2003 (6) TMI 452 - HC - VAT and Sales Tax

Summary

Issues:
1. Entitlement to refund of tax deducted at source and interest thereon.
2. Delay in refunding the amount and entitlement to interest.
3. Compliance with statutory provisions regarding depositing tax deducted at source.

Analysis:

Issue 1: Entitlement to refund of tax deducted at source and interest thereon
The petitioner, a works contractor, entered into contracts with a company where tax was deducted at source as per the Bihar Finance Act. However, subsequent court decisions declared the relevant sections unconstitutional. The petitioner sought a refund of the tax deducted and applied for it in 1998, claiming interest as per section 43 of the Act. The court acknowledged the petitioner's entitlement to interest on the refund amount from the due date until the actual refund date.

Issue 2: Delay in refunding the amount and entitlement to interest
The petitioner filed a writ petition for a mandamus to direct the State and the department to refund the amount with interest. The department argued that the delay was due to verifying the amount, not deliberate. The court emphasized that the statutory scheme entitled the petitioner to interest after six months from the refund application date. The court rejected the department's argument and held that the delay in refunding the amount was not justifiable. The petitioner was awarded interest on the refunded amount from the due date till the actual refund date.

Issue 3: Compliance with statutory provisions regarding depositing tax deducted at source
The court highlighted the importance of strict compliance with rule 26A of the Bihar Sales Tax Rules to prevent delays in refunding amounts to taxpayers. The court directed the State, treasury officers, and the Commercial Taxes Department to enforce the rules strictly. It emphasized invoking penalties against those not complying with the rules and ensuring timely refunds to entitled dealers. The court stressed that adherence to these provisions would save the government from incurring interest liabilities and enable prompt refunds as per the law.

In conclusion, the court allowed the writ petition, directing the respondents to pay interest to the petitioner on the refunded amount and ensure strict implementation of the relevant tax rules. The court emphasized the importance of timely refunds and compliance with statutory provisions to prevent delays and financial implications for the government.