2023 (7) TMI 941 - HC - VAT and Sales Tax

Requirement of adjusting the pending dues from the amount of refund due to a tax payer - date when the amount of refund is payable for the purposes of Section 42 of the DVAT Act - HELD THAT - The language of Section 38(2) of the DVAT Act indicates the scheme of application of an amount refundable to a person towards the outstanding dues. It requires the Commissioner to apply the excess amount due to a taxpayer towards recovery of any other amount due under the DVAT Act or under the CST Act. Clearly, if there is a crystalized demand, which is due and payable by any taxpayer, the Commissioner is required to first apply the amount refundable for satisfaction of that liability. If any amount remains after the discharge of such dues, the same is required to be refunded within the stipulated period - It is apparent that the use of the words any other amount due in Section 38(2) of the DVAT Act refers to the amount due and outstanding at the material time, which is other than that covered under the assessment or quantification resulting in the claim for the refund either made separately or as reflected in the return furnished by the taxpayer. The taxpayer s remedies and claim in respect of any amount correctly applied in terms of Section 38(2) of the DVAT Act that is against other amounts due outside the rubric of the return furnished or its claim for the refund would follow a different trajectory. If the refund claimed by the taxpayer in his return is not paid on account of the assessment and reassessment framed under Sections 32 or 33 of the DVAT Act for the same tax period and the petitioner is successful in upsetting the same either pursuant to the objections filed under Section 74 of the DVAT Act, or in an appeal filed before the Appellate Authority under Section 76 of the DVAT Act, the self-assessment (return furnished) would stand confirmed and the assessee s claim would be required to be processed. This is so because, if the petitioner prevails in its objections under Section 74 of the DVAT Act, or appeals under Section 76 of the DVAT Act, that would amount to vindicating its stand that the assessments framed are erroneous and the refund claimed under the return should have rightly been paid within the time as stipulated under Section 38(3)(a) of the DVAT Act. Even in cases where the assessments are reviewed under Section 74B of the DVAT Act and as a consequence, the refund as reflected in the return is required to be made, the refund would be traceable to the return furnished by the taxpayer. The doctrine of Harmonious Construction requires that provisions of a statute not be read in isolation but in conformity with the scheme of the statute so as to avoid any conflict with the other provisions. This interpretation of Sub-rule (2) and Subrule (4) of Rule 34 of the DVAT Rules is consistent with the said doctrine. Entitlement to Interest on delayed refunds - relevant time for calculation of interest - Interest on the refund is required to be reckoned with reference to the date of filing its revised return, or not - HELD THAT - In terms of Section 42(1) of the DVAT Act, a person is entitled to interest from the date that the refund was due to be paid or the date when the amount was over paid by the person, whichever is later - In the present case, undisputedly, the date on which the refund was due was later. According to the Revenue, the return furnished by a taxpayer, would stand superseded by the subsequent assessments under Sections 32 or 33 of the DVAT Act and, if no refund is due in terms of such assessments, the refund would be payable only after the taxpayer has succeeded in its challenge for setting aside or modifying the assessments framed under Sections 32 and 33 of the DVAT Act. It is contended that if the taxpayer secures the orders for setting aside or modifying the said assessments, the refund would be payable as a consequence of such orders - This aforesaid contention is unmerited. Once the taxpayer has succeeded in upsetting the assessments framed under Sections 32 or 33 of the DVAT Act, which results in vindicating its claim for refund either in part or as a whole, as claimed by furnishing a return, interest under Section 42(1)(a) of the DVAT Act would be payable from such date as the refund was due to be paid to the taxpayer. The expression, the date that refund was due to be paid must be construed as the date when such a refund ought to have been paid to the taxpayer. If the taxpayer succeeds in vindicating its stand that its claim for the refund was correct and that the subsequent assessments framed by the concerned authorities for the same tax period were erroneous or unjustified; it would follow that the taxpayer should have been refunded the amount claimed and that interest would be payable from the said date. In the present case, the petitioner had filed its revised return for the fourth quarter of the Financial Year 2013-14 on 31.03.2015. However, prior to that (on 15.05.2014 and 07.06.2014) default assessments under Section 32 and 33 of the DVAT Act were framed for various tax periods falling within the Financial Year 2012-13. The said default assessments were framed on 15.05.2014 and 07.06.2014. The petitioner had not filed any objections to the said assessments at the material time. In terms of Section 35 of the DVAT Act, the demands that were assessed in respect of the tax periods in the Financial Year 2012-13 were payable and outstanding. However, the refund due to the petitioner was not applied towards the dues pertaining to the amounts due against demands raised in respect of the tax periods in the Financial Year 2012-13, at the material time. Thus, the same were required to be disbursed. Insofar as the demands for assessments for the Financial Year 2013-14 are concerned, the assessments under Sections 32 and 33 of the DVAT Act were framed subsequent to the last date of processing the petitioner s claim for refund and the refund could not have been withheld at the material time. There is no dispute that the petitioner s refund was required to be paid within a period of two months from the date of filing the revised return. The respondent had clearly failed to act in accordance with Section 38 of the DVAT Act as it had not processed the petitioner s claim within the stipulated period of two months - withholding of the amount due to the petitioner was in breach of Section 38 of the DVAT Act. Thus, interest would be payable to the petitioner on the said amount from 01.06.2015, as claimed. Whilst the Department has processed the petitioner s claim for the refund of ₹44,14,979/-. The Department has withheld a sum of ₹10,43,918/- ₹6,50,434/- as tax and interest and ₹3,93,484/- on account of penalty for the tax period covered under the Financial Year 2013- 14. The demand for the same was raised on 04.09.2018. However, the said amount is not recoverable as the petitioner had filed its objections against the said demands on 02.11.2018. It is impermissible to withhold refund towards demands which are not recoverable - it is considered apposite to direct the concerned authority to refund the remaining withheld amount of amount ₹10,43,918/- along with interest with effect from 01.06.2015 and recompute the interest for the amount of ₹44,14,979/- as refunded in terms of the order dated 01.02.2023 and refund the interest due after adjusting the amount of ₹7,983/- already disbursed. Petition allowed.

