2021 (7) TMI 842 - HC - VAT and Sales Tax

Withholding of the Refund of the tax paid - change in classification of goods - Mango pulp/puree - denial of refund due to the petitioner on the ground of the pendency of the tax revision cases before the Hon ble High Court - HELD THAT - The approach of the respondents in not granting refund along with interest beyond the period permitted, without the assessee/ dealer asking for the same, in contradistinction can be compared with the proceedings under Income Tax Act, 1961. In the assessment orders / intimations issued by the Income Tax Authorities, where refund is due, the proceeding issued itself provides for the calculation of Interest under Section 244-A of the Income-tax Act, 1961, and the same is paid out along with the refund of tax. Though it is contended by the 3rd respondent that he exercised powers conferred under Section 40(2) of the Act, to withhold the refund due to the petitioner, no order/proceeding to that effect is shown to this Court. The said statement made on behalf of the respondents is also disputed by the learned counsel for the petitioner, as no such communication withholding the refund has been received by the petitioner either before filing of the Writ Petition or during the pendency of the present proceeding - this Court cannot accept the statement made on behalf of the respondents that the 3rd respondent, having exercised powers conferred under Section 40(2) of the Act, has decided to withhold the refund due to the petitioner. The respondents are hereby directed to refund the amount - Petition allowed.

Summary

Issues:
Petitioner seeking refund of tax paid following Tribunal's order.

Analysis:
The petitioner filed a Writ Petition under Article 226 for a refund of tax paid, following the Telangana Value Added Tax Appellate Tribunal's decision. The petitioner contended that the initial assessment by the 1st respondent classified goods under a lower tax bracket, but the 2nd respondent revised it to a higher tax bracket, leading to the petitioner filing appeals with the Tribunal. The Tribunal allowed the appeals, granting the petitioner the right to a refund. Despite the Tribunal's decision, the respondents, particularly the 1st respondent, did not refund the tax paid within the stipulated 90-day period. The petitioner argued that the respondents were obligated to refund the tax without the need for a separate application. The petitioner also highlighted the delay in the refund process despite submitting necessary documents and an indemnity bond as requested by the 1st respondent.

The petitioner emphasized that the respondents' failure to grant the refund promptly, as mandated by the Act, led to the accrual of interest on the refund amount. The petitioner cited previous cases where dealers had to approach the Court for refunds, indicating a systemic issue in the refund process. The Court noted that the Act stipulates a time frame for refunds and the payment of interest if refunds are delayed. The Court criticized the respondents' approach, likening it to considering refunds as favors rather than statutory obligations. The Court compared the refund process under the VAT Act with the Income Tax Act, where interest is automatically calculated and paid along with the refund.

The Court referred to legal precedents and statutory provisions to support the petitioner's claim for a refund. It highlighted that the State cannot deny a refund during the pendency of a revision before the Court. The Court also addressed the 3rd respondent's argument that withholding the refund was necessary to protect revenue, stating that no formal order withholding the refund was presented to the Court. Consequently, the Court ruled in favor of the petitioner, directing the respondents to refund the specified amount within fifteen days, along with interest as per the Act. The Court also ordered the respondents to pay costs to the petitioner, closing the pending petitions in light of the final order.