2017 (5) TMI 495 - HC - VAT and Sales Tax

Reopening of assessment - Section 34(1) of DVAT Act - time limitation - Held that - it is only when the Assessee came forward with the present petition complaining of the failure by the DVAT Department to process its refund claim in terms of Section 38 of the DVAT Act, that the DVAT Department decided to examine the return filed more than four years earlier - While, technically, it could be argued that these default assessment orders were passed within time they were in fact issued on the last date of expiry of limitation. The Court cannot be blind to what the orders really purport to do. The Court is constrained to observe that there has been a persistent attempt by the DVAT Department to somehow ensure that the refund claims are defeated by creating fresh demands which are then adjusted against the refund amount. The Court is, therefore, not able to sustain any of these orders of notice of default assessment of tax and interest passed on 31st March, 2017 by the VATO, Ward-50 creating fresh demands in respect of the periods of November and December, 2012 and January and March, 2013. The said notices of default assessment of tax are hereby quashed. Petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Delay in processing refund claims under the DVAT Act.
2. Authority re-opening assessments to create fresh demands.
3. Abuse of statutory powers by the DVAT Department.
4. Legality of default assessment orders issued by the VATO.

Analysis:
1. The petitioner filed a petition seeking a refund under the DVAT Act, stating that the refund applications for specific tax periods were pending with the Respondents. The court noted that despite the obligation to process claims within one month, the DVAT Department had not acted on the refund claim, contrary to previous court decisions emphasizing timely processing of refunds.

2. The court highlighted that the VATO had waited until the last day to pass default assessment orders, creating demands for earlier periods when refund claims were pending. The VATO's actions were seen as an attempt to frustrate refund orders by re-assessing earlier years and creating fresh demands, which was condemned by the court as an abuse of power.

3. The court expressed concern over the persistent pattern of the DVAT Department in creating fresh demands to offset refund amounts, despite previous judgments criticizing such behavior. The court condemned the DVAT Department's routine conduct of delaying refunds and creating new demands, labeling it as an abuse of statutory powers and an illegal practice.

4. The court found the default assessment orders issued by the VATO on the last day of the limitation period to be illegitimate and ordered their quashing. The court directed the DVAT Department to pay the refund amount with accrued interest to the petitioner within two weeks, warning of consequences for non-compliance. Additionally, the Commissioner, VAT was instructed to investigate and prevent the abuse of powers leading to the creation of fresh demands by VATOs.

This judgment highlights the importance of timely processing of refund claims, condemns the abuse of statutory powers by tax authorities, and emphasizes the need for accountability and adherence to legal procedures in tax assessments and refund processes.