2018 (7) TMI 906 - HC - VAT and Sales Tax

Refund of excess amount paid - the respondents could no longer process the return and assess the amounts, in view of the limitation under Section 34 - DVAT Act - Held that - The petitioner had previously approached this court, for a direction that having regard to the circumstances, its refund claims for the period upto March, 2011 ought to be granted. This court, while disposing of the petition, gave a time bound direction. Instead of adhering to it, the respondent/ DVAT department of the Govt. of NCT proceeded to issue the order dated 22.08.2016, denying the claims on the ground that inadequate or unsatisfactory material had been produced by the petitioner. The petitioner s grievance is two-fold. First of all, since the period of limitation for making an assessment on merits had expired, the default assessment became final. In the present case, the original assessment was set aside by the OHA. In the present case, the assessment for the period 2009 to March, 2011 became final, because the remand order (dated 17.09.2012) was never followed through with a fresh assessment order within the time period. Therefore, even if a fresh four-year period were to have been reckoned, that too ended. The revenue s attempt to either verify the refund claim or to reopen the assessment under Section 34 is therefore, clearly beyond the authority of law - The revenue s argument that refund is impermissible because the period for revising returns is utterly frivolous and baseless. If such an argument were to be countenanced, in every case, the assessee would have to revise its returns wherever it anticipates a refund, or a remand by the OHA. Clearly, it is the duty of the revenue to give consequential effect to the final effect of the OHA s orders, that might set aside assessments. If no order is made within the time limit prescribed, clearly the revenue cannot hold on to the monies which do not bear the character of a valid levy; they have to be refunded. Petition allowed.

Summary

Issues Involved:
1. Failure to process and refund excess amounts by DVAT.
2. Limitation period for scrutinizing documents and assessing amounts.
3. Legality of reopening assessments and verifying refund claims.
4. Compliance with court orders and procedural fairness.

Detailed Analysis:

1. Failure to Process and Refund Excess Amounts by DVAT:
The petitioner, a company engaged in works contracts transactions, contended that DVAT failed to process and refund excess amounts payable for the period March 2012. The company had an excess credit of ?4,60,41,149, which was inadvertently carried forward in the return instead of being claimed as a refund. Despite representations, the company did not receive the refund and approached the court seeking a direction to DVAT to refund the amounts due under Sections 38 and 42 of the Delhi Value Added Tax Act.

2. Limitation Period for Scrutinizing Documents and Assessing Amounts:
The court had previously directed the petitioner to file Form-DVAT-21, which the company complied with. However, the Additional VAT Officer (AVATO) issued a notice for hearing under Section 34 of the Act after the limitation period for scrutinizing documents had expired. The company argued that further enquiry was barred as the limitation period had not been extended, and the court's decision in Electoral Systems Private Ltd vs. Commissioner Value-Added Tax supported this position.

3. Legality of Reopening Assessments and Verifying Refund Claims:
Despite the expired limitation period, the AVATO proceeded to examine documents and proposed a refund without interest. The company argued that the refund should be processed as a matter of course once the limitation for framing an assessment had expired. The VAT department countered that the company did not claim the refund in the relevant period and carried forward the amount, which was not reflected in the subsequent period. The department believed it could scrutinize documents to ensure excess amounts were not refunded erroneously.

4. Compliance with Court Orders and Procedural Fairness:
The court found that the VAT department failed to adhere to its previous direction to process the refund within a stipulated time. The department issued an order denying the refund claims on the grounds of inadequate material produced by the petitioner. The court cited the case of Shaila Enterprises, which emphasized the mandatory nature of time limits under Section 38 for processing refunds. The court ruled that the revenue's attempt to verify the refund claim or reopen the assessment under Section 34 was beyond the authority of law, as the limitation period had expired.

Conclusion:
The court held that the order dated 22.08.2016 and subsequent notices concerning the period 2009 to March 2011 were legally unsustainable and quashed them, including any consequent demands and recovery proceedings. The court directed that the proceedings for the subsequent period, which were the subject of appeal/objections before the Objection Hearing Authority (OHA), should be concluded in accordance with law. The petition was allowed without any order on costs.