2012 (11) TMI 1044 - HC - VAT and Sales Tax

Withholding refund claim with interest - Held that - It was noticed that the order giving rise to refund was subject-matter of further proceedings and it had been certified that the recovery of the amount ultimately found due would be adversely affected later on, if the refund is allowed and the refund was directed to be withheld. Section 21 of the Act provides that the taxing authority itself is to record reasons in writing and if the authority is below the rank of the Commissioner, he is to refer the case within 30 days of the application for refund to the Commissioner. Thus, withholding order of refund is held to be legally unsustainable, the order dated September 27, 2012 (annexure P5 in CWP No. 20823 of 2012) is hereby quashed. A perusal of section 20(4) to 20(11) goes on to show that where the excess amount has been paid, refund will be allowed by the Assessing Authority and shall carry interest at one per cent per month Present petition is allowed and the respondents are directed to refund sum of ₹ 21,88,947 along with interest at one per cent per month from the date after expiry of 60 days after passing of the assessment order, i.e., April 8, 2012 till payment. The said amount be paid to the petitioner within a period of one month from the date of receipt of certified copy of the order.

Issues Involved:
1. Justification for withholding refund under Section 21 of the Haryana Value Added Tax Act, 2003.
2. Validity of the non-speaking order dated September 27, 2012.
3. Entitlement to interest on the refund amount.
4. Applicability of alternative remedies under the statute.

Detailed Analysis:

1. Justification for Withholding Refund under Section 21 of the Act:
The primary issue for adjudication was whether the respondents were justified in withholding the refund under Section 21 of the Haryana Value Added Tax Act, 2003 (the Act). Section 21 allows the taxing authority to withhold a refund if the order giving rise to the refund is the subject of further proceedings and if granting the refund is likely to adversely affect recovery in the event of success in such proceedings. The authority must record reasons in writing and refer the case to the Commissioner if the authority is below the rank of Commissioner. The Commissioner then has three options: withhold the refund, direct refund upon furnishing of security, or decline to withhold the refund.

2. Validity of the Non-Speaking Order Dated September 27, 2012:
The petitioner argued that the order dated September 27, 2012, was non-speaking and lacked reasons, making it violative of principles of natural justice. The court agreed, noting that the Commissioner's order merely followed the reference without giving any reasons. The court emphasized that Section 21(2) requires the Commissioner to provide reasons for withholding the refund or for declining to withhold it. The absence of reasons rendered the order unsustainable. The court referenced previous judgments, including National Agricultural Co-operative Marketing Federation of India Ltd. v. State of Haryana, which held that failure to record reasons makes such orders legally unsustainable.

3. Entitlement to Interest on the Refund Amount:
The court examined Sections 20(4) to 20(11) of the Act, which stipulate that any excess amount paid should be refunded with interest at one percent per month if not refunded within 60 days of the application. The court noted that the assessment was completed on February 8, 2012, and the surety bond was accepted on June 13, 2012, with the revision notice issued on August 28, 2012, well beyond the 60-day period. The court cited previous judgments, including Bhasin Associates v. State of Haryana and Khem Ram Devi Sahai v. State of Haryana, which directed refunds with interest under similar circumstances.

4. Applicability of Alternative Remedies under the Statute:
The State contended that the petitioner should have exhausted statutory remedies of appeal. However, the court held that it could exercise jurisdiction under Articles 226 and 227 of the Constitution of India when the State's action was without jurisdiction or violated principles of natural justice, even if alternative remedies were available. The court referenced judgments from the Supreme Court, including M.P. State Agro Industries Development Corporation Ltd. v. Jahan Khan, to support this stance.

Conclusion:
The court allowed the petition, quashing the order dated September 27, 2012, and directed the respondents to refund Rs. 21,88,947 along with interest at one percent per month from April 8, 2012, until payment. The refund was to be made within one month from the receipt of the certified copy of the order.

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