2020 (7) TMI 676 - HC - VAT and Sales Tax

Jurisdiction - Withholding of refund - Refund of pre-deposit amount alongwith the interest - the impugned order was passed by the Sales Tax Officer - HELD THAT - This petition deserves to be allowed on the sole ground that the impugned order was passed by the Sales Tax Officer, who had no authority to withhold the amount under Section 39 of the VAT Act. A plain reading of Section 39 of the VAT Act stipulates that the power is vested in the Commissioner to withhold the refund upon recording an opinion that the revenue would be adversely affected and that too after affording due opportunity to the assessee - In the present case, there is no order passed by the Commissioner recording his satisfaction and since there is no order of the Commissioner, there is no question of affording any opportunity. The Sales Tax Officer has no authority to withhold the amount under Section 39 of the VAT Act. At the best he could have referred the matter to the Commissioner for taking appropriate decision, if he was of the view that the revenue would be adversely affected. That having not been done, the order of the Sales Tax Officer dated 18.10.2019, impugned in the present petition (Annexure-A), cannot be sustained. Normally, an opportunity would be given to the Commissioner to pass an order, but since no such power has been exercised by the Commissioner for the last 5 years, today we are not inclined to grant such liberty. Whether appropriate direction for refund would be given or not - no appeal had been filed before the Supreme Court - HELD THAT - As per the impugned order, till that date, no appeal had been filed before the Supreme Court. Further the petitioner had succeeded before the Tribunal in August, 2015. The Department took two years to file appeal before the High Court which was dismissed in October, 2018. Thereafter, much later the Department has simply submitted an appeal before Supreme Court on 05.03.2020 and Dairy No.9032 of 2020 was allotted and till date no further progress has been made in the said appeal. Admittedly, the Commissioner has not exercised the powers - the refund should forthwith be made to the petitioner along with admissible interest permissible under law from the date of deposit till the date of actual payment. The impugned order passed by the respondent No.2 is hereby quashed and set aside with further direction to the respondents to refund the amount of ₹ 15 lakhs along with statutory interest within a period of two weeks from the date of production of the certified copy of this order - petition allowed.

Summary

Issues:
1. Quashing of order withholding refund of pre-deposit
2. Authority to withhold refund under Section 39 of the VAT Act
3. Granting of refund and interest to the petitioner

Analysis:
1. The petitioner sought to quash an order withholding the refund of ?15 lakhs paid as a pre-deposit, along with a prayer for immediate refund with interest. The Tribunal had ruled in favor of the petitioner in a tax dispute, leading to the pre-deposit. The High Court dismissed the State's appeals challenging the Tribunal's decision. Subsequently, the Sales Tax Officer refused the refund, citing a potential Supreme Court challenge by the State.

2. The High Court found that the Sales Tax Officer lacked the authority to withhold the refund under Section 39 of the VAT Act. The section empowers the Commissioner, not the Sales Tax Officer, to withhold refunds if deemed necessary to protect revenue, after providing the dealer with a hearing. As the Commissioner did not issue any order in this case, the Sales Tax Officer's decision to withhold the refund was deemed invalid. The Court emphasized that the Sales Tax Officer should have referred the matter to the Commissioner for a decision if revenue protection was a concern.

3. The Court noted the delay in the State's appeal process, highlighting that no appeal had been filed before the Supreme Court until a much later date. Given the lack of action by the Commissioner and the prolonged delay in the appeal process, the Court directed the immediate refund of the pre-deposit amount to the petitioner, along with statutory interest from the date of deposit to the date of payment. The Court allowed the petition, quashed the impugned order, and instructed the respondents to refund the amount within two weeks of the order's certified copy submission.