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2022 (7) TMI 643 - HC - GSTRejection of the transition of the ITC - Levy of penalty for wrongful transition, ineligible credit as well as interest - section 42(5) of the TANVAT Act read with Section 9 (2) of the CST Act and Section 174 of the TNGST Act - HELD THAT - The provisions of Section 42(5) of the TNVAT Act provide for the payment and recovery of tax, penalty etc. and cast a mandate upon the Commercial Taxes Department to refund any excess determined within a period of 90 days from date of order of assessment/revision/appellate order. Where the refund exceeds the stipulated time of 90 days, the Government is liable to pay interest where the amount is not less than one hundred rupees, a sum equal to a sum calculated at the rate of half percent or part thereof for such amount for each month or part thereof. The motives of the petitioner are found to be bondfide in law, since it not only asks for a refund but also states that it is not entitled for transition under GST laws. This Court is unable to appreciate how the petitioner is expected to be aware of the technical difficulties faced by the officer or indeed, why such delay should enure to its detriment - The petitioner is entitled to the claim for refund, prima facie, as evidenced by order dated 30.12.2016 of the first respondent wherein the amount in question has been determined as excess payment and there is no dispute raised in this regard. Levy of penalty and interest - HELD THAT - Sustaining the penalty and interest would be hypertechnical. No doubt, the petitioner has made an inadmissible claim of transition. While the filing of a TRAN 1 is clearly misconceived, the petitioner is protected by the intention to protect its claim for refund in the face of the unjustified, and admitted delay on the part of the respondents. That apart, the provisions of Section 74 would be applicable only in the case of wrongful availment/utilization of ITC by reason of fraud. The precondition for invocation of Section 74 is that the revenue must establish willful misstatement or suppression to evade tax - In the present case, the question evasion of tax does not arise since it is not an assessment but only determination of the correctness of availment of ITC. In such a case, what would be relevant is to see whether the availment of credit is with the intent of evading tax. Let the refund claim dated 19.07.2017 be processed on merits by the State Taxes Officer/R1, and paid over to the petitioner with interest till 27.12.2017, being the date when the TRAN 1 application was filed by the petitioner, within a period of four weeks from date of receipt of copy of this order. Petition allowed.
Issues involved:
1. Claim for refund under the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act) and Central Sales Tax Act, 1956 (CST Act). 2. Transition of excess amount under the Tamil Nadu Goods and Services Tax Act, 2017 (TNGST Act). 3. Imposition of penalty and interest for wrongful transition. Detailed Analysis: Issue 1: Claim for refund under TNVAT Act and CST Act The petitioner, a registered dealer under TNVAT and CST Acts, claimed concessional rate of tax at 2% under CST Act for the period 2015-16. An audit revealed discrepancies, and the petitioner deposited Rs.40,00,000/- towards nonavailability of C-Forms. The assessment order showed an excess of Rs.38,91,410/-, with Rs.11,94,312/- as credit balance. The petitioner sought a refund under TNGST Act, but the claim was not processed. The petitioner filed a TRAN-1 for refund, which was deemed inadmissible. The High Court held that the petitioner's request for refund made in 2017 was legitimate, and the delay in processing the refund was unjustified. Issue 2: Transition of excess amount under TNGST Act The petitioner attempted to transition the excess amount under TNGST Act through a TRAN-1 filing, which was considered incorrect. The Court acknowledged the petitioner's awareness of the inadmissible claim but noted the petitioner's genuine intention to protect its interests. The Court found the petitioner entitled to a refund rather than transition, as per the provisions of the TNGST Act. Issue 3: Imposition of penalty and interest for wrongful transition The respondent proposed penalties and interest for wrongful transition by the petitioner. The Court considered the petitioner's actions as a desperate measure due to the delayed response on the refund claim. The Court emphasized that the petitioner's intention was not to evade tax but to secure a legitimate refund. Consequently, the Court set aside the penalties and interest imposed, directing the refund claim to be processed promptly with interest till the date of the incorrect filing. In conclusion, the High Court ruled in favor of the petitioner, allowing the refund claim and rejecting penalties and interest for the incorrect transition. The judgment highlighted the importance of timely processing refund claims and the need to consider the genuine intentions of the parties involved in tax matters.
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