2009 (4) TMI 844 - HC - VAT and Sales Tax

Withhold refunds under section 33C of the Andhra Pradesh General Sales Tax Act, 1957 - Held that - None of the orders impugned in this batch of writ petitions recorded any reasons whatsoever nor set out any facts or circumstances for recording that the grant of refund is likely to adversely affect the Revenue. These orders cannot therefore be sustained. Consequently the several orders of the first respondent, dated November 1, 2008, impugned in this batch of writ petitions, are set aside.

Summary

Issues Involved:

1. Validity of the orders passed under Section 33C of the Andhra Pradesh General Sales Tax Act, 1957.
2. Requirement of recording reasons for withholding refunds.
3. Normative range of circumstances considered as "adversely affecting the Revenue."

Issue-wise Detailed Analysis:

1. Validity of the Orders Passed Under Section 33C of the Act of 1957:

The petitioner, a small-scale industry, sought tax exemptions for second sales of pulp-moulded egg trays under the Andhra Pradesh General Sales Tax Act, 1957 (APGST Act) and the Central Sales Tax Act, 1956 (CST Act). Initially granted by the Commercial Tax Officer, the exemption was later revoked by the Deputy Commissioner, leading to demand notices. The Sales Tax Appellate Tribunal (STAT) allowed the petitioner's appeals, prompting the petitioner to seek refunds of deposits made as a condition precedent for the appeals. Despite refund orders being issued, the refunds were withheld under Section 33C of the APGST Act due to pending revisions by the Revenue before the High Court.

2. Requirement of Recording Reasons for Withholding Refunds:

The court emphasized that the power under Section 33C is conditioned upon forming an opinion that granting the refund would adversely affect the Revenue. This power is not absolute but must be exercised on an objective assessment of relevant circumstances. The court stated that the mere pendency of an appeal or proceeding is insufficient to justify withholding refunds. Reasons must be recorded, and relevant facts and circumstances must be set out to form an opinion that the refund would adversely affect the Revenue. This ensures that the discretion is exercised fairly and transparently, adhering to principles of natural justice.

3. Normative Range of Circumstances Considered as "Adversely Affecting the Revenue":

The court identified several factors that could justify withholding a refund under Section 33C, including:
- The financial stability and creditworthiness of the assessee.
- The amount involved in the refund.
- The likelihood of difficulty in recovering the amounts if the State succeeds in the appeal.
- The potential interest liability on the State in case of delayed refunds.
- The adverse economic impact on the business of the assessee due to withholding the refund.

The court suggested that the State or the Commissioner should issue guidelines to ensure uniformity in exercising discretion under Section 33C.

Conclusion:

The court found that the orders withholding refunds did not record any reasons or set out relevant facts and circumstances, rendering them unsustainable. Consequently, the orders dated November 1, 2008, were set aside, and the writ petitions were allowed. The court also expressed gratitude to the counsel for their balanced and comprehensive arguments.