2019 (5) TMI 1450 - HC - VAT and Sales Tax

Delay in sanction of refund - Relief with regard to payment of interest @ 24% per annum - HELD THAT - While dealing with the issue of interest Section 55(3) is relevant, which prescribes that the refund has to be made within a period of 120 days from the date of such sales, Admittedly, the date of sale and the payment of vat tax, are the factors which would be in the knowledge of the department. The refund, therefore, should have certainly been made within a period of 120 days from the date of sales, inasmuch as, element of sale necessarily is accompanied with an element of deposit of tax. Equally clear is the provision with regard to the rate of interest. If the payment is delayed by three months beyond 120 days prescribed, it has to be @ 24% per annum simple interest - Admittedly, the rate of interest in the present case, which would apply is @ 24 %. The order impugned also does not in so many words clearly reflect the rate, which has been applied for purposes of calculating the amount, which the petitioner is held entitled to receive. Mr. Amit Gupta, learned counsel for the respondents stated that the rate applied was @ 18%. The order impugned dated 22.08.2017, in so may ways is not totally in accord with the obligation cast upon the respondents in terms of Section 55 of the Act in regard to the determination of the amount, as also the rate of interest applicable for payment of interest - Impugned order set aside - appeal disposed off.

Summary

Issues:
1. Interpretation of Section 55 of the Jammu & Kashmir Value Added Tax Act, 2005 regarding refund of tax paid by a dealer.
2. Calculation of interest rate applicable for delayed refund under Section 55(4) of the Act.
3. Determination of the correct date for the commencement of interest payment on the refunded amount.

Analysis:
1. The petitioner, a Private Limited Company engaged in the business of walnuts, challenged an order by the Commissioner, Commercial Taxes Department for not granting full relief regarding the payment of interest at 24% per annum. The dispute arose from the provisions of Section 55 of the Act, which allows for zero-rated treatment of exported goods but requires payment of input tax credit at the time of sale. The petitioner claimed a refund under Section 55(2) and (3) for sales made in 2006-07, emphasizing the obligation to refund within 120 days. The High Court directed reconsideration of the interest payment at 24% per annum as per the statutory provisions.

2. The Court noted that Section 55(4) mandates payment of simple interest at 18% per annum if the refund is delayed beyond the prescribed period, increasing to 24% if the delay exceeds three months. The Commissioner had awarded interest only from the date of approval for the refund in 2014, contrary to the statutory requirement. The petitioner contested this basis for interest calculation, arguing it was misconceived. The Court emphasized the correct application of interest rates as per the law, highlighting the error in the Commissioner's approach.

3. The Court clarified that the date of sales and payment of VAT tax are crucial factors for determining the refund timeline. It stressed that refunds must be processed within 120 days of sales, with interest at 24% per annum for delays. The judgment criticized the Commissioner's decision to calculate interest from the approval date instead of the sales date as prescribed by Section 55(3) and (4). Consequently, the Court set aside the Commissioner's order and instructed a recalculation of the interest payable to the petitioner based on the correct legal provisions and relevant dates.

In conclusion, the High Court's judgment focused on upholding the statutory requirements of Section 55 of the Jammu & Kashmir Value Added Tax Act, 2005, ensuring the accurate calculation and payment of interest on delayed refunds to the petitioner in accordance with the law.