2009 (9) TMI 884 - HC - VAT and Sales Tax

Refund application of unadjusted input tax credit under section 58(4) of the OVAT Act, 2004 read with rule 66 of the Orissa Value Added Tax Rules, 2005 rejected Held that - While the petitioner s refund application was not processed even after the Assistant Commissioner s request to the Commissioner of Commercial Taxes to withhold the refund was turned down by the Commissioner on December 10, 2008 with a further direction to him to dispose of the refund application after necessary enquiry. This fact clearly indicates mala fide in exercise of quasi-judicial authority. We allow the writ application and quash the order dated March 9, 2009 (annexure 8) rejecting the petitioner s refund application, and direct the opposite parties to effect the refund amount claimed by the petitioner under annexure 2 within a period of two months from the date of communication of this order along with interest due to the petitioner in terms of section 59 of the OVAT Act, 2004.

Issues Involved:

1. Legality of the rejection of the refund application under section 57(3) of the OVAT Act, 2004.
2. Entitlement to refund of unadjusted input tax credit under section 58(4) of the OVAT Act, 2004.
3. Application of sections 57 and 58 of the OVAT Act, 2004.
4. Validity of the reassessment order and its impact on the refund claim.
5. Allegations of mala fide in the exercise of quasi-judicial authority.

Issue-wise Detailed Analysis:

1. Legality of the rejection of the refund application under section 57(3) of the OVAT Act, 2004:
The petitioner argued that the rejection of the refund application was illegal, arbitrary, and without jurisdiction. The Assistant Commissioner rejected the refund application on the grounds that the original assessment order for 2005-06 had been set aside in appeal and no reassessment had been made. The court found that the rejection based on section 57(3) was not applicable as the reassessment was limited to the additional input tax credit of Rs. 17,69,021.21 and did not affect the already determined excess input tax credit of Rs. 6,56,77,059.97.

2. Entitlement to refund of unadjusted input tax credit under section 58(4) of the OVAT Act, 2004:
The petitioner claimed entitlement to a refund of unadjusted input tax credit under section 58(4) and rule 66 of the OVAT Rules, 2005. The court agreed, noting that the petitioner had met the statutory requirements by filing the refund application within one month from the expiry of twenty-four months from the end of the assessment year. The court emphasized that section 58 deals with special circumstances for refund and is distinct from section 57.

3. Application of sections 57 and 58 of the OVAT Act, 2004:
The court analyzed sections 57 and 58 of the OVAT Act and concluded that they provide for different circumstances for refunds. Section 57 is a general clause covering refunds, while section 58 specifically deals with refunds under special circumstances. The court rejected the Revenue's contention that sections 57 and 58 should be read together, affirming that they are distinct provisions with different applications.

4. Validity of the reassessment order and its impact on the refund claim:
The court found that the reassessment order following the appeal was a "limited remand" and not an "open remand." The reassessment was limited to the additional input tax credit claim of Rs. 17,69,021.21 and did not impact the already determined excess input tax credit of Rs. 6,56,77,059.97. Therefore, the reassessment did not preclude the petitioner from claiming a refund of the unadjusted input tax credit.

5. Allegations of mala fide in the exercise of quasi-judicial authority:
The court noted that the Assistant Commissioner's request to withhold the refund was turned down by the Commissioner, who directed the disposal of the refund application after necessary enquiry. Despite this, the refund application was not processed, indicating mala fide in the exercise of quasi-judicial authority. The court cited the Supreme Court's principles on mandamus, emphasizing that the High Court has the power to compel the performance of statutory duties and prevent injustice.

Conclusion:
The court quashed the order rejecting the refund application and directed the authorities to effect the refund within two months, along with interest as per section 59 of the OVAT Act, 2004. The writ petition was allowed without costs.

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