2016 (8) TMI 425 - HC - VAT and Sales Tax

Withholding of refund - Assessing Authority held that the petitioner is entitled to refund - revenue stated that mere passing of the order of assessment resulting into refund, would not be sufficient for the assessee to claim such refund and a separate order of refund has to be passed. - power to revise of the order - period fo limitation to revise the order has not expired - Held that - In addition to the order of assessment which results into refund being payable to the assessee, refund order has to be separately passed. If the order of assessment results into refund, the assessee would be entitled to receive the same, of course after due verification and passing through other legal processes. Refund allowed. Held that - we do not find any provision where in addition to the order of assessment which results into refund being payable to the assessee, refund order has to be separately passed. If the order of assessment results into refund, the assessee would be entitled to receive the same, of course after due verification and passing through other legal processes. The Commissioner has full period of three years from the date of the order to take the same into suo motu revision. Surely, the department cannot withhold the refund arising out an order of assessment for such full period of three years without any reason. The period of limitation for taking an order in revision cannot be related to the right of the assessee to seek refund arising out of an order of assessment. Such right can be curtailed in terms of Section 39 of the VAT Act by withholding the refund in the interest of revenue. - Unless such order is passed, the refund cannot be automatically withheld. In facts of the case, looking to the considerable revenue implications involved, at the same time, on the basis of materials produced by the respondents on record, we direct that the respondents shall release the refund of ₹ 2 crores latest by 31.08.2016. For the remaining amount, the authority referred to in sub section (1) of Section 39 shall, if wishes to withhold such amount beyond 30.09.2016, grant hearing to the petitioner before passing appropriate order in this respect. - Decided partly in favor of petitioner.

Summary

Issues:
1. Delay in granting VAT refund to a registered dealer for the assessment year 2011-12.
2. Validity of a notice issued by the Joint Commissioner of Commercial Tax for producing documents in connection with the assessment.
3. Justification for withholding the VAT refund by the authorities based on discrepancies in inter-state transactions.

Analysis:
1. The petitioner, a registered dealer under the VAT Act, sought a refund of ?2,40,67,092/- along with interest, as per the order of assessment dated 08.05.2015. Despite the order, the VAT authorities did not release the refund, leading to the filing of Special Civil Application No. 7176 of 2016 to direct the refund's release. The High Court observed that the petitioner was entitled to the refund arising from the assessment order without the need for a separate refund order. The court directed the authorities to release ?2 crores by 31.08.2016 and address the remaining amount by 30.09.2016, if withholding was deemed necessary under Section 39 of the VAT Act.

2. The Joint Commissioner issued a notice to the petitioner to produce documents related to the assessment, triggering the filing of Special Civil Application No. 9901 of 2016 challenging the notice. The court noted that the authorities had the documents seized during a search operation and directed the petitioner to respond to the notice by 31.08.2016. The court upheld the validity of the notice, emphasizing the petitioner's duty to reply and the Commissioner's power to call for such documents.

3. The authorities justified withholding the refund citing discrepancies in the petitioner's inter-state transactions, particularly sales to a dealer in Rajasthan. The court analyzed the objections raised by the authorities and clarified that the right to refund could not be indefinitely delayed based on the Commissioner's power to revise orders. The court highlighted the need for a formal order to withhold the refund under Section 39 and emphasized the requirement of a hearing before such action. The court directed the release of the refund by a specified date and instructed a hearing if withholding beyond that date was considered necessary.

In conclusion, the High Court directed the release of the VAT refund to the petitioner, addressed the validity of the notice issued by the Joint Commissioner, and analyzed the authorities' justifications for withholding the refund based on discrepancies in inter-state transactions. The judgment clarified legal provisions, timelines for refund release, and the necessity of formal orders and hearings before withholding refunds.