2008 (11) TMI 620 - HC - VAT and Sales Tax

Refund claim along with interest - Held that - Refund application dated October 1, 2002 filed by the petitioner, which was kept pending by opposite party No. 1 for about five years, was without any authority of law. Such action is always to be deprecated. The petitioner is entitled to get refund of ₹ 91,512 from October 1, 2002 along with interest as provided under section 14C of the OST Act during relevant time till the date of payment. Re-computation order dated August 30, 2007 (which was issued vide order No. 927 dated September 12, 2007) does not speak anything about petitioner s refund application dated October 1, 2002. It simply contains re-computation of the petitioner s tax liability as per the direction of the Sales Tax Tribunal vide order dated April 20, 2005 passed under annexure 6. In view of the above, the impugned order passed by opposite party No. 1 is not sustainable in the eyes of law. However, the petitioner shall be allowed by opposite party No. 1 to make correction of the refund amount to be ₹ 6,750 in place of ₹ 98,262 in the second refund application dated November 3, 2007 within a period of four weeks from today. It is so required because the petitioner claimed refund amount of ₹ 98,262 in its second application as no refund had been made to the petitioner on its first refund application dated October 1, 2002. The writ application is disposed of with direction to opposite party No. 1 to release the refundable amount in favour of the petitioner along with interest.

Issues Involved:
1. Entitlement to refund of Rs. 91,512 based on the refund application dated October 1, 2002.
2. Legality of the order dated September 13, 2007, rejecting the refund application.
3. Entitlement to refund of Rs. 98,262 along with interest at 24% per annum from the date of the original application till the date of payment.

Issue-wise Detailed Analysis:

1. Entitlement to Refund of Rs. 91,512:
The petitioner, a private limited company, sought a refund of Rs. 91,512 based on an assessment order dated December 22, 1997, which was confirmed by the first appellate authority on July 20, 2002. The petitioner filed a refund application on October 1, 2002, within the prescribed period under Section 14 of the Orissa Sales Tax Act, 1947 (OST Act). Despite this, the Sales Tax Officer (STO) did not act on the refund application for about five years and ultimately rejected it on September 13, 2007, without providing any reason for the delay. The court held that the STO was obliged under Section 14 to promptly consider the refund application and refund the amount within ninety days, failing which the petitioner was entitled to interest on the refund amount. The court cited precedents emphasizing that refund applications should not be kept pending and must be processed within a reasonable time.

2. Legality of the Order Dated September 13, 2007:
The court examined the legality of the STO's order dated September 13, 2007, which rejected the refund application on the grounds that it was premature as per the re-computation order dated September 12, 2007. The court found that the STO did not conduct any inquiry or provide the petitioner with an opportunity to be heard before rejecting the application, violating Rule 39 of the Orissa Sales Tax Rules, 1947 (OST Rules). Furthermore, the court noted that the re-computation order did not address the refund application. The court concluded that the rejection of the refund application was not sustainable in law and quashed the order.

3. Entitlement to Refund of Rs. 98,262 with Interest:
The petitioner claimed a refund of Rs. 98,262, which included an additional amount of Rs. 6,750 resulting from a re-computation order dated August 30, 2007. The court held that the petitioner was entitled to interest on the original refund amount of Rs. 91,512 from the date of the first refund application (October 1, 2002) under Section 14C of the OST Act. However, the petitioner was not entitled to interest on the enhanced refund amount of Rs. 98,262 from the date of the first application but could claim interest on the additional amount of Rs. 6,750 from the date of the second refund application (November 3, 2007). The court directed the STO to allow the petitioner to correct the refund amount in the second application and process the refund along with interest within eight weeks.

Conclusion:
The court quashed the STO's order dated September 13, 2007, and directed the STO to release the refundable amount along with applicable interest within eight weeks from the date of receipt of the certified copy of the order. The petitioner was entitled to interest on Rs. 91,512 from October 1, 2002, and on the additional amount of Rs. 6,750 from November 3, 2007.

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