2018 (8) TMI 995 - HC - VAT and Sales Tax

Entitlement to Interest on refund amount - relevant date for calculation of interest - pre-deposit of amount - Held that - Pre-deposit sums which the assessee is compelled to pay to seek recourse to an appellate remedy, do not necessarily bear the stamp or character of tax, especially when it succeeds on the particular plea. That being the case, the insistence upon a procedural step, i.e. filing of a form which is purely for the purpose of administrative convenience cannot in any manner fix the period or periods of limitation when the amounts became due on the question of interest. The fact that the amounts were due and payable from the date the appeal was allowed is not in dispute. The postponement of the period from when interest became calculable is incomprehensive and illogical - the petitioner is entitled to interest calculable from the date when its appeal was allowed by this Court by order dated 14.05.2015. Petition allowed.

Summary

Issues:
1. Refund of tax without interest.
2. Interpretation of provisions regarding interest on refund.

Issue 1: Refund of tax without interest
The petitioner succeeded in an appeal for exclusion of certain amounts in its taxable turnover, resulting in a refund claim. Despite this success, the respondent GST authorities did not grant any interest on the refund. The petitioner argued that the amounts paid during the interregnum period, before the appellate authority's decision, did not constitute payment of tax and hence should carry interest. The Revenue contended that interest would be due only after following the prescribed procedure of filing form ST 21, as per Section 30 of the Delhi Sales Tax Act. However, the Court found the Revenue's contention untenable, citing precedents emphasizing that pre-deposit amounts for appeals do not equate to tax payments and should be refunded with interest upon appeal success. The Court ruled in favor of the petitioner, entitling them to interest from the date of the appeal's allowance.

Issue 2: Interpretation of provisions regarding interest on refund
The Court analyzed the legal provisions and precedents related to the grant of interest on refunds. It referred to judgments highlighting that pre-deposit amounts for appeals are not akin to tax payments and should be refunded with interest upon appeal success. The Court rejected the Revenue's argument that interest would accrue only after following the prescribed procedure, emphasizing that the amounts became due and payable from the date the appeal was allowed. The Court held that the petitioner was entitled to interest from the date of the appeal's allowance and directed the respondents to process and credit the amounts within four weeks. The judgment underscored that procedural steps for administrative convenience should not delay the calculation of interest on refunds, especially when the amounts were due and payable post-appeal success.