2016 (1) TMI 830 - HC - VAT and Sales Tax

Refund of tax paid - Interstate sale or stock transfer - release of the bank guarantee - According to the petitioner, the goods were directly dispatched to its depots located in the State of U.P. and that the goods did not move in pursuance of any pre-determined contract or sale. - Held that - until and unless there is an adjudication and an authority finds that the amount is refundable, no amount can be refunded to the petitioner at this stage since we find that the assessment proceedings are still pending before the Assessing Officer. - the prayer for refund of the disputed tax pursuant to the setting aside of the assessment order cannot be granted to the petitioner at this stage. - Decided against the assessee. Release of the bank guarantee - Held that - once the assessment order is set aside by the Appellate Authority, the security relating to the demand comes to an end. Once the assessment order is set aside, there is no requirement for the assessee to continue to furnish security or in the instant case, the bank guarantee. - In the light of the aforesaid, the impugned notice dated 15.12.2015 directing the petitioner to extend the bank guarantee can not be sustained and is quashed. The petitioner is entitled to get its bank guarantee released. - Decided in favor of assessee.

Summary

Issues:
1. Stock transfers made by the petitioner in the State of U.P.
2. Refund of disputed tax deposited by the petitioner.
3. Renewal of bank guarantee demanded by the Assessing Authority.

Analysis:

*Stock Transfers:*
The petitioner, a limited company registered under the Indian Companies Act, had no manufacturing unit in the State of U.P. The controversy revolved around stock transfers made by the petitioner in U.P. The petitioner claimed that goods were dispatched directly to its depots in U.P. without a pre-determined contract. The dispute spanned assessment years 2005-06 to 2011-12. The petitioner disclosed stock transfers amounting to Rs. 17,12,47,311.75, but the Assessing Authority assessed tax at Rs. 2,05,99,886. The petitioner appealed, and the Tribunal eventually set aside the assessment order, directing a fresh assessment.

*Refund of Tax:*
The petitioner sought a refund of the disputed tax deposited, amounting to Rs. 93,09,968, along with bank guarantees. The Assessing Officer demanded renewal of the bank guarantee for five years, threatening cancellation of registration if not complied with. The petitioner renewed the bank guarantee for one month and filed a writ petition challenging the renewal notice. The court held that until an authority finds the amount refundable, no refund could be granted as assessment proceedings were ongoing.

*Bank Guarantee Renewal:*
Regarding the bank guarantee, the Tribunal's stay order required the petitioner to furnish security. However, once the assessment order was set aside, the requirement for security ceased. The court ruled that the Assessing Officer could not insist on extending the bank guarantee for five years or direct encashment. The notice demanding bank guarantee extension was quashed, and the petitioner was entitled to the release of the bank guarantee.

*Conclusion:*
The court partially allowed the writ petition, rejecting the refund of tax but granting the release of the bank guarantee. The Assessing Officer was directed to complete assessment proceedings within six months, provided the petitioner cooperated. The judgment clarified the obligations regarding stock transfers, tax refunds, and bank guarantee renewals, ensuring procedural fairness and adherence to legal provisions in taxation matters.