assessments had been set aside and remanded for reassessment. The Sales Tax Officer deemed the refund application premature, stating that the refund would only be due after reassessments were completed. The assessee argued that with the setting aside of the assessments, the demands were wiped out, and no tax was due until fresh demands were raised. The court concluded that the rejection of the refund applications was untenable and irrelevant, as the amounts paid against the set-aside assessments became refundable.

2. Interpretation of Section 14 and Section 14-D of the Orissa Sales Tax Act:
Section 14 of the Orissa Sales Tax Act provides for the refund of any amount of tax, penalty, or interest paid in excess of the amount due. The court emphasized that a claim for refund arises when payment by the dealer is in excess of the amount due under the Act. With the assessments set aside, the court held that no tax was due from the assessee, making the amounts paid refundable. Section 14-D allows the Commissioner to withhold refunds if an order giving rise to a refund is under appeal or further proceeding. However, the court noted that this power had not been exercised in the present case, and the Sales Tax Officer did not have the authority to reject the refund application under Section 14-D.

3. Applicability of Rule 39 of the Orissa Sales Tax Rules:
The opposite parties relied on Rule 39 of the Orissa Sales Tax Rules, which the petitioners challenged as ultra vires the scheme of the Act. However, Dr. Pal, representing the petitioners, did not press this submission during the hearing. The court did not delve into the validity of Rule 39, focusing instead on the statutory provisions of the Orissa Sales Tax Act.

4. Determination of the Right to Refund and the Timing of Such Refund:
The court analyzed the statutory provisions and relevant case law to determine when a refund becomes due. It referred to the explanation to Section 11(3), which requires a return to be accompanied by proof of payment of the admitted tax. Since the petitioners had made such returns and paid the admitted tax, no further liability existed unless a fresh demand was raised. The court also cited relevant case law, including the Allahabad High Court's decision in Purshottam Dayal Varshney v. Commissioner of Income-tax, which held that tax paid under a set-aside assessment order becomes refundable. The court concluded that the amounts paid by the assessee against the set-aside demands were refundable, and the refund applications were not premature.

Conclusion:
The court quashed the Sales Tax Officer's order rejecting the refund application and issued a writ of mandamus directing the Sales Tax Officer to refund the amounts paid against the set-aside assessments in accordance with the law. The court emphasized that the right to claim a refund arises when the assessments are set aside, and the amounts paid become refundable, irrespective of pending reassessments. The court's decision aligns with the statutory provisions and relevant case law, ensuring that the assessee's right to a refund is upheld.