2015 (5) TMI 915 - HC - VAT and Sales Tax

Claim of interest on refund - Refund claim was adjusted towards penalty imposed - Penalty for charging tax at higher rate - Held that - On an order being made by the First Appellate Authority on 04.10.1988 that a decision was taken by the Assessing Authority on 16.05.1989 to the effect that the money cannot be returned in view of Section 29 (3) of the Sales Tax Act. The issue of refusal to refund the money due under Section 29(3), in our opinion, would only arise when something becomes payable to the assessee under orders of the competent authority which in the facts of the case would be the order of the First Appellate Authority dated 04.10.1988. - under Section 29(1) proviso of the Sales Tax Act, a power has been conferred upon the taxing authority to adjust any amount which is refundable against any other outstanding of the assessee. It is with reference to this power that the amount of excess tax which was paid by the assessee had been adjusted by the department against the amount of penalty which was levied under Section 15-A(1)(QQ). It is also relevant to note that Explanation II to Section 29 provides that the refund would include any adjustment under sub-section 1 of Section 29 of the Act. In the facts of case, the order for refund of the money adjusted against penalty was directed to be returned to the assessee under the order dated 04.10.1988 which order stands affirmed up to the High Court. Therefore, the liability to make payment of interest under sub Section 29(2) would accrue from the date the order of the First Appellate Authority was received by the department. - it is a fit case to issue a writ of mandamus directing the Assessing Authority to re-calculate and pay the interest for the period commencing from the date the Assessing Authority had received the order of the First Appellate Authority dated 04.10.1988 till 27.12.2002 at the rates as were applicable from time to time to the assessee. - Decided in favour of assessee.

Summary

Issues:
- Claim for interest on refunded amount
- Interpretation of Section 29 of the Sales Tax Act
- Applicability of interest on refunded amount
- Legal principles regarding refund and adjustment

Analysis:

The petitioner sought a writ of mandamus for interest on the refunded amount directed under the order of the Appellate Authority dated 04.10.1988. The petitioner, engaged in a confectionery business, was initially assessed for tax at 8%, which was later reduced to 4% as per a High Court ruling. The Assessing Authority imposed penalties on the petitioner for charging tax at a higher rate, which were adjusted against the refundable amount due to the rate reduction. The Appellate Authority ordered the penalty amount to be returned to the petitioner. The department's subsequent appeals were dismissed by the Sales Tax Tribunal and the High Court.

The petitioner's application for refund was rejected by the Assessing Authority citing Section 29(3) of the Trade Tax Act. The First Appellate Authority also rejected the appeal, but the Tribunal allowed the appeal, directing the department to return the excess money with interest from the date of the Tribunal's order. The Commissioner of Trade Tax's revision against the Tribunal's order was dismissed by the High Court.

The main contention was whether interest should be paid from the date of the Appellate Authority's order or from the Tribunal's order. The Court analyzed Section 29 of the Sales Tax Act, emphasizing that the refund can be refused if the liability has been passed on to another party to prevent undue enrichment. However, in this case, the refund was directed by the competent authority and affirmed by subsequent orders.

The Court held that interest should accrue from the date of the Appellate Authority's order as the liability to pay interest under Section 29(2) arose from that date. The Tribunal's order quashing the refund denial under Section 29(3) did not affect the interest applicability. A writ of mandamus was issued directing the Assessing Authority to recalculate and pay interest from the Appellate Authority's order date to a specified date at applicable rates.

In conclusion, the Court allowed the writ petition, emphasizing the legal obligation to pay interest on the refunded amount from the date of the Appellate Authority's order, as per Section 29(2) of the Sales Tax Act.