2017 (5) TMI 590 - HC - VAT and Sales Tax

Jurisdiction of VATO - refund claims - re-opening of the assessments - time limitation - Held that - This court in several judgments including Swarn Darshan Impex (P) Ltd. v. Commissioner, Value Added Tax 2010 (6) TMI 725 - DELHI HIGH COURT emphasized that the pendency of a refund application should not be viewed by the Department as an opportunity to create a fresh demand particularly if the time limits not only for making the refund but even for re-opening the assessments of previous years has long been crossed - The entire exercise indulged in by the VATO as above at the stage of refund is wholly without the authority of law. The re-opening of the assessments of earlier periods is time-barred and not in accordance with the procedure set out for that purpose under the DVAT Act. The Court therefore directs that the refund amount in the sum of ₹ 1,97,494/- together with interest payable thereon under Section 42 of the DVAT Act shall be directly paid into the account of the Petitioner by the Respondent DVAT Department - petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
Refund application pending with DVAT Department, creation of fresh demand against the refund amount, legality of the Department's actions, time-barred re-opening of assessments, setting aside the notice of default assessment, direction for refund payment with interest, compliance by DVAT Department.

Analysis:
The petitioner's refund application for the 4th quarter of 2013-14 had been pending with the DVAT Department since June 24, 2014. However, without informing the court, the VATO passed a notice of default under Section 32 of the DVAT Act on February 3, 2017, adjusting the refund against a fresh demand of ?3,10,526, reducing the refund amount to Nil. The reasons for creating the fresh demand included disallowance of Input Tax Credit (ITC) and cancellation of registration of a related entity. The court noted that the Department's actions were unauthorized and contrary to established legal principles, as highlighted in previous judgments. The Department's attempt to create a fresh demand when the time limits for refunds and reassessments had expired was deemed unlawful.

The court unequivocally set aside the notice of default assessment of tax, interest, and penalty dated February 3, 2017, under Sections 32 and 33 of the DVAT Act, along with the 'Adjustment Order.' It directed the DVAT Department to directly pay the refund amount of ?1,97,494, along with applicable interest under Section 42 of the DVAT Act, to the petitioner's account within two weeks. The court emphasized the importance of the DVAT Department adhering to the specified timelines. In case of any non-compliance or grievances regarding the refund payment or other directions, the petitioner was granted the right to seek appropriate legal remedies. Ultimately, the petition was allowed in favor of the petitioner, ensuring the rightful refund amount is promptly disbursed by the DVAT Department in accordance with the court's directives.