2019 (3) TMI 968 - HC - VAT and Sales Tax

Interest on delayed refund - Relevant date for calculation of interest - Held that - The controversy involved in the present case is no longer res integra, inasmuch as the same stands decided by the above referred decision of this court in the case of M/s Syngenta Crop Protection Pvt. Ltd. v. State of Gujarat 2018 (4) TMI 1669 - GUJARAT HIGH COURT . In the said case this court, relied upon an earlier decision of this court in the case of State of Gujarat v. Doshi Printing Press 2015 (3) TMI 211 - GUJARAT HIGH COURT wherein the court turned down the contention that while giving effect to section 54(1)(aa) of the Act, the effect would be available to the assessment made by the assessing authority only and not the further modification made by the first appellate authority or thereafter, the second appellate authority or even third appellate authority, as the case may be. The court held that the interpretation canvassed by the revenue of section 54(1) (aa) of the Act, if accepted, would run counter to the basic principles of the doctrine of merger which is a well accepted doctrine incorporated in the system of administration of justice. The Gujarat Value Added Tax Act, 2003 came into force with effect from 1st April, 2006. In the light of what is held in the above decision, considering the fact that in the present case the payment has been made in August, 2006, that is, after the coming into force of the Gujarat Value Added Tax Act, 2003, for the period prior to the coming into force of the GVAT Act, the petitioner would be entitled to payment of interest at the rate of 9% per annum as provided under section 54 of the Gujarat Sales Tax Act and for the subsequent period it would be entitled to interest at the rate of 6% per annum as provided under section 38 of the Gujarat Value Added Tax Act. Petition allowed.

Summary

Issues:
1. Entitlement to interest on delayed refund under section 54 of the Gujarat Sales Tax Act, 1969.
2. Applicability of interest rate on the refund amount.
3. Interpretation of the refund claim arising from an order of assessment.

Issue 1: Entitlement to interest on delayed refund under section 54 of the Gujarat Sales Tax Act, 1969.
The petitioner sought a direction for the respondents to pay interest at 9% per annum on the principal amount of refund. The petitioner had paid a significant amount against the demand raised by the assessing authority and had appealed against the assessment order. The Commissioner (Appeals) later granted partial relief, resulting in a refund due to the petitioner. The petitioner argued that as per section 54 of the Act, interest on delayed refund is mandatory from the date of assessment order until the refund is made. Reference was made to a previous decision by the court in a similar case to support this argument.

Issue 2: Applicability of interest rate on the refund amount.
The respondents contended that the refund claim in this case arose from an order of the appellate authority, not an order of assessment, falling under a different clause of section 54 of the Act. The petitioner claimed interest from the date of the assessment order in 2006 until the actual refund. The court noted that the controversy had been previously addressed in a judgment where it was held that the petitioner would be entitled to interest at a rate of 6% per annum under the Gujarat Value Added Tax Act, not 9% as claimed under the Gujarat Sales Tax Act.

Issue 3: Interpretation of the refund claim arising from an order of assessment.
The court analyzed previous decisions to determine that when the appellate authority allows an appeal, it corrects the order of assessment rather than creating a new refund claim. The court emphasized the doctrine of merger and held that the corrected assessment prevails, and the refund claim cannot be considered as arising from an order other than the order of assessment. The court clarified that interest on the refund amount would be governed by the Gujarat Value Added Tax Act, not the repealed Gujarat Sales Tax Act.

In conclusion, the court allowed the petition, directing the respondents to pay interest to the petitioner at a rate of 6% per annum from August 2006 until the actual refund on the principal amount. The decision was based on the interpretation of relevant legal provisions and previous judgments, resolving the issues raised regarding the entitlement to interest on delayed refund and the applicable interest rate.