2016 (9) TMI 1159 - HC - VAT and Sales Tax

Demand of input tax rebate - cancellation of refund of input tax credit - Section 47(2) of the Madhya Pradesh Value Added Tax Act, 2002 - edible oil - whether demand of input tax credit refunded earlier justified? - Held that - the proper course in construing revenue Acts is to give a fair and reasonable construction to their language without leaning to one side or the other but keeping in mind that no tax can be imposed without words clearly showing an intention to lay the burden and that equitable construction of the words is not permissible. It is equally well settled legal proposition that consideration of hardship, injustice or anomalies do not play any useful role in construing taxing statutes unless there is some real ambiguity and the regard must be had to strict letter of law. The notice must mention the grounds on which the action is proposed to be taken and if the notice mentions one ground but the action has been taken on some other ground, the same would amount to violation of principle of natural justice. The impugned order dated 10.1.2012 cannot be sustained in the eye of law, as from perusal of the notice, Annexure P/4, dated 20.11.2009, it is found that the order has been passed on the grounds de hors the grounds mentioned in the notice dated 20.11.2009. In other words, the impugned order has been passed in violation of principle of natural justice. On perusal of the proviso to Section 14(3) of the Act, it is evident that the words from the close of relevant financial year are used instead of the words subsequent years . In the instant case, the refund of the amount of input tax rebate relates to the assessment year 2006-2007. The assessment was made in respect of the aforesaid year by an order dated 28.4.2009, i.e., from the close of relevant financial year. Therefore, the assessing authority has rightly awarded the refund of input tax rebate to the petitioner to which he was entitled as the case of the petitioner is squarely covered in view of proviso to section 14(3) of the Act. Demand of input tax credit not sustainable - petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Validity of the order cancelling the refund of Input Tax Rebate and raising a demand.
2. Interpretation of relevant provisions of the Madhya Pradesh Value Added Tax Act, 2002.
3. Legality of invoking Section 47(2) of the Act for issuing the notice and subsequent order.
4. Compliance with the principles of natural justice in the issuance of notice and passing of the impugned order.

Issue 1: Validity of the order cancelling the refund of Input Tax Rebate and raising a demand:
The petitioner challenged the order cancelling the refund of Input Tax Rebate and raising a demand, contending that the order was unjustified. The assessing authority initially granted a refund of &8377; 41,40,093/- to the petitioner, which was later questioned through a notice and subsequent order. The High Court noted the facts and previous legal proceedings related to the matter, emphasizing the petitioner's entitlement to the refund based on the provisions of Section 14(3) of the Act. The court held that the authority rightly awarded the refund as per the proviso to Section 14(3), which allows refunds if unadjusted even after two years from the close of the relevant financial year. The court also referenced a Division Bench order supporting the petitioner's claim, ultimately quashing the impugned order.

Issue 2: Interpretation of relevant provisions of the Madhya Pradesh Value Added Tax Act, 2002:
The court delved into the interpretation of key provisions of the Act, specifically Section 2(z)(b-1) and Section 14(3). Section 2(z)(b-1) defines "Year" as the twelve months ending on the 31st day of March, while Section 14(3) outlines the adjustment and carry-over of input tax rebate for registered dealers. By analyzing the proviso to Section 14(3), which deals with unadjusted rebates after two years from the close of the financial year, the court determined that the petitioner's case aligned with the statutory provisions, leading to the rightful grant of the refund.

Issue 3: Legality of invoking Section 47(2) of the Act for issuing the notice and subsequent order:
The petitioner argued that invoking Section 47(2) of the Act for issuing the notice and order amounted to a review of the original sanction. However, the court disagreed, highlighting that the Additional Commissioner, Commercial Tax initially granted the sanction administratively before invoking statutory powers under Section 47(2) for the subsequent actions. The court clarified that in the given circumstances, the invocation of Section 47(2) did not constitute a review, thereby dismissing this contention raised by the petitioner.

Issue 4: Compliance with the principles of natural justice in the issuance of notice and passing of the impugned order:
The court emphasized the importance of adherence to the principles of natural justice, particularly regarding the grounds mentioned in the notice and the subsequent action taken. Citing legal precedents, the court ruled that if the notice specifies certain grounds but the action is based on different grounds, it violates the principle of natural justice. In this case, the court found that the impugned order was passed on grounds not mentioned in the notice, leading to a breach of natural justice principles. Consequently, the court quashed the impugned order due to this procedural flaw.

In conclusion, the High Court of Madhya Pradesh, through a detailed analysis of the legal provisions and factual background, ruled in favor of the petitioner, quashing the impugned order and allowing the writ petition. The judgment underscored the importance of statutory compliance, fair interpretation of laws, and adherence to principles of natural justice in administrative actions under tax statutes.