1997 (8) TMI 502 - HC - VAT and Sales Tax

Summary

Issues:
1. Legality of order rejecting application for refund under section 14 of the Orissa Sales Tax Act.
2. Compliance with section 14-D of the Act for withholding refund.
3. Requirement of forming an opinion by the Commissioner before withholding refund.
4. Consideration of creditworthiness in withholding refund.
5. Need for relevant information and details for forming an opinion on creditworthiness.

Analysis:

1. The petitioner challenged the order rejecting its refund application under section 14 of the Orissa Sales Tax Act. The Commissioner had withheld the refund amount based on section 14-D of the Act, citing potential difficulty in collecting sales tax dues if the appeal favored the State. The petitioner contended that the order was indefensible as the requirements of section 14-D were not met.

2. Section 14-D of the Act allows the Commissioner to withhold a refund if it is likely to adversely affect the Revenue. However, the Court found that the Commissioner did not form or record an opinion as required by the statute. Mere reference to the section was deemed insufficient, emphasizing that the Commissioner's opinion must be based on grounds and must be part of the records.

3. The Court clarified that forming an "opinion" under section 14-D entails more than hearsay or speculation. It must be a judgment or belief based on valid grounds. Mere pendency of an appeal cannot be the sole reason for withholding a refund; the Commissioner must genuinely believe that granting the refund would harm the Revenue.

4. The Court acknowledged the importance of considering creditworthiness before withholding a refund. While a pre-decisional hearing was not mandated, the Commissioner should have sought relevant information to assess creditworthiness. The petitioner, a reputed entity, was not given the opportunity to demonstrate its creditworthiness, which was deemed essential for a legitimate decision.

5. The judgment highlighted the necessity of gathering relevant details and allowing the concerned party to provide information regarding creditworthiness. The Court set aside the impugned order and directed a fresh consideration by the Commissioner within one month. The petitioner was given the opportunity to present financial stability details for the Commissioner's assessment regarding creditworthiness before a final decision on the refund application.

In conclusion, the Court emphasized the importance of complying with statutory requirements, forming a valid opinion based on grounds, and considering creditworthiness before withholding a refund under the Orissa Sales Tax Act.