2016 (2) TMI 612 - HC - VAT and Sales Tax

Claim of interest of on Refund of sales tax / vat which was paid under protest - earlier Apex court clarified that if lease is executed in one State but the goods are situated in another State, no local tax was payable in the state - Held that - Such refund was actually paid to the petitioners alongwith partial interest. When the petitioners demanded interest for the full period, the authority conveyed to the petitioners that by virtue of the judgement of Supreme Court in case of Mafatlal Industries on the basis of principles of unjust enrichment, the petitioners were not entitled to any refund in the first place. Question of paying interest, therefore, would not arise. For multiple reasons, such approach was wholly erroneous. Firstly, whether the principles of unjust enrichment, as expounded by the Supreme Court in case of Mafatlal Industries would apply at all is a question. More importantly, such question could not have been considered by the authority without any opportunity to the petitioner. Even more importantly, the claim of interest is statutorily recognized under Section 54 of the Sales Tax Act and flows from the petitioners right to seek refund. The authority who himself granted such refund, now questions the legality and validity of his own order. He did not have any power of review. The revision authority has not yet taken his order in revision. The Assistant Commissioner of Commercial Tax, therefore, had no authority to question his own order of granting refund. The Competent authority shall compute the interest payable to the petitioners for the entire period between the deposit of the tax till actual payment and pay to the petitioners such interest at the statutory rate after adjusting the interest already computed and paid over while granting refund. - Decided in favor of assessee.

Summary

Issues:
Challenge to order by Assistant Commissioner of Commercial Tax regarding refund interest computation.

Analysis:
1. The petitioners challenged an order passed by the Assistant Commissioner of Commercial Tax related to refund of taxes paid under protest on lease agreements outside the State of Gujarat.
2. The petitioners were engaged in leasing goods and had paid sales tax under protest, which was later clarified by the Supreme Court in a relevant case.
3. The Gujarat Value Added Tax Tribunal allowed the petitioners' appeals, setting aside assessment and appellate orders for imposing tax, penalty, and interest on lease income.
4. The appellate authority also allowed the petitioners' appeal for the assessment year 1999-2000.
5. The competent authority granted refund to the petitioners under three separate orders, with interest computed from different dates based on the judgment outcomes.
6. The petitioners requested further interest on the refund, which was rejected by the authority citing principles of unjust enrichment and pending legal proceedings.
7. The High Court found the authority's rejection of interest application erroneous, emphasizing the statutory right to seek refund interest under Section 54 of the Sales Tax Act.
8. The Court criticized the authority for questioning its own refund order without proper review procedures and statutory limitations, highlighting the breakdown of the quasi-judicial process.
9. The High Court set aside the impugned order and directed the competent authority to compute and pay the interest to the petitioners for the entire period from tax deposit to actual payment by a specified date.

This detailed analysis covers the issues involved in the legal judgment, outlining the background, arguments, and the court's decision in a comprehensive manner.