2017 (5) TMI 656 - HC - VAT and Sales Tax

Order of assessment - Refund claim - reopening of assessment while processing refund claim - Section 9(2)(g) of the DVAT Act - Held that - with reference to Section 9(2)(g) of the DVAT Act, it requires to be noticed that it envisages a situation where a selling dealer fails to deposit the tax that has been collected or fails to lawfully adjust it against the output tax liability - The entire exercise is fraught with illegality and is an abuse of the process of the law by the VATO. The Court, accordingly, sets aside the default assessment order dated 11th April, 2017 - there being no other compliance pointed out by the VATO, there can be no justification for delaying the issue of refund to the Petitioner any longer - petition allowed - decided in favor of petitioner.

Issues:
1. Delay in processing refund application by the Delhi Value Added Tax Department.
2. Legality of default assessment order issued by the Value Added Tax Officer.
3. Violation of Section 9(2)(g) of the Delhi Value Added Tax Act.
4. Delay in issuing the refund amount to the Petitioner.
5. Observations regarding delayed refunds and recommendations for the Commissioner of VAT.

Detailed Analysis:
1. The High Court addressed the issue of delay in processing the Petitioner's refund application by the Delhi Value Added Tax Department, which had been pending since January 20, 2015, for an amount of ?18,21,440. Despite circulars emphasizing speedy disposal of refund claims, the Value Added Tax Officers (VATOs) were creating fresh demands instead of processing refunds in accordance with the law, leading to prolonged delays.

2. The Court examined the legality of the default assessment order issued by the Value Added Tax Officer on April 11, 2017, under Section 32 of the Delhi Value Added Tax Act. The order disallowed an input tax credit claimed by the dealer, citing Section 9(2)(g) of the DVAT Act. The Court emphasized that such actions should not be taken without notice to the Petitioner and without providing an opportunity for explanation, especially when the refund was long overdue. The Court found the default assessment order to be illegal and an abuse of the legal process.

3. Regarding the violation of Section 9(2)(g) of the DVAT Act, the Court clarified that the provision applies when a selling dealer fails to deposit collected tax or adjust it against output tax liability. Mere discrepancies between deposited and collected amounts do not automatically trigger Section 9(2)(g). The Court emphasized the necessity of due process and notification to the Petitioner before invoking such provisions, especially when a refund application is pending.

4. The Court highlighted the unnecessary delay in issuing the refund amount to the Petitioner, noting that no other compliance issues were identified by the VATO. Consequently, the Court ordered the VATO to ensure the refund amount, along with interest, is paid directly into the Petitioner's account within two weeks to avoid further delays. Failure to comply would allow the Petitioner to seek legal remedies.

5. In concluding remarks, the Court referenced previous judgments and circulars emphasizing the persistent issue of delayed refunds and the need for the Commissioner of VAT to prioritize and streamline the refund process. The Court urged disciplinary action against officers causing delays and emphasized the importance of periodic reviews to monitor refund processing and ensure compliance with statutory duties to prevent unnecessary financial burdens on the exchequer.

Overall, the judgment addressed the issues of delay in refund processing, legality of default assessment orders, violation of statutory provisions, and provided recommendations for improving the efficiency of refund processing within the Delhi Value Added Tax Department.

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