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2023 (1) TMI 3 - HC - VAT and Sales TaxInterest on delayed refunds - Refund of only principal amount without interest for the period spanning 2005 till the date to the petitioner under Section 54 of the Gujarat Sales Tax Act 1969 - whether the respondent is required to be directed to pay the interest from 01.04.2005 till the date of actual refund on the total amount? - HELD THAT - Learned senior advocate Mr.Soparkar appearing with learned advocate Mr.Davavala has pressed into service the order of the First Court in case of ASIAN PAINTS LIMITED VERSUS JP GUPTA STATE OF GUJARAT 2022 (3) TMI 1472 - GUJARAT HIGH COURT where the Court has in contempt jurisdiction on dated 28.03.2022 has directed the amount to be refunded - It is thus clear that the First Court directed the amount to be deposited when the challenge before the Apex Court had already been made. The State has accepted this order without a murmur. It is also to note that the case which has been followed for the purpose of seeking the refund no stay has been granted by the Apex Court and couple of matters are still at a diary stage. In that view of the matter the request on the part of the petitioner for the interest on the amount of delayed refund deserves to be allowed following the decision in case of M/s Syngenta Crop Protection Pvt. Ltd. v. State of Gujarat 2018 (4) TMI 1669 - GUJARAT HIGH COURT . The petitioner thus would be entitled to the interest on the delayed refund at the rate of 6% per annum - It is thus made clear in all the decisions which have been referred to hereinabove that when the doctrine of merger is borne in mind and when the statutory authority allows the appeal of an assessee he gives legal shape to the contours of the matter which assessing authority should have adopted and therefore the refund claim of the assessee would essentially arise from the order of assessment. The respondent No.3 is directed to pay interest to the petitioner at the rate of 6% per annum from 13.07.2009 till the date of actual refund on the principal amount of Rs.2, 15, 80, 739/- and not later than twelve weeks from the date of receipt of a copy of this judgment - petition allowed.
Issues Involved:
1. Legality of the refund order dated 02.11.2017. 2. Entitlement to interest on the refunded amount. 3. Applicability of Section 54 of the Gujarat Sales Tax Act, 1969. 4. Doctrine of merger in the context of tax assessments and appeals. 5. Precedents and their relevance to the case. Detailed Analysis: 1. Legality of the Refund Order Dated 02.11.2017: The petitioner challenged the order dated 02.11.2017, which granted a refund of the principal amount of Rs. 2,15,80,739 without interest for the period from 2005 to the refund date. The petitioner argued that this was illegal and contrary to the law under Section 54 of the Gujarat Sales Tax Act, 1969. 2. Entitlement to Interest on the Refunded Amount: The petitioner sought interest at 6% per annum on the refunded amounts from various dates in 2005, 2008, and 2009 until the actual refund date. The court noted that the issue of interest on delayed refunds was previously decided in favor of the petitioner in Special Civil Application No.18379 of 2018, where the respondents were directed to pay interest at 6% per annum until the actual refund date. 3. Applicability of Section 54 of the Gujarat Sales Tax Act, 1969: Section 54 of the Act stipulates that a dealer is entitled to receive simple interest at the rate of 24% per annum on the refund amount from the date immediately following the closure of the accounting year to the date of the assessment order. However, if the amount is paid after the closure of the accounting year, no interest is payable for the period from the closure date to the payment date. This section also states that no interest shall be payable on refunds not exceeding Rs. 100. The court emphasized that Section 54 clearly speaks of the dealer's entitlement to interest on delayed refunds. 4. Doctrine of Merger in the Context of Tax Assessments and Appeals: The court referred to the doctrine of merger, stating that once an assessment order is appealed and modified by an appellate authority, the assessment is considered finalized by the appellate authority. This principle ensures that the final assessment, whether by the first, second, or third appellate authority, is the one that prevails. The court noted that denying interest on refunds resulting from appellate modifications would be discriminatory and contrary to the principles of equity and justice. 5. Precedents and Their Relevance to the Case: The court cited several precedents, including: - State of Gujarat vs. Doshi Printing Press (Tax Appeal No.87 of 2015): This case established that interest on refunds should be paid from the date of the original assessment order, not just the appellate order. - State of Gujarat vs. Unjha Pharmacy: This case reinforced the principle that interest on refunds should be calculated from the date of the original assessment order. - M/s. Syngenta Crop Protection Pvt. Ltd. vs. State of Gujarat: This case reiterated the applicability of the doctrine of merger and the entitlement to interest on delayed refunds. - Asian Paints Limited vs. State of Gujarat: This case confirmed that the petitioner is entitled to interest at 6% per annum on the refunded amount from the relevant dates until the actual refund date. Conclusion: The court concluded that the petitioner is entitled to interest at 6% per annum from 13.07.2009 until the actual refund date on the principal amount of Rs. 2,15,80,739. The respondents were directed to pay this interest within twelve weeks from the date of receipt of the judgment. The court's decision was based on the principles of the doctrine of merger, the provisions of Section 54 of the Gujarat Sales Tax Act, and relevant precedents. The court also noted that similar issues were pending before the Supreme Court, but no stay had been granted, and therefore, the precedent set by the High Court should be followed.
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