2023 (1) TMI 293 - HC - VAT and Sales Tax

Maintainability of petitioner - availability of statutory remedy of appeal - Refund of the amount of tax deposited by the petitioner - grant of interest in terms of Section 29(2) of U.P. Trade Tax Act, 1948 - HELD THAT - Certain amount of tax due from three companies namely, M/s Shristi Agencies (Pvt.) Limited, M/s Rudder Steels (Pvt.) Ltd. and M/s Shivalik Ispat and Fabricators Private Ltd., was sought to be recovered from M/s Usha India Ltd. and M/s Malvika Steel Pvt. Ltd. in which the petitioner along with his brothers Anil Rai were the shareholders and directors. M/s Usha India Ltd. and M/s Malvika Steel Pvt. Ltd. are said to be debtors of the companies, from whom amount of tax is due. The amount was sought to be recovered from them in their individual capacity. The order was challenged by them by filing writ petitions before this Court. They were relegated to avail of their remedy of appeal before the Tribunal, which was to be heard on merits, subject to deposit of ₹ one crore by both the brothers. Undisputedly, the petitioner deposited ₹ one crore. Both the appeals preferred by the petitioner and his brother were allowed by the Tribunal vide order dated June 9, 2016 and demand against them was quashed with liberty to the Department to deal with the recovery from the companies. An application for refund was filed by the petitioner on August 25, 2017, which remained pending. A reminder was sent on July 23, 2020 on which the order dated September 17, 2020 was passed, rejecting the claim for refund on the flimsy ground that the Tribunal while accepting the appeal had not directed for refund of the amount. We are not required to deal with that order on merits for the reason that learned counsel for the State has fairly submitted that after the order of demand was set aside by the Tribunal, the petitioner will be entitled to refund of the amount deposited as pre-condition for hearing of appeal on merits - Still further, what is required to be noticed is that the order of the Tribunal dated September 17, 2020 was not challenged by the Department immediately when the same was passed. But, when the petitioner filed the present writ petition in this Court, impugning the order rejecting his prayer for refund, Sales/Trade Tax Revision Defective No. 28 of 2021 was filed, after a delay of 1766 days. The same was dismissed on September 2, 2021 as the delay could not be satisfactorily explained. From the facts of the present case, what is established is that retention of the amount deposited by the petitioner as a precondition for hearing of appeal on merits would be a direct violation of Article 265 of the Constitution of India, as the State has no authority to retain the amount after the demand raised was set aside by the Tribunal and the revision against the same was dismissed by this Court - Let the amount of refund due to the petitioner be now paid within a period of four weeks along with interest due in terms of Section 29(2) of the Act of 1948. The interest shall be calculated from January, 2018 onwards at the rates specified in Section 29(2) of the Act of 1948. As apparently in the case in hand the delay in grant of refund to the petitioner is patently illegal in view of the order passed by respondent no. 3, the State shall be at liberty to recover the amount of interest to be paid to the petitioner from the officer(s) concerned, as public exchequer should not be burdened on account of illegal action by the officer(s) of the Department - The writ petition is allowed with costs of ₹ 10,000/- to be paid along with the amount of refund.

Summary

Issues Involved:
Petition for quashing order rejecting refund of tax amount, challenge to recovery notices, appeal before Commercial Tax Tribunal, application for refund, delay in refund, challenge to Tribunal's order, concealment of facts in counter affidavit, violation of Article 265, interest on refund, recovery of interest from responsible officers.

Analysis:

1. The petitioner filed a writ petition seeking to quash the order rejecting the refund of tax amount deposited by the petitioner as directed by a previous court order. The recovery notices were issued against companies where the petitioner was a director and shareholder, seeking recovery from other companies where the petitioner was also involved. The Tribunal allowed the appeals, quashing the demand against the petitioner. The petitioner applied for a refund, which was rejected, leading to the present petition.

2. The respondents challenged the Tribunal's order after a significant delay, which was dismissed by the Court due to lack of satisfactory explanation for the delay. Despite this, the refund was not processed for the petitioner, prompting the current petition for direction to refund the deposited amount along with interest as per the Act of 1948.

3. The Court noted the high-handedness of the Trade Tax Department in dealing with taxpayers. The Tribunal's order in favor of the petitioner was not challenged promptly by the Department. The Court emphasized that the State had no authority to retain the deposited amount after the demand was set aside and the revision dismissed. The Court ordered the refund to be paid within four weeks with interest from January 2018 as per the Act.

4. Due to the illegal delay in granting the refund, the State was permitted to recover the interest amount from the responsible officers to avoid burdening the public exchequer. The writ petition was allowed, with costs imposed on the respondents for the delay and inconvenience caused to the petitioner in the refund process.