2017 (9) TMI 1306 - HC - VAT and Sales Tax

Rectification application - refund claim - The petitioner seeks for a direction upon the respondent to modify the orders of refund dated 23.11.2015 and the orders of rejecting the applications filed by the petitioner for rectification dated 25.11.2016 and consequently to sanction refund of the value of Capital Goods in terms of Section 18(1) of the TNVAT Act and the refund pertaining to wastage - time limitation - Held that - It is no doubt true that the petitioner did not immediately file the applications but preferred the applications after about a period of 10 months. Be that as it may. The respondent was bound to consider the said applications since the TNVAT Act does not prescribe an outer time limit for filing applications under Section 84 of the Act - the reason assigned by the respondent in the orders dated 25.11.2016 for rejecting the applications filed under Section 84 of the Act is incorrect. Admittedly in the order dated 23.11.2015 while granting partial relief to the petitioner the respondent disallowed the substantial portion of the refund claim. The order does not stated as to why such disallowance has been made. There is no explanation in the order dated 23.11.2015 as to how the respondent adopted uniform percentage of wastage at 2%. When the respondent has not assigned reasons for disallowing part of refund claim while passing order dated 23.11.2015 it is sufficient to hold that the order suffers from error apparent on the face of the record and necessarily rectifiable under Section 84 of the Act. Therefore the respondent was bound to exercise the power in a judicious manner and consider the case of the petitioner as putforth by them in their applications filed under Section 84 of the Act dated 28.10.2016. The orders passed by the respondent dated 25.11.2016 and the orders of refund dated 23.11.2015 in so far as it disallow the part of the refund claim under the heads Wastage as per Section 19(9) of the Act at 2 % and Less Capital Goods are set aside and the matter is remanded to the respondent for fresh consideration - petition allowed by way of remand.

Summary

Issues:
Refund claim modification and rejection under TNVAT Act, 2006 and CST Act, 1956; Rectification application delay and rejection under Section 84 of TNVAT Act; Disallowance of refund claim portion without notice or reasons; Uniform percentage wastage disallowance; Correctness of respondent's rejection reasoning under Section 84 of TNVAT Act.

Refund Claim Modification and Rejection:
The petitioner, engaged in manufacturing and exporting automobile components, sought direction to modify refund orders and sanction refund of 'Capital Goods' under TNVAT Act and refund related to wastage. The respondent partially accepted refund claims but disallowed portions without providing reasons, leading to rectification applications by the petitioner under Section 84 of TNVAT Act.

Rectification Application Delay and Rejection:
Although the petitioner filed rectification applications about 10 months after the refund orders, the court held that the delay was not grossly delayed, especially given the absence of reasons for disallowance in the initial orders. The respondent's rejection of rectification applications based on lack of valid reason to reopen the claim was deemed incorrect.

Disallowance Without Notice or Reasons:
The court found that the respondent's disallowance of part of the refund claim without assigning reasons was an error apparent on the face of the record, making it rectifiable under Section 84 of the Act. The disallowance, especially regarding uniform percentage wastage, was deemed incorrect based on previous court decisions.

Uniform Percentage Wastage Disallowance:
Relying on a previous court decision, the judgment emphasized that adopting a uniform percentage of wastage is incorrect, as process loss should be determined on a case-by-case basis. The court highlighted the need for a detailed consideration of the petitioner's case and the incorrectness of the respondent's approach in disallowing part of the refund claim without adequate explanation.

Correctness of Respondent's Rejection Reasoning:
The court set aside the respondent's rejection orders and directed a fresh consideration, emphasizing the need for a show cause notice with full particulars, granting the petitioner an opportunity to file objections and have a personal hearing. The judgment molded relief by remanding the matter to the respondent for proper reconsideration in accordance with law.

In conclusion, the judgment focused on rectifying the errors in the respondent's handling of the refund claim disallowance, emphasizing the importance of providing reasons, allowing objections, and ensuring a fair process in line with the legal provisions under the TNVAT Act.