2016 (8) TMI 1076 - HC - VAT and Sales Tax

Application for remission and claim for refund - Held that - The sum of ₹ 50 lakhs, ordered to be deposited by the petitioner, must be seen in the light of the petitioner s possible liability of tax, which may be ascertained at a future date. Till this is done, such amount would remain in the nature of a deposit, which the Government would hold in trust. Till the Government framed the remission scheme on 18.11.2014, no such tax liability was ascertained through any order of assessment. The same therefore could not have been treated as a payment of tax. May be, the petitioner s request for adjustment of such amount at the stage of considering the petitioner s request for remission, was turned down, however, this would not conclude the issue since the petitioner did not accept such verdict of the authority. The petitioner merely applied afresh and made cash deposit of the petitioner s liability under the remission scheme which application was accepted upon the remaining liability being satisfied by the petitioner. The petitioner s application for remission and the petitioner s claim for refund of ₹ 50 lakhs deposited pursuant to the Courts directions, thus were segregated. The stand of the authorities that such amount of ₹ 50 lakhs was deposited by way of tax prior to the scheme and, therefore, cannot be refunded, cannot be accepted. In fact, we have some doubt about the correct interpretation of para-13 of the scheme which refers to no refund of a tax, interest or penalty already paid. One way of looking at this provision could be that the scheme prohibits refund of tax already paid. Does it also prohibit adjustment of tax for the past period paid, but which is now covered by the amnesty scheme, is a question we need not answer.Be that as it may, the respondents cannot withhold the petitioner s deposit of ₹ 50 lakhs when for the very same period, the petitioner applied and was granted remission on conditions, which the petitioner fulfilled. Under the circumstances, the respondents shall refund a sum of ₹ 50 lakhs to the petitioner with simple interest at the rate of 7% per annum from the date of the deposit till refund, which shall be done latest by 30th September, 2016.

Summary

Issues:
- Interpretation of remission scheme for tax liabilities
- Validity of deposit made by petitioner
- Refund of deposited amount

Interpretation of Remission Scheme for Tax Liabilities:
The judgment revolves around the interpretation of a remission scheme introduced by the State Government for contractors and developers to settle past tax liabilities. The scheme offered waivers on interest and penalty amounts but had a condition that no refund would be given for amounts already paid. The crux of the controversy was whether a deposit made by the petitioner was considered as tax payment under the scheme, thus disqualifying them from a refund.

Validity of Deposit Made by Petitioner:
The petitioner had deposited a sum of ?50 lakhs as per the court's order, which was to be held in trust until the tax liability was ascertained. The court clarified that the deposit was not a tax payment but a safeguard against a possible tax liability that may be determined in the future. The authorities rejected the petitioner's request for refund, citing that the deposit was made before the scheme declaration. However, the court held that the deposit was not a tax payment and should be refunded to the petitioner.

Refund of Deposited Amount:
The court ruled in favor of the petitioner, directing the respondents to refund the deposited amount of ?50 lakhs with simple interest at 7% per annum. The court emphasized that the deposit was not a tax payment and should be returned to the petitioner, especially since the petitioner had fulfilled the conditions for remission under the scheme. The respondents were instructed to refund the amount by a specified date.

In conclusion, the judgment clarified the nature of the deposit made by the petitioner, distinguished it from a tax payment, and ordered the refund of the deposited amount along with interest. The decision highlighted the importance of interpreting legal schemes accurately and ensuring fairness in dealing with taxpayers' deposits and liabilities.