Summary

Issues Involved:
1. Entitlement to refund and interest under the DVAT Act.
2. Requirement of filing Form DVAT 21 for refund claims.
3. Date from which interest on the refund is to be computed.

Summary:

Issue 1: Entitlement to Refund and Interest under the DVAT Act
The petitioner sought a refund of Rs. 54,58,897/- along with interest from 01.06.2015, related to the fourth quarter of Financial Year 2013-14. The petitioner filed a revised return on 31.03.2015. The Department issued default assessments for various periods, leading to the withholding of the refund. The petitioner filed objections which were accepted, and the demands were set aside by the Objection Hearing Authority (OHA) on 12.07.2022. The Court held that the petitioner was entitled to a refund and interest from 01.06.2015, as the Department failed to process the refund within the stipulated period.

Issue 2: Requirement of Filing Form DVAT 21 for Refund Claims
The Department argued that the petitioner needed to file Form DVAT 21 to claim a refund. However, the Court clarified that once a claim for a refund is made in a return, there is no need to file Form DVAT 21. Rule 34(2) of the DVAT Rules supports this, indicating that a claim in Form DVAT 21 is required only if it was not made in a previous return. The Court emphasized that the refund should be processed based on the return filed by the taxpayer.

Issue 3: Date from Which Interest on the Refund is to be Computed
The Court addressed whether the interest on the refund should be calculated from the date of filing the revised return or from the date of filing Form DVAT 21. The Court held that interest should be computed from the date the refund was due to be paid, which is two months after the filing of the revised return. The Court rejected the Department's contention that interest should be calculated from the date of filing Form DVAT 21, stating it would lead to unjust results and penalize the taxpayer for the Department's delay.

Conclusion:
The Court directed the Department to refund the withheld amount of Rs. 10,43,918/- along with interest from 01.06.2015 and to recompute the interest for the amount of Rs. 44,14,979/- already refunded, adjusting the amount of Rs. 7,983/- already disbursed. The petition was allowed in these terms.