2015 (8) TMI 1004 - HC - VAT and Sales Tax

Interest on refund of Tax demand Interest to be granted from date of deposit or from the date of assessment order Petitioner filed appeal before Appellate Authority claiming interest on refund of tax as demanded, appellate authority merely directed assessing authority to pay interest amount Petitioner challenged order before Tribunal Whether petitioner is entitled to interest from dates on which petitioner paid amounts to respondents as condition precedent to maintainability of appeal Held that - In view of Section 39(5), petitioner was compelled to pay tax assessed in order to have its appeal entertained Petitioner had admittedly paid amounts to authorities Revenue suffers no loss thereby for it has enjoyed benefit of money during period Petitioner restricted his claim for interest from date of assessment order under which he was entitled to refund Admittedly Interest was granted on basis of Section 12 of Punjab General Sales Tax Act, 1948 which is not same as HGST Act which is involved in case Therefore interest is payable from date of deposit Impugned order modified by directing respondents to pay interest on amounts deposited from dates on which deposits were made till payment Petition disposed of Decided in favour of Petitioner.

Issues Involved:
1. Entitlement to interest on tax collected without authority of law.
2. Quashing of the order dated 22.05.2014 by the Haryana Tax Tribunal.
3. Refund of tax and interest thereon.
4. Applicability of Sections 25(5), 39(5), and 43 of the HGST Act.
5. Interpretation of Rules 35 and 38 of the Haryana General Sales Tax Rules, 1975.
6. Equitable relief under Article 226 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Entitlement to Interest on Tax Collected Without Authority of Law:
The petitioner sought a writ of mandamus for interest on tax collected by respondents allegedly without authority of law. The court recognized that the petitioner had paid the tax as a condition precedent for maintaining the appeal, and upon succeeding in the appeal, the petitioner was entitled to a refund. The court emphasized that absent any statutory bar, denying interest on the refunded amount was unjustified as the revenue had enjoyed the benefit of the money during this period.

2. Quashing of the Order Dated 22.05.2014 by the Haryana Tax Tribunal:
The petitioner also sought a writ of certiorari to quash the order dated 22.05.2014 by the Haryana Tax Tribunal. The Tribunal had set aside the assessment order and remanded the matter for reassessment. The court found that the Tribunal's decision was in line with the precedent set by the High Court in the case of State of Haryana vs. M/s Ambika Oil & Soap Industries.

3. Refund of Tax and Interest Thereon:
The petitioner was entitled to a refund of Rs. 11,47,390/-, which was paid without interest initially. The court noted that interest was only paid for a period of four months, which was inadequate. The petitioner claimed interest from the date of the Tribunal's order (05.12.2008) to the date of refund (04.01.2010). The Tribunal held that interest was payable from the date of the fresh assessment order (28.05.2009) till the date of refund. The court, however, found that interest should be payable from the date of deposit as the revenue had the benefit of the money during this period.

4. Applicability of Sections 25(5), 39(5), and 43 of the HGST Act:
The court examined Sections 25(5), 39(5), and 43 of the HGST Act. Section 39(5) mandates payment of assessed tax, penalty, and interest as a precondition for entertaining an appeal. Section 43(2) entitles an assessee to interest if the refund is delayed beyond a prescribed period. The court found no implied or express bar in these sections against the payment of interest on refunded amounts.

5. Interpretation of Rules 35 and 38 of the Haryana General Sales Tax Rules, 1975:
Rule 35(1)(a) and (b) and Rule 38 were scrutinized. Rule 35(1)(b) entitles an assessee to interest if the refund is not made within ninety days of an application. Rule 38 mandates the sanctioning authority to record an order for interest on delayed refunds. The court concluded that these rules did not bar interest for the period before the application for refund and supported the petitioner's claim for interest from the date of deposit.

6. Equitable Relief under Article 226 of the Constitution of India:
The court exercised its extraordinary jurisdiction under Article 226, emphasizing that equity supported the petitioner's claim for interest from the date of the deposit. The court cited precedents from similar cases where interest was granted on delayed refunds, reinforcing the petitioner's entitlement to interest.

Conclusion:
The court disposed of the petition by modifying the impugned order, directing the respondents to pay interest at 12% per annum on the amounts deposited from the dates of deposit until payment. The legal principles established in this judgment ensure that taxpayers are compensated for the period during which the revenue holds their money without entitlement.

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