2021 (7) TMI 844 - HC - VAT and Sales Tax

Refund of Input Tax Credit - purchase turnover corresponding to export sales - rejection on the pretext that customs clearance certificate was not produced by the petitioner - HELD THAT - Admittedly under Section 38(1) of the APVAT Act 2005 refund due to an exporter has to be made within 90 days from the date of VAT return and so the 1st respondent who is presumed to be aware of the said provision could not have rejected the refund due to the petitioner - More importantly on 28.04.2006 after remand by the Appellate Deputy Commissioner on 18.04.2006 it is the 1st respondent who had issued advice to the petitioner referring to the petitioner s application for refund of 4, 71, 347/- stating that the said refund claim was accepted. It is not in dispute that the petitioner s application for refund enclosed the documents except the customs clearance certificate which was not being issued by the Customs Authority - petitioner had also admittedly produced label / customs declaration furnished to the postal authorities to evidence export proper as the goods were exported by post by it. The petitioner had also produced the certificate issued by the Postal Department of Government of India confirming and corroborating delivery of postal consignments to the consignees outside the country with relevant details such as place of destination date of delivery etc. It had also produced other documents referred to in Rule 35(6) other than the customs clearance certificate. The action of the 1st respondent in denying refund to the petitioner is violative of Article 14 of the Constitution of India perverse and in contempt of the order dt.18.04.2006 of the Appellate Deputy Commissioner (CT) Punjagutta Division Hyderabad - the 1st respondent is directed to refund the sum of 6, 38, 724/- by crediting the above said amount to the petitioner s bank account within fifteen (15) days from the date of receipt of a copy of this order along with interest due thereon at the rate of 1% per month - petition allowed.

Summary

Issues:
Refund of VAT under Telangana VAT Act, 2005 based on documentary evidence, rejection of refund by the 1st respondent, appeal to Appellate Deputy Commissioner, subsequent rejection of refund claim, legality of denying refund, compliance with Rule 35(6) of APVAT Rules, introduction of new requirement post-acceptance of refund claim, violation of Article 14 of the Constitution of India.

Analysis:
The petitioner, a dealer in Cellular Phones, claimed a refund of VAT under the Telangana VAT Act, 2005 for the period of April to November, 2005. The petitioner submitted VAT returns with supporting documents for export sales, excluding the customs clearance certificate as it was not issued for postal exports. The 1st respondent denied the refund solely on the grounds of the missing customs clearance certificate, leading to an appeal by the petitioner to the Appellate Deputy Commissioner, which was initially allowed on April 18, 2006. The Appellate Authority acknowledged alternative documentary evidence could be considered in the absence of a customs clearance certificate.

Despite the Appellate Authority's decision, the 1st respondent again rejected the refund claim in August 2006, instructing the petitioner to reapply after March 2007. The petitioner filed a Writ Petition challenging this rejection, arguing that the denial of refund was against the previous appellate decision and amounted to contempt. The petitioner also highlighted the absence of a legal basis for the rejection, especially in light of the Commissioner of Customs and Central Excise's clarification that no customs clearance certificate was issued for postal exports.

The Court found merit in the petitioner's arguments, noting the contradictory actions of the 1st respondent and the violation of the statutory provision requiring refunds to be processed within 90 days. The Court also questioned the introduction of a new requirement post-acceptance of the refund claim and emphasized the discriminatory treatment of the petitioner's claim compared to others without a customs clearance certificate.

In its decision, the Court declared the 1st respondent's rejection of the refund as arbitrary, illegal, and against jurisdiction. The Court directed the 1st respondent to refund the amount claimed by the petitioner with interest and pay costs to the petitioner. The Court emphasized that the denial of refund based on the absence of a customs clearance certificate was a violation of Article 14 of the Constitution of India, highlighting the need for fair and non-discriminatory treatment in such matters.