2009 (4) TMI 846 - HC - VAT and Sales Tax

Withhold of refund due to the petitioner - Held that - A perusal of impugned order dated April 28 2006 (P8) shows that it has recorded a finding granting approval to withhold refund of 4, 32, 21, 206 by observing that recovery of the aforesaid amount would be adversely affected later on if the refund is allowed. The Commissioner has failed to record any reason as to how the recovery is likely to be affected. The order is totally laconic as it does not give any reasons. There is not even a whisper of the material forming basis of aforesaid satisfaction by the Commissioner. The impugned order is wholly unsustainable in the eyes of law and is thus liable to be set aside. Appeal allowed. The impugned order dated April 28 2006 (P8) is set aside. The respondents are directed to refund a sum of 4, 32, 21, 206 in respect of assessment year 2002-2003 along with interest to the assessee-Society.

Summary

Issues:
1. Quashing of order withholding refund of Rs. 4,32,21,206 due to petitioner under article 226 of the Constitution.
2. Compliance with section 44 of the Haryana General Sales Tax Act, 1973 regarding withholding of refund.
3. Justification of withholding refund by the Excise and Taxation Commissioner.
4. Financial stringency plea by the petitioner and its impact on the refund.

Analysis:

1. The petition sought to quash the order dated April 28, 2006, passed by the Excise and Taxation Commissioner, Haryana, withholding a refund of Rs. 4,32,21,206 due to the petitioner, a Co-operative Society. The petitioner applied for refund after the assessment for the year 2002-2003 was finalized, and the First Appellate Authority accepted the appeal but remanded the matter to the Assessing Authority. The Society's financial position was highlighted, citing financial stringency, and the refund was withheld without providing a proper reason.

2. The court analyzed section 44 of the Haryana General Sales Tax Act, 1973, which allows withholding of a refund during pending proceedings if it may adversely affect recovery. The impugned order failed to provide any substantial reasons for withholding the refund, rendering it unsustainable in the eyes of the law. The Commissioner's decision lacked justification on how the recovery would be affected, leading to the order being set aside.

3. The court emphasized the importance of a balanced approach while withholding refunds, especially for enterprises with limited liquidity. Referring to similar cases where refund withholding orders were quashed, the court highlighted that authorities must consider the impact on businesses and revenue generation. Mechanical passing of orders withholding substantial refunds was discouraged, and sensitivity towards the financial well-being of enterprises was advised.

4. The argument regarding the petitioner's plea of financial stringency, which was rejected by the Appellate Authority and Tribunal previously, did not hold ground in justifying the refund withholding. The court emphasized that reasons for an order must be based on the order itself, citing relevant legal precedents. Ultimately, the petition succeeded, and the order withholding the refund was set aside, directing the respondents to refund the amount due along with statutory interest.

This detailed analysis of the judgment covers the issues involved comprehensively, highlighting the legal aspects and reasoning behind the court's decision to quash the order withholding the refund.