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2016 (7) TMI 858 - HC - VAT and Sales TaxDelay in processing and issuing the refund - It is asserted that neither was the refund issued to the Petitioner within 15 days nor was the case picked up for audit nor any security under Section 38 (5) of the DVAT Act demanded. No notice was issued under Section 59 (2) of the DVAT Act within 10 days from the date of filing return. - Held that - the failure by the Respondent to process the refund claimed by the Petitioners for all the above tax periods appear to be wholly unjustified. It is no longer open to the Respondent to raise an objection to the grant of refund claimed together with interest. In view of the matter a direction is issued to the Respondent to process the claim refund made by the Petitioners for the aforementioned periods as set out in the three writ petitions and issue appropriate orders granting refund together with interest in terms of Section 38 of the DVAT Act within a period of eight weeks from today and in any event not later than September 10 2016. If there is any failure by the Respondent to comply with the directions the Petitioners shall seek appropriate relief in accordance with law. - Decided against the revenue.
Issues Involved:
1. Delay in granting refund under Section 38 of the DVAT Act. 2. Alternative remedy available to the Petitioners under the DVAT Act. 3. Legality of the survey conducted by the Enforcement Branch. 4. Compliance with Circular No. 6 issued by the Commissioner, VAT. 5. Interpretation of Section 38 of the DVAT Act concerning refunds. Detailed Analysis: 1. Delay in Granting Refund under Section 38 of the DVAT Act: The Petitioners, Nucleus Impex Pvt. Ltd (NIPL) and Nucleus Marketing & Communication (NMC), claimed refunds for various tax periods under the DVAT Act. NMC's refund was due for November 2012, while NIPL's refunds were due for the 3rd and 4th quarters of 2012-13 and all quarters of 2013-14. Despite filing returns on time, the refunds were not processed within the stipulated period as per Section 38 of the DVAT Act. The Court noted that the Respondent failed to adhere to the time limits set out in Section 38, which mandates refunds to be processed within specified periods post-filing of returns. 2. Alternative Remedy Available to the Petitioners under the DVAT Act: The Respondent argued that the Petitioners had an alternative remedy under the DVAT Act, where any return filed by a dealer is deemed a notice of assessment under Section 31 (1) (b). If the Commissioner fails to issue an assessment, the aggrieved party can file an objection before the Objection Hearing Authority (OHA) under Section 74 (2), and subsequently appeal to the Appellate Tribunal under Section 76 (1). However, the Court rejected this preliminary objection, emphasizing that relegating the Petitioners to the alternative remedy would only further delay the refunds, which were already overdue. 3. Legality of the Survey Conducted by the Enforcement Branch: The Respondent conducted a survey on the Petitioners' premises on 17th October 2014, finding variations in cash and stock and alleging false ITC claims from suspicious dealers. The Petitioners were asked to provide documents for verification, which they allegedly did not submit, leading to the withholding of refunds. However, the OHA, in its order dated 30th November 2015, found the survey and subsequent actions by the Respondent to be illegal, noting that tax and penalty were collected unlawfully and under duress without framing any assessment. 4. Compliance with Circular No. 6 Issued by the Commissioner, VAT: Circular No. 6, issued on 15th June 2015, mandates that refunds be granted within 15 days if the return is not picked for audit. The Petitioners argued that their cases were neither picked for audit nor was any security demanded under Section 38 (5). The Respondent failed to comply with this circular, which is binding on the VAT Officer (VATO). The Court highlighted this non-compliance, further strengthening the Petitioners' case for immediate refunds. 5. Interpretation of Section 38 of the DVAT Act Concerning Refunds: Section 38 of the DVAT Act outlines the procedure and time limits for granting refunds. The Court reiterated that the provisions of Section 38 are mandatory, not directory, emphasizing that refunds must be processed within the specified periods. The Court referenced its decision in Swarn Darshan Impex (P) Limited v. Commissioner, Value Added Tax, which clarified that refunds should be granted within two months for quarterly returns unless specific conditions under Section 38 (4) or (5) apply. The Court rejected the Respondent's argument that the issuance of a notice under Section 59 could delay the refund, asserting that such notices must be issued within the time limits prescribed in Section 38 (3). Conclusion: The Court directed the Respondent to process the refund claims of the Petitioners for the specified periods and issue appropriate orders granting refunds with interest as per Section 38 of the DVAT Act within eight weeks. The petitions were allowed with no orders as to costs, and the Petitioners were advised to seek appropriate relief if the Respondent failed to comply with the directions.
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