2024 (4) TMI 764 - HC - VAT and Sales Tax

Short payment of Interest - denial of interest from 01.04.2017 to 18.12.2020, the period during which the amount of input tax credit was lying in the electronic credit ledger of the petitioner - section 38 of the VAT Act. HELD THAT - On perusal of provisions of subsection (2) of section 38 of the Act, it is clear that the registered dealer is entitled to refund from the date immediately following the date of closure of the accounting year to which the said the amount of refund relates till the date of payment of the amount of such refund. In the facts of the case, appellant order would be the relevant date or the end date however, the date from which the interest starts running is the date of immediately following the accounting year which is 01.04.2017 under the facts of the case. Merely because the petitioner has transferred the amount to the electronic credit ledger coupled with the fact that such amount remained unutilized till it was reversed by the petitioner by filling Form DRC-03, the transfer of amount to the electronic credit ledger was only a memorandum entry on 01.07.2017 which was reversed on 18.12.2020. For all effect and purpose, the amount was never utilized by the petitioner and the Commissioner has also rightly not granted refund of the amount input tax credit which is utilized by the petitioner. It is pertinent to note that the petitioner made claim of refund for the amount of Rs. 42,35,215/- after considering already utilized amount of Rs. 3,45,133/- and there was shortfall of Rs. 22,500/ and therefore, the Commissioner, while granting refund, has taken into consideration this aspect and granted refund of only Rs. 42,34,894/- to the petitioner. Therefore, respondent-authority is required to calculate the interest on the amount as per the order passed by the appellate-authority from 01.07.2017 till the date of order i.e. 22.05.2023. The respondent authorities are directed to refund balance amount of Rs. 8,81,322/- within a period of four weeks from the date of receipt of copy of this order - Petition allowed.

Summary

Issues involved:
The judgment involves the interpretation of Section 38 of the VAT Act regarding the payment of interest on refund, as well as the authority of the respondent to revise a refund payment order without following proper procedures.

Interpretation of Section 38 of the VAT Act:
The petitioner, a chemical manufacturing company, sought a refund under the VAT Act for unutilized input tax credit after transitioning to the GST Act. The Assessing Officer initially rejected the refund claim, stating that the petitioner had already availed transitional tax credit under the GST Act. However, the Commissioner later allowed the appeal and granted a refund. The petitioner then requested interest on the refund amount under Section 38 of the VAT Act. The respondent calculated interest from the date of reversal of the input tax credit, arguing that the amount had been transferred to the electronic credit ledger and remained unutilized until reversed. The court held that the interest should be calculated from the date immediately following the closure of the accounting year, i.e., 01.04.2017, as per the provisions of Section 38.

Revision of Refund Payment Order:
The petitioner contended that the respondent authority improperly revised the refund payment order, reducing the interest amount without providing an opportunity for the petitioner to be heard. The respondent argued that the interest was correctly calculated based on the date of reversal of the input tax credit. The court noted that the respondent's revision of the refund payment order without following the revisional proceedings under Section 75 of the VAT Act was not in accordance with the law. Consequently, the court directed the respondent authorities to refund the balance amount of interest to the petitioner within four weeks, emphasizing that the self-revision made by the respondent was not in line with the provisions of the VAT Act.