2016 (6) TMI 727 - HC - VAT and Sales Tax

Refund - process of pre-audit before granting refund to the petitioners - Held that - On all counts, the procedure adopted by the department was wholly unauthorised and impermissible in law. To be bound by an order of higher authority in an administrative set up is entirely different from the discretion of a statutory authority being governed by an outside agency. In effect the directions to pass the order in a particular manner came to be issued by an authority who was a party in the appeal and therefore was a person interested in tax litigations. He disapproved the draft order passed by tax appellate authority and asked him to modify his order and forward a copy of fresh order to him. This would be in grossest breach of natural justice and the order would be tainted by bias. The Joint Commissioner had already passed a draft order which contained detailed discussion, reasons and ultimate conclusions including directions to be issued. It is true that an order which is not yet signed by the competent authority would remain as a draft and ordinarily and for valid reasons it would always be open for the authority to pass another or different order before it is signed. However, in the present case, the order remained at a draft stage only on account of wholly unauthorised interference by the external authority. We therefore, direct the Joint Commissioner to proceed to pass the order in terms of the draft order dated 26.2.2010 latest by 10th July, 2016. We are informed that the then Joint Commissioner who had framed the draft order has retired and he has been replaced by another officer. For our purpose this would make no difference. The Government agencies are not without any remedy in case an erroneous or even palpably wrong order being passed. Statute provides for sufficient safeguards in terms of the appeals and revisions. It is always open to the Government to have any such order legally scrutinised and resort to such legal remedy as is provided in the statute. - Decided in favor of petitioner.

Issues Involved:
1. Legitimacy of pre-audit procedure before granting refund.
2. Entitlement of the petitioners to a refund of ?75,73,923/-.
3. Authority of appellate bodies and interference by higher authorities.
4. Compliance with statutory provisions and principles of natural justice.

Issue-wise Detailed Analysis:

1. Legitimacy of Pre-audit Procedure Before Granting Refund:
The petitioners challenged the pre-audit process required before granting a refund exceeding ?5 lakhs, arguing that it lacked legal sanctity. The court scrutinized the procedure and found that it did not stem from any statutory scheme under the Gujarat Value Added Tax Act, 2003. The Act makes detailed provisions for filing returns, assessments, appeals, and revisions, but it does not authorize any pre-audit procedure. The court emphasized that the appellate authority, being a quasi-judicial body, must act independently without any external influence, and any such interference would undermine the statutory scheme.

2. Entitlement of the Petitioners to a Refund of ?75,73,923/-:
The petitioners sought a refund of ?75,73,923/- based on a decision by the Tribunal in their favor. The Tribunal had remanded the matter to the Joint Commissioner for a fresh decision. The Joint Commissioner, after a detailed hearing, concluded that the petitioners were entitled to the refund and issued a draft order accordingly. However, due to internal directives for pre-audit, the order was not finalized. The court found that the petitioners were indeed entitled to the refund as per the Tribunal's decision and the Joint Commissioner's draft order.

3. Authority of Appellate Bodies and Interference by Higher Authorities:
The court addressed the issue of whether a higher authority could control the discretion of a statutory appellate authority. It was noted that the Joint Commissioner, acting as an appellate authority, was directed by the Additional Commissioner to modify his draft order and only then finalize it. The court held that such interference was unauthorized and impermissible. The appellate authority must exercise its judgment independently, and no external agency, including a higher authority, can dictate its decisions.

4. Compliance with Statutory Provisions and Principles of Natural Justice:
The court underscored the importance of adhering to statutory provisions and principles of natural justice. It cited several precedents where higher authorities' interference in quasi-judicial functions was condemned. The court reiterated that the appellate authority's discretion must be free from external influence to ensure fair and impartial administration of justice. The court concluded that the procedure adopted by the department violated these principles and directed the Joint Commissioner to finalize the order as per the draft dated 26.2.2010.

Conclusion:
The court directed the Joint Commissioner to pass the order in terms of the draft order dated 26.2.2010 by 10th July 2016, emphasizing that the statutory appellate authority must act independently without any external interference. The petition was disposed of with these observations and directions.

← Previous Next →