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2016 (7) TMI 477 - HC - VAT and Sales TaxRefund of amount deposited with the court against the purchase of property under auction - Cancellation of tax deferment certificate of the seller - violation of the scheme since the business was discontinued during the subsistence of the deferment period - Held that - the first question that arises for consideration is the character of the amount deposited by the petitioner pursuant to the order passed by this court, as to whether it can be said to be payment of tax or penalty as envisaged in the proviso to section 73 of the GVAT Act. In the opinion of this court, the answer would be in the negative because in view of the order passed by the Tribunal granting stay against further recovery, the question of payment of any amount under the orders impugned before the Tribunal would not arise. Therefore, such amount would not partake the character of tax or penalty, as contemplated under the proviso to section 73 of the GVAT Act. The court is of the view that the respondents having elected to prefer stay applications against the impugned order passed by the Tribunal and having invited an order on merits, there was no justification in thereafter invoking the provisions of section 39(1) of the GVAT Act for withholding the refund which arose in the light of the order of the Tribunal. The impugned order dated 11.01.2016 passed under section 39(1) of the GVAT Act, therefore, cannot be sustained.
Issues Involved:
1. Liability of the petitioner company for the sales tax dues of M/s Arunoday Mills Ltd. 2. Validity of the order withholding the refund under section 39(1) of the GVAT Act. 3. Entitlement of the petitioner to the refund of the amount deposited pursuant to the court's order. Detailed Analysis: 1. Liability of the petitioner company for the sales tax dues of M/s Arunoday Mills Ltd.: The petitioner, a Private Limited Company, purchased the property of M/s Arunoday Mills Ltd. in an auction conducted by IDBI Bank. M/s Arunoday Mills Ltd. was a registered dealer with sales tax deferment benefits. Following the assessment for the financial year 2005-06, demands were raised under the CST Act and GST Act. The deferment benefit certificate was canceled due to discontinuation of business, leading to appeals that were dismissed for non-payment of pre-deposit. The petitioner company was later served with a demand notice for recovery of sales tax dues of M/s Arunoday Mills Ltd. The petitioner appealed to the Gujarat Value Added Tax Tribunal, which held that the petitioner company was not liable to pay interest and penalty on the sales tax dues. The State Government's appeals against this decision were pending. 2. Validity of the order withholding the refund under section 39(1) of the GVAT Act: The petitioner sought a refund of the amount deposited pursuant to the court's order, which was withheld by the Assistant Commissioner of Commercial Tax under section 39(1) of the GVAT Act. The court noted that the amount deposited was not in the nature of tax or penalty but was a condition for lifting the attachment on the petitioner's properties. The court emphasized that the respondents had initially approached the court for a stay, which was denied, and thus could not later invoke section 39(1) to withhold the refund. The court found that the Assistant Commissioner had not recorded the necessary satisfaction that the grant of refund would adversely affect the revenue, rendering the order unsustainable. 3. Entitlement of the petitioner to the refund of the amount deposited pursuant to the court's order: The court held that the amount deposited by the petitioner was not towards tax or penalty but was a deposit conditionally for lifting the attachment. Since the petitioner succeeded before the Tribunal and no amount was outstanding, the court directed the refund of the deposited amount. The court also highlighted the respondents' mala fide intention to avoid refunding the amount under one pretext or another. The court quashed the impugned order dated 11.01.2016 and directed the respondent authorities to refund the amount deposited by the petitioners. Conclusion: The court allowed the petition, quashed the order withholding the refund, and directed the respondents to refund the amount deposited by the petitioners. The court emphasized the improper invocation of section 39(1) of the GVAT Act and the lack of bona fide action by the respondent authorities.
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