2024 (5) TMI 928 - HC - VAT and Sales Tax

Refund of excess ITC - rejection on the ground that the ITC was brought forward from previous years and the petitioner was directed to apply for refund from the relevant year - entitlement of interest on delayed refund - interest on the refund of excess ITC would be accruable only after expiry of sixty days of the last application moved or not - HELD THAT - Application which was moved on 27.11.2020 was for the refund of the excess ITC which accrued for the years 2010- 11 to 2013-14 of Rs. 48, 20, 533/- whereas all the subsequent facts as pointed out by learned counsel for the respondents are for the assessment proceedings which started from 2014-15 to 2017-18. The subsequent aspects and facts would not deprive the assessee for the benefit of interest on the excess ITC which accrued to him on the refund amount for the period from 2010-11 to 2013-14 and the same was not released after moving application for refund dated 27.11.2020. Hence when the application moved on 27.11.2020 it was binding upon the respondents to have released the interest on the accrued amount after sixty days from the date of application on account of non-payment of refund which admittedly has not been done. Even the assessment proceedings which they initiated for the year 2014-15 were set aside by the DETC (A) vide its order dated 07.07.2022. Thus it cannot be said that they were in any manner correct in withholding the said refund application - Subsequent adjustment of the amount for the assessment years 2015-16 2016-17 and 2017-18 would not in any manner deprive the assessee of the interest or the refund amount which accrued on 27.11.2020. Liability of interest - HELD THAT - The same accrued from the date the first application was moved i.e. 27.11.2020 on the total amount of Rs. 48, 20, 533/-. The interest as payable under Section 40 of the Act would therefore be paid on amount of Rs. 48, 20, 533/- from the expiry of sixty days of 27.11.2020 i.e. 27.01.2021 up to 20.02.2023 when the refund was made. However the said interest would be calculated from 27.01.2021 up to 20.02.2023 whereafter the interest is not payable as the amount of Rs. 41, 21, 072/- was paid. Petition allowed.

Summary

Issues Involved:
The judgment deals with the issue of refund of excess Input Tax Credit (ITC) and the payment of interest on delayed refund under the Punjab VAT Rules, 2005.

Refund of Excess ITC:
The petitioner sought a writ of mandamus for the refund of excess ITC as per the application filed, which was supported by the order passed by the Deputy Excise and Taxation. The respondents argued that the original application was rejected due to ITC being brought forward from previous years, leading to subsequent assessment proceedings. However, the DETC (A) set aside the assessment order, and a fresh refund application was submitted. The court held that the interest on the refund accrued from the date of the first application and should have been paid within sixty days as per Rule 52(10) of the Punjab VAT Rules.

Legal Precedent and Interpretation:
The respondents relied on a Supreme Court judgment regarding interest on delayed payment, emphasizing the relevant date for determining liability to pay interest. The court analyzed Rule 52 and Section 40 of the Punjab VAT Act, 2005, which specify the procedure for refund and interest on delayed refund, respectively. It was concluded that interest is payable after sixty days from the date of the application for refund.

Decision and Conclusion:
The court disagreed with the respondents' argument that only the fresh application should be considered for calculating the sixty-day period. It held that the interest accrued from the date of the original application and should have been paid accordingly. The subsequent adjustments for other assessment years did not negate the petitioner's entitlement to interest on the initial refund amount. The court allowed the writ petition for the payment of interest on the excess ITC accrued up to the date of refund, as per the provisions of the Act and Rules.

Final Verdict:
The court directed the respondents to pay interest on the excess ITC amount from the date of the original application until the date of refund. The judgment allowed the writ petition and disposed of all pending applications in line with the decision.