2017 (1) TMI 1221 - HC - VAT and Sales Tax

Interest on refund - Whether on the refund amount of predeposit, which the petitioner deposited while preferring the appeal before the learend Tribunal, when the petitioner has succeded before the learned Tribunal and the demand of tax is set aside and consequently the amount of predeposit is refunded, the petitioner-dealer is entitled to interest on such refund of predeposit as mandatory under Setion 54(1)(aa) of the Act? Held that - Considering subsection (4) of Section 65 of the Act, whatever the amount is deposited would be towards payment of the tax / part payment of the tax, may be as a condition precedent for availing right of appeal. In a given case, if the appeal against the assessment order is dismissed and the tax liability / demand of tax is confirmed, in that case, whatever amount deposited at the time of preferring the appeal may be by way of predeposit is required to be given credit and the balance amount of tax liability is required to be thereafter deposited with the interest as provided under the Act. On conjoint reading of the subsection( 4) of Section 65 and Section 54, on the appeal being allowed and th tax liability is either reduced or set aside by the appellate authority in that case, concerned person shall be entitled to get back the said amount / refund the said amount with interest on completion of 90 days from the date of order passed by the Appellate Authority / Tribunal. Any other contrary view shall deprive interest of the concerned person. However, consdiering Section 54 the period of 90 days shall be calculated from the date of reciept of such order by the Sales Tax Officer (order passed by the Appellate Authority / Tribunal). The petitioners shall be entitled to interest at the rate of 9% p.a on the amount deposited by them as predeposit while preferring the appeal against the assessment order - petition allowed - decided in favor of petitioner.

Summary

Issues Involved:

1. Entitlement to interest on the refund of predeposit under Section 54(1)(aa) of the Gujarat Sales Tax Act, 1969.
2. Applicability of Section 54(1)(aa) to predeposit amounts.
3. Calculation of interest period for refunds arising from appellate orders.

Issue-wise Detailed Analysis:

1. Entitlement to Interest on Refund of Predeposit:

The primary issue addressed in the judgment is whether a dealer is entitled to interest on the refund of predeposit amounts made while preferring an appeal, as mandated under Section 54(1)(aa) of the Gujarat Sales Tax Act, 1969. The petitioners argued that they should receive interest at the rate of 9% per annum on the refunded predeposit amounts from the date of deposit until the refund, following the appellate order that set aside the additional tax demand.

2. Applicability of Section 54(1)(aa) to Predeposit Amounts:

The petitioners contended that Section 54(1)(aa) of the Act, which provides for interest on delayed refunds, applies to predeposit amounts as well. They argued that predeposit amounts should be considered part of the tax payment and eligible for interest upon refund. The State, however, argued that Section 54(1)(aa) applies only to tax refunds and not to predeposit amounts, which are merely conditions for availing the right of appeal.

The court examined the language of Section 54(1)(aa) and the nature of predeposit amounts. It concluded that predeposit amounts, required under Section 65(4) of the Act, are indeed part payments of tax. Consequently, if an appeal results in a reduction or setting aside of the tax liability, the predeposit amounts should be refunded with interest as per Section 54(1)(aa).

3. Calculation of Interest Period for Refunds Arising from Appellate Orders:

The court clarified that the interest on the refunded predeposit amounts should be calculated from the date of completion of 90 days following the receipt of the appellate order by the Sales Tax Officer. This interpretation aligns with the provision in Section 54(1)(aa), which stipulates that interest accrues if the refund is not made within 90 days of the appellate order. The court emphasized that any other interpretation would deprive the petitioner of their rightful interest.

Conclusion:

The court ruled in favor of the petitioners, holding that they are entitled to interest at the rate of 9% per annum on the predeposit amounts from the date of completion of 90 days after the receipt of the appellate order by the Sales Tax Officer. The court ordered the State to calculate and pay the interest accordingly. The petitions were thus allowed, and the rule was made absolute to the extent of granting interest on the refunded predeposit amounts.