1997 (1) TMI 505 - HC - VAT and Sales Tax

Summary

Issues:
Petition seeking direction to adjust refund amount for meeting sales tax dues of next year, challenge to order withholding refund amount under section 12(6) of the Act.

Analysis:
The petitioner, a company engaged in textile and vanaspati ghee business, sought a direction to adjust a refund amount of Rs. 33,558 for the assessment year 1975-76 against sales tax dues of the next year. An additional sales tax liability was created after assessment for 1975-76, which was reduced by Rs. 33,558 in an appeal. The petitioner applied for the refund, but the Excise and Taxation Officer withheld it under section 12(6) of the Act, citing a pending suo motu action. The petitioner deposited an amount to meet the outstanding sales tax demand for the next year and requested adjustment of the refund. The assessing authority threatened penalty and interest, claiming the refund was withheld due to pending suo motu action. The respondents admitted withholding the refund but failed to prove fulfillment of conditions under section 12(6) of the Act.

The key question was whether the assessing authority could validly withhold the refund under section 12(6) of the Act. The court emphasized that the authority must form an opinion that the refund could adversely affect recovery and show that the refund was subject to appeal or further proceedings. The court found no pending appeal or revision against the appellate order reducing the tax liability. The Excise and Taxation Officer's assertion of pending suo motu action lacked substantiation, as no record was presented to support the claim. The court highlighted the necessity for the assessing authority to record satisfaction that the refund might affect recovery, which was absent in this case.

The court deemed the withholding of the refund amount as illegal and invalid, contrary to section 12(6) of the Act. It allowed adjustment of the refund amount towards the tax demand for the next year, absolving the petitioner from penalty or interest for non-payment. The court concluded by allowing the writ petition in favor of the petitioner, with no costs imposed.