2019 (8) TMI 575 - HC - VAT and Sales Tax

Recovery by Coercive action - refund of disputed tax - Section 44 of the GVAT Act, 2002 - the writ-applicant prays that as the amount of ₹ 29,85,544/has been deposited as ordered by the appellate authority, the amount of ₹ 1,49,27,723/should be refunded by the respondent no.1 with interest at the rate of 12% p.a. - HELD THAT - The action on the part of the concerned authorities could be termed as absolutely highhanded and arbitrary. The facts of this case speak for themselves. In the course of the hearing of this matter, the Officer assisting the learned AGP went to the extent of even making a statement that the amount of ₹ 1,49,27,723/is not to be recovered from the writ-applicant. He conceded to the fact that while determining this amount, there is an error. He also conceded to the fact that amount of ₹ 75 lakh and odd out of ₹ 1,49,27,723/is only to be taxed - As on date also, the respondent no.1 is ready and willing to refund only an amount of ₹ 1,07,98,892/. It still wants to hold on to the entire amount Plus the amount deposited by the writapplicant towards 20% of the predeposit as ordered by the appellate authority. We were inclined to take a very strict view of the matter. This is not the way and the manner to recover tax. The department should not get so much desperate for the revenue. The revenue is to be collected in accordance with law. The action at the end of the authorities in the present case is nothing short of extortion. The respondents directed to refund the amount of ₹ 1,49,27,723/- with interest at the rate of 6% p.a. from the date of 15/02/2019 from the date of 15/02/2019 shall be refunded to the writ-applicant within a period of One week from today without fail - petition allowed - decided in favor of petitioner.

Issues Involved:
1. Legality of the coercive recovery under Section 44 of the GVAT Act.
2. Entitlement to a refund of the disputed tax amount.
3. Award of interest on the refunded amount.
4. Validity of the assessment order under Section 34(1) of the GVAT Act.
5. Conduct of the tax authorities in handling the recovery process.

Detailed Analysis:

1. Legality of the coercive recovery under Section 44 of the GVAT Act:
The petitioner, a company registered under the Companies Act 2013, challenged the coercive recovery of ?1,49,27,723 by the tax authorities under Section 44 of the GVAT Act. The recovery was made by attaching the petitioner’s bank account despite the pending appeal and stay application. The court observed that the action by the authorities was "absolutely highhanded and arbitrary" and highlighted that the petitioner was not served with a copy of the recovery notice, which violated principles of natural justice.

2. Entitlement to a refund of the disputed tax amount:
The petitioner sought a refund of the disputed tax amount, arguing that the recovery was illegal as the appeal and stay application were pending. The court noted that the petitioner had deposited 20% of the disputed tax amount as directed by the appellate authority. Despite this, the authorities coerced the bank to release the entire disputed amount. The court directed the respondents to refund ?1,49,27,723 to the petitioner.

3. Award of interest on the refunded amount:
The petitioner requested interest at the rate of 12% per annum on the refunded amount from the date of illegal recovery. The court, referencing the Supreme Court's decision in Alok Shanker Pandey Vs. Union of India, awarded interest at the rate of 6% per annum from the date of recovery (15/02/2019) until the refund is made. The court emphasized that interest is not a penalty but a normal accretion on capital.

4. Validity of the assessment order under Section 34(1) of the GVAT Act:
The petitioner challenged the assessment order dated 30/10/2018, claiming it was a non-speaking order issued without a proper show-cause notice and failed to account for sales returns. The court noted that the assessment order did not disclose the basis for the excess demand and was issued without considering the petitioner’s credit and debit notes. The court found the assessment order to be in violation of natural justice.

5. Conduct of the tax authorities in handling the recovery process:
The court criticized the conduct of the tax authorities, describing their actions as "nothing short of extortion." The authorities coerced the bank to release the disputed amount without advance notice to the petitioner and continued to hold both the disputed amount and the 20% pre-deposit. The court reminded the authorities of previous decisions which emphasized that coercive recovery should not be initiated while stay applications are pending unless there are exceptional circumstances.

Conclusion:
The court directed the respondents to refund the amount of ?1,49,27,723 with interest at the rate of 6% per annum from the date of recovery within one week. The petition was disposed of accordingly, emphasizing the need for tax recovery to be conducted in accordance with the law and principles of natural justice.

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