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2024 (1) TMI 508 - HC - VAT and Sales TaxInterpretation of statute - time limitation - Rejection of refund claim - no prescription of time limitation in the parent Act - striking down the rules as ultra vires. Whether rules can provide a period of limitation when there is no such prescription in the parent Act? - HELD THAT - It has been considered by the Hon ble Apex Court in the case of BHARAT BARREL DRUM MFG. CO. LTD. ANR. VERSUS EMPLOYEES STATE INSURANCE CORPORATION 1971 (9) TMI 183 - SUPREME COURT . The Hon ble Supreme Court delved into the question as to whether limitation affects substantive and procedural rights - it has been inter alia held that where the legislature intends to provide the period of limitation it specifically provides for the same in the main Act and does not leave it to the government under its delegated power. Since the Rule bars the claim of the Corporation, the same can t be within the realm of procedure. It was also held that since such a provision affects substantive rights, it must be dealt with the legislature itself and cannot be inferred from the rule making power unless provided for expressly. In the present case as well, the right to refund gets extinguished by the time limit provided in the JVAT Rules. This certainly affects the substantive and statutory right of the petitioner to get refund to which it is guaranteed under Section 52 of the JVAT Act. Thus, we hold that the refund application of the petitioner could not have been rejected on the ground of limitation since Rule 19(2)(a) is de hors the provision of Section 52 of the JVAT Act. From scrutiny of Section 55 of the JVAT Act it would make it evident that interest would be levied for the period commencing 90 days after the application for refund. Thus, the legislature has intended that Refund Application should be decided within a period of 90 days. In the present case, the same has been given a complete go by - the action of the Respondents is unjust and arbitrary which seek to defeat legitimate claims of the petitioner. The impugned order has been rejected, is hereby, quashed and set-aside - Application disposed off.
Issues Involved:
1. Whether rules can provide a period of limitation when there is no such prescription in the parent Act? 2. When no relief has been claimed to strike down the rules as ultra vires; relief attached to can be granted? 3. Whether outstanding dues can be a ground for denial of refund application? Summary: Issue 1: Limitation Period in Rules vs. Parent Act The court examined whether rules can prescribe a limitation period when the parent Act does not. The petitioner argued that Section 52 and 55 of the JVAT Act, 2005, do not specify any limitation period for seeking refunds, and thus Rule 19(2)(a) of the JVAT Rules, which imposes a 90-day limit, is ultra vires. The court referred to the Supreme Court judgment in Bharat Barrel and Drum Mfg. Co. Ltd. v. ESI Corpn., (1971) 2 SCC 860, which held that substantive rights should be dealt with by the legislature itself and not through delegated rule-making powers. The court concluded that Rule 19(2)(a) is de hors the provision of Section 52 of the JVAT Act and thus, the refund application could not have been rejected on the ground of limitation. Issue 2: Granting Relief Without Striking Down Rules The petitioner contended that even if no relief was sought to strike down the rules as ultra vires, the rules could still be ignored if they are inconsistent with the Act. The court agreed, citing Shree Bhagwati Steel Rolling Mills v. CCE, (2016) 3 SCC 643, and held that the rules could be ignored when they are inconsistent with the Act, even if no specific relief to strike them down was sought. Issue 3: Outstanding Dues and Refund Denial The petitioner argued that the Act does not envisage denial of refund on the grounds of existing dues, as Rule 19(5) only deals with outstanding dues at the time of filing the refund application. The court noted that allowing the respondents to deny refunds based on dues arising subsequently would be unjust and arbitrary. The court referred to the Supreme Court's judgment in Global Energy Ltd. v. Central Electricity Regulatory Commission, (2009) 15 SCC 570, which held that substantive rights or obligations cannot be created through delegated rule-making powers unless expressly provided. The court found that the VAT dues for the period 2017-18 had been paid, CST dues had been set aside by the Appellate Court, and VAT dues for 2016-17 had been stayed. Additional Observations: The court criticized the respondents for the unexplained delay in processing the refund application and noted that the order sheet only started from January 2021, despite the application being filed years earlier. The court emphasized that Section 55 of the JVAT Act mandates interest for delays beyond 90 days, indicating the legislature's intent for timely processing of refund applications. Conclusion: The court quashed the impugned orders dated 28.05.2022, which rejected the refund applications for the assessment years 2009-10 and 2012-13. The respondents were directed to calculate and pay the refund amounts, including interest, within 12 weeks. Disposition: Both writ applications were disposed of with the above directions.
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