2015 (12) TMI 640 - HC - VAT and Sales Tax

Claim of interest for delayed Refund - revenue contended that in the case at hand no excess deposit of tax was made by the assessee, but he was held entitled to a refund by the assessing officer only on account of the benefit of set-off. - Held that - Section 23(2) of the Act of 1954 entitles an assessee to refund of excess tax paid to the Department along with interest at 15 per cent from the date of excess amounts obtain with the Department till date of payment. It is obvious that the section in issue incorporates a principle of equity. Money only has time value, i.e., the value is diluted with time. Interest compensates for dilution of money value. If the contention of the OIC were to be upheld, the assessee s entitlement to refund for reasons of set-off he would be made to bleed with passage of time and be left with no recourse. Such an interpretation would also confer arbitrary powers in the hands of the Department to hold back without limit money due to an assessee as refund. In the circumstances, I am not inclined to narrowly read section 23(2) to exclude payment of interest at the rate prescribed thereunder on excess tax in deposit with the Department arrived at by the assessing office for reason of the assessee s right to set-off and which amount was admittedly found refundable to the assessee. - There is no illegality or perversity in the impugned order passed by the tax Board. - Decided against Revenue.

Summary

Issues:
1. Entitlement to interest on refund amount under Rajasthan Sales Tax Act, 1954.

Analysis:
The case involved a revision petition challenging an order passed by the Rajasthan Tax Board regarding the entitlement of interest on a refund amount under the Rajasthan Sales Tax Act, 1954. The petitioner, engaged in the business of manufacturing and selling tin containers and mustard oil, was directed by the assessing officer to be refunded an amount resulting from the right of set off of tax. The petitioner appealed before the Board seeking interest at the rate of 15 per cent on the refund amount. The Board, in its order dated March 23, 1998, allowed the petitioner's claim for interest at the rate of 15 per cent from the date the amount became due till the date of payment.

Upon hearing the officer in-charge and examining the impugned order, the court considered the submission challenging the payment of interest at the rate of 15 per cent on the refund amount. The officer in-charge contended that the decision to pay interest was not within the scope of section 23(2) of the Rajasthan Sales Tax Act, 1954. However, the court referred to section 23 of the Act, which provides for refunds to dealers along with interest at the rate of 15 per cent per annum from the date of deposit of the amount to be refunded.

The court analyzed that section 23(2) of the Act entitles an assessee to a refund of excess tax paid along with interest at 15 per cent from the date of deposit till the date of payment. It emphasized that interest compensates for the dilution of money value over time and ensures equity in financial transactions. Upholding the petitioner's entitlement to interest on the refund amount, the court rejected the officer's contention that such entitlement was not valid in cases of refunds due to set-off benefits. The court concluded that denying interest on refund amounts due to set-off would unfairly disadvantage the assessee and give arbitrary powers to the Department to withhold refunds indefinitely.

In light of the above analysis, the court found no merit in the officer's submission challenging the order of the Tax Board dated March 23, 1998. It held that there was no illegality or perversity in the impugned order and dismissed the revision petition, affirming the entitlement of the petitioner to interest on the refund amount as per the provisions of the Rajasthan Sales Tax Act, 1954.