2006 (4) TMI 533 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the petitioner is entitled to interest on the refund of sales tax paid under protest for the period prior to Assessment Year 1993-94.

Analysis:
The petitioner, a stone crushing firm, paid sales tax under protest due to the belief that stone crushing was considered a manufacturing activity. However, following Supreme Court judgments, it was established that stone crushing does not fall under manufacturing activity, leading to a refund claim by the petitioner. The main contention was the entitlement to interest on the refund amount. The respondent argued that interest was only applicable from Assessment Year 1993-94 onwards as per sec. 54(1)(aa) of the Gujarat Sales Tax Act, 1969.

The Supreme Court's decision in the case of Sandvik Asia Ltd. v. Commissioner of Income-tax-I emphasized compensating the assessee for unjustified retention of money by government authorities. Drawing from this precedent, the High Court directed the government to pay simple interest at 9% p.a. to the petitioner on the amount retained by revenue authorities for the period before 1993-94. The interest was to be calculated and paid within specific timelines to ensure prompt compensation. Failure to comply would result in an increased interest rate of 15% p.a. after two months from the court's directive.

In conclusion, the High Court allowed the petition, directing the payment of interest to the petitioner at the specified rate. The ruling was made absolute with no order as to costs, and direct service was permitted for implementation of the judgment.