2016 (2) TMI 813 - HC - VAT and Sales Tax

Claim of refund of VAT paid on purchases and export of tractors - VAT was not deposited by the seller - Section 38 (3) (a) (i) of the DVAT Act - (VATO) disallowed the input tax credit (ITC) claimed on certain purchases - Held that - a feeble attempt has been made to justify the initiation of fresh proceedings under Section 59 of the DVAT Act, while offering no satisfactory explanation for allowing the time period for completion of the original default assessment proceedings under Section 32 of the DVAT Act to lapse. Instead of processing the claims for refund in terms of Section 38 of the DVAT Act, the VATO proceeded to pass two fresh default assessment orders under Section 32 of the DVAT Act for the aforementioned periods - At the outset, it requires to be noticed that in the fresh orders of default assessment of tax passed on 28th August 2014, the VATO makes no reference to the orders passed by the OHA on 11th August and 21st October 2010 setting aside the original assessment orders dated 6th October, 2009 and remanding the matters to the VATO for deciding afresh. Apart from the obvious error committed by the VATO in purporting to review a non-existent order, even the requirements of Section 74 B of the DVAT Act were not satisfied and therefore the powers thereunder could not have been invoked. - Further, the jurisdictional requirement for invoking the extended period of limitation under Section 34 of the DVAT Act is not satisfied. Revenue directed to refund the amount with simple interest @6% - Decided in favor of asessee.

Issues Involved:
1. Entitlement of the Petitioner to a refund under Section 38 of the DVAT Act.
2. Legitimacy of the disallowance of Input Tax Credit (ITC) by the Value Added Tax Officer (VATO).
3. Compliance with the orders of the Objection Hearing Authority (OHA).
4. Validity of fresh assessment orders and penalties imposed by the VATO.
5. Invocation of extended period of limitation under Section 34 of the DVAT Act.
6. Abuse of process of law by the Department of Trade and Taxes (DTT).

Issue-wise Detailed Analysis:

1. Entitlement of the Petitioner to a refund under Section 38 of the DVAT Act:
The Petitioner, a partnership firm registered under the DVAT Act, claimed refunds for the periods 1st August to 31st August 2008 and 1st October to 31st October 2008. The refunds were claimed within the stipulated time, and under Section 38 (3) (a) (i) of the DVAT Act, the Petitioner was entitled to these refunds within two months of making the claims. However, the refunds were disallowed by the VATO, leading to the present litigation.

2. Legitimacy of the disallowance of Input Tax Credit (ITC) by the VATO:
The VATO disallowed the ITC claimed by the Petitioner on the basis that the purchases from certain dealers were bogus. The dealers in question were found to be non-existent or not maintaining proper records. This disallowance was challenged by the Petitioner, and the OHA set aside the VATO's orders, directing a fresh assessment after giving the Petitioner a reasonable opportunity to be heard.

3. Compliance with the orders of the Objection Hearing Authority (OHA):
The OHA's orders dated 11th August 2010 and 21st October 2010, which set aside the VATO's disallowance of ITC and directed a fresh assessment, were not complied with by the VATO. No fresh orders were passed within the stipulated time, leading to the expiry of the period for passing a default assessment under Section 34 of the DVAT Act by 31st March 2013.

4. Validity of fresh assessment orders and penalties imposed by the VATO:
Fresh default assessment orders were passed by the VATO on 20th August 2014, disallowing the refund claims and imposing fresh tax demands and penalties. These orders were purportedly issued under Section 32 of the DVAT Act but were found to be without legal basis as they did not comply with the requirements of Section 74 B and Section 34 of the DVAT Act. The orders were quashed by the Court as they were an abuse of the process of law.

5. Invocation of extended period of limitation under Section 34 of the DVAT Act:
The Court found that the extended period of limitation under Section 34 of the DVAT Act could not be invoked as the necessary conditions were not met. Specifically, there was no recorded reason to believe that the tax was not paid due to concealment, omission, or failure to disclose material particulars by the Petitioner. The original assessment orders had already been set aside by the OHA, and there was no basis for the VATO to review or rectify non-existent orders.

6. Abuse of process of law by the Department of Trade and Taxes (DTT):
The Court observed that the DTT's actions in initiating fresh proceedings and passing new assessment orders were an abuse of the process of law. The DTT failed to comply with the earlier Court orders and attempted to deny the refund due to the Petitioner by issuing fresh notices under Section 59 of the DVAT Act. The Court held that the Petitioner was entitled to the refund as claimed, along with interest, and directed the Respondent to process the refund accordingly.

Conclusion:
The Court allowed the writ petitions, directing the Respondent to refund the entire amount claimed by the Petitioner, along with simple interest at 6% per annum from the date the refund was due until the actual date of payment. The Court emphasized that the DTT's actions were without legal basis and constituted an abuse of the process of law.

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