2014 (8) TMI 817 - HC - VAT and Sales Tax

Interest claim on refund - Whether a dealer can make adjustment while depositing tax on the basis of tax, admitted to be payable, out of certain amounts which according to him had been deposited in excess for some other assessment periods - Held that - Sub-section (1) of Section 29 of UPTT requires the Assessing Authority to refund to a dealer any amount of tax paid in excess of the amount due from him under the Act. Under the proviso, any amount found to be refundable had to be first adjusted towards tax or any other amount outstanding against the dealer under the Act. Sub-section (2) imposes a liability for the payment of interest upon the amount found to be refundable. The liability to pay interest would arise if it is not refunded within three months from the date of the order of refund passed by the Assessing Authority or from the date of the receipt by him of the order of refund, where it is passed by any other Court or competent authority. The Supreme Court in Commissioner of Sales Tax, U.P. Vs. Hind Lamps Ltd. (2008 (7) TMI 563 - SUPREME COURT OF INDIA) has clearly held that the expression an amount to be found to be refundable must be as a result of an adjudication. Under the Explanation I to sub-section (2), the date of refund is relatable to the intimation regarding the preparation of the refund voucher. The decision in Commissioner of Sales Tax, U.P. Vs. Hind Lamps Ltd. has been followed in the case of the assessee itself by the Supreme Court on 4 March 2014 while reversing the judgment of the learned Single Judge of this Court in Lucent Technologies. In view of this clear legal position, the conflict between the views taken by the two Division Benches of this Court in Indodan Milk Products 1973 (7) TMI 90 - ALLAHABAD HIGH COURT and in Ellora Mechanical Products 2006 (1) TMI 557 - ALLAHABAD HIGH COURT would stand resolved in terms of the law laid down by the Supreme Court, as noticed above. - Decided in favour of assessee.

Issues Involved:

1. Interpretation of Section 29 of the U.P. Trade Tax Act, 1948.
2. Obligation to refund tax amounts and pay interest upon remand of assessment orders.
3. Conflict between the judgments in Indodan Milk Products Ltd. Vs. State of U.P. and Ellora Mechanical Products Pvt. Ltd. Vs. State of U.P.
4. Relevance of Supreme Court judgments in Commissioner of Sales Tax, U.P. Vs. Hind Lamps Ltd. and Commissioner, Trade Tax, U.P. Vs. Lucent Technologies Pvt. Ltd.

Detailed Analysis:

1. Interpretation of Section 29 of the U.P. Trade Tax Act, 1948:

The core issue revolves around the interpretation of Section 29, which deals with refunds of tax, fees, or other dues paid in excess. The section mandates that any amount found refundable should be adjusted first against any outstanding dues, and the balance, if any, should be refunded. Sub-section (2) specifies that if the refund is not processed within three months from the date of the refund order, the dealer is entitled to interest at 18% per annum. The key phrase "amount found to be refundable" is critical for determining the obligation to refund and the accrual of interest.

2. Obligation to Refund Tax Amounts and Pay Interest Upon Remand of Assessment Orders:

The question was whether the assessing officer is obligated to refund the amount and pay interest if the appellate authority remands the case without specific directions to refund. The judgment clarifies that the obligation to refund and pay interest arises only when a specific refund order is issued by the assessing authority or any competent authority. This interpretation is consistent with the legislative intent to ensure refunds are based on formal adjudications rather than provisional or interim orders.

3. Conflict Between Judgments in Indodan Milk Products Ltd. Vs. State of U.P. and Ellora Mechanical Products Pvt. Ltd. Vs. State of U.P.:

In Indodan Milk Products, the court held that interest on refundable amounts accrues from the date of the specific refund order passed by the assessing authority. Conversely, Ellora Mechanical Products, following Hind Lamps, suggested that refunds should be processed based on the remand order itself, without waiting for a specific refund order. This conflict necessitated a reference to the Full Bench to resolve the divergent views.

4. Relevance of Supreme Court Judgments in Commissioner of Sales Tax, U.P. Vs. Hind Lamps Ltd. and Commissioner, Trade Tax, U.P. Vs. Lucent Technologies Pvt. Ltd.:

The Supreme Court in Hind Lamps clarified that the expression "found to be refundable" requires a formal adjudication. The dealer cannot unilaterally adjust amounts presumed to be refundable without an explicit order. This principle was reiterated in Lucent Technologies, where the Supreme Court reversed the High Court's decision that had followed Ellora Mechanical Products. The Supreme Court emphasized that refunds and interest obligations arise only from specific refund orders, thereby settling the legal interpretation of Section 29.

Conclusion:

The Full Bench resolved the legal conflict by aligning with the Supreme Court's interpretation in Hind Lamps and Lucent Technologies. It held that the obligation to refund and pay interest under Section 29 arises only upon a specific refund order by the assessing authority or any competent authority. This decision harmonizes the conflicting judgments and provides a clear legal framework for handling refunds and interest under the U.P. Trade Tax Act, 1948. The revisions will now be disposed of in light of this interpretation.

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