2014 (11) TMI 923 - HC - VAT and Sales Tax

Interest on refund - state is contesting payment of interest at 12 per cent per annum to the assessees on the amounts refunded - refund was issued in compliance of order of the Supreme Court in Shri Krishna Enterprises case 1988 (3) TMI 407 - SUPREME COURT OF INDIA - Held that - grant of interest on refund of tax by the Appellate Deputy Commissioners was valid in view of section 33B read with section 33F of the Act, but such interest should have been granted only from the date immediately following the expiry of the period of six months from the date of order of Appellate Deputy Commissioners granting refund to the date on which the refund is granted as mandated in section 33F. The principles of res judicata or estoppel do not apply in these cases and the mere fact that the assessees have not claimed interest either originally or subsequently in appellate proceedings would not preclude them from claiming it as section 33F gives them a right to get interest on the refund. - Decided partly against the revenue.

Issues Involved:
1. Imposition of tax on sales of soft drinks and food.
2. Entitlement to exemption under Section 6 of the 46th Amendment.
3. Refund of excess tax collected.
4. Entitlement to interest on the refunded tax.
5. Applicability of principles of res judicata and estoppel.
6. Jurisdiction of revisional authorities under Section 20 of the Act.

Detailed Analysis:

1. Imposition of Tax on Sales of Soft Drinks and Food:
The respondents were initially taxed on the sales of soft drinks and food during the assessment years 1982-83 to 1985-86. The tax was imposed regardless of whether it was collected from customers. The Supreme Court's decision in Shri Krishna Enterprises v. State of Andhra Pradesh [1990] 76 STC 67 (SC) clarified that supplies made by these assessees to consumers were not treated as sales exigible to sales tax under the Andhra Pradesh General Sales Tax Act, 1957, prior to the 46th Amendment to the Constitution of India.

2. Entitlement to Exemption Under Section 6 of the 46th Amendment:
The 46th Amendment, effective from February 2, 1983, included tax on the supply of food and drinks as part of any service. The Supreme Court directed that assessees should be given an opportunity to prove that they had not collected tax until September 13, 1985, to claim exemption. The Andhra Pradesh General Sales Tax Act was amended accordingly, extending the benefit of the 46th Amendment.

3. Refund of Excess Tax Collected:
The Supreme Court's judgment mandated refunds of excess tax collected if assessees could prove non-collection of tax until September 13, 1985. The State Government issued a memorandum extending this benefit to all dealers who questioned their assessments and had pending proceedings. The Sales Tax Appellate Tribunal directed refunds following this judgment.

4. Entitlement to Interest on the Refunded Tax:
The respondents claimed interest on the refunded tax at 12% per annum as directed by the Supreme Court in the Shri Krishna Enterprises case. The Tribunal initially granted this interest. However, the High Court held that interest should only be granted from six months after the appellate order granting the refund, as per Section 33F of the Act. The State contested this, arguing that interest was only due if a claim was made under Section 33A in form XXIII, which the respondents had not done.

5. Applicability of Principles of Res Judicata and Estoppel:
The State argued that the principles of res judicata and estoppel barred the respondents from claiming interest since they had not claimed it in earlier proceedings. The High Court rejected this argument, stating that Section 33F grants a right to interest on refunds, independent of prior claims.

6. Jurisdiction of Revisional Authorities Under Section 20 of the Act:
In 18 cases, revisional authorities granted interest on refunds. The High Court found this exercise of power under Section 20 to be without jurisdiction, as the revisions were filed after the amendment restricting revisional powers to orders prejudicial to the revenue. Consequently, these proceedings could not be construed as "proceedings under the Act" for the application of Sections 33B or 33F.

Conclusion:
The High Court allowed the TRCs partly, restricting interest payable by the State to the period from six months after the appellate order granting the refund to the date of the actual refund. In cases where revisional authorities granted interest, the High Court disallowed the interest, deeming the exercise of revisional powers without jurisdiction.

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