2019 (5) TMI 1562 - HC - VAT and Sales Tax

Refund claim - subsequent cancellation of registration - DVAT Act - CST Act - denial of refunds on the ground of 'Zero Demands' - HELD THAT - The judgment of this Court in On Quest Merchandising India Pvt. Ltd. 2017 (10) TMI 1020 - DELHI HIGH COURT read down Section 9 (2) (g) of the DVAT Act and precluded the Department from invoking it to deny input tax credit to a purchasing dealer who has bonafide entered into a purchase transaction with a registered selling dealer was issued a tax invoice reflecting the TIN number . In terms of the said decision, the above demands created for July 2012, December 2012 and May and June 2010 cannot be justified. The orders creating such demands simply state that the purchase made from a registered dealer could not be verified . This is not a good enough a reason to invoke Section 9(2)(g) of the DVAT Act as explained by this Court in its judgment in On Quest Merchandising India Pvt. Ltd. This Court sets aside the fresh demands created by the Respondents for the aforementioned periods i.e. May 2010, June 2010, July 2012 and December 2012 - Respondents are directed now to issue the refund orders for the aforementioned periods and ensure that the refund amounts are credited to the account of the Petitioner not later than 30th June 2019 - petition allowed.

Summary

Issues:
- Refund of VAT under DVAT Act and CST Act for specific periods denied to the Petitioner.
- Failure of the Assessing Authority to issue refunds.
- Legitimacy of 'Zero Demand' orders to deny refunds.
- Adjustment of refund due by creating fresh demands under DVAT Act.
- Interpretation of Section 9(2)(g) of the DVAT Act.
- Justification of demands created for specific periods.
- Review petition filed by the Department in a related case.

Analysis:
1. The judgment addresses two writ petitions filed by the same Assessee seeking directions for refunds denied by the Respondents for specific periods under the Delhi Value Added Tax Act, 2004 (DVAT Act) and the Central Sales Tax Act (CST Act).

2. The Petitioner was registered under the DVAT Act and CST Act during the periods in question but later requested cancellation of registration. However, the petitions pertain to refunds due during the registration period under the DVAT Act.

3. The Petitioner claimed refunds for various periods, stating that returns were duly assessed with NIL demand. The Assessing Authority issued 'Zero Demand' orders for some periods, seeking to deny refunds, without a valid explanation for such denials.

4. The VATO adjusted the refund due by creating fresh demands for specific periods, invoking Section 9(2)(g) of the DVAT Act. The Court found these demands unsustainable based on a previous judgment and a Supreme Court order dismissing a related case.

5. The Court referred to a previous judgment that interpreted Section 9(2)(g) of the DVAT Act, emphasizing the need for bonafide purchase transactions with registered dealers to claim input tax credit.

6. The Court set aside the fresh demands created by the Respondents for certain periods, ruling that reasons like unverified purchases were insufficient to justify invoking Section 9(2)(g) of the DVAT Act.

7. The judgment directed the Respondents to issue refund orders for the periods in question, ensuring that the refund amounts, along with applicable interest, are credited to the Petitioner's account by a specified date.

8. The Court disposed of the petitions and applications accordingly, issuing orders to the parties involved for further action in compliance with the judgment.