2023 (2) TMI 290 - HC - VAT and Sales Tax

Interest for the period prior to the three years - respondent has refunded the excess tax and also paid interest for the period of three years - HELD THAT -The said issue was considered by a coordinate bench of this Court in IJM Corporation Berhad v. Commissioner of Trade and Taxes 2017 (11) TMI 1298 - DELHI HIGH COURT . This Court had held that in terms of Section 42 of the DVAT Act, interest would be payable if the refund is not paid within a period of two months of filing of the return. On a closer examination of the facts of this case, we are unable to accept that the petitioner can be denied interest on the amount of refund which has been unjustifiably withheld, mainly for two reasons. First, that there is no dispute that the petitioner is entitled to the refund and his return was required to be considered as an application for the same. The petitioner was not required to approach or pursue the authorities for its claim for refund of excess tax. Second, that the delay in processing claims for refund is endemic to the DVAT authorities and if the same is considered, the delay on the part of the petitioner approaching this court is not long. Although the petitioner has not approached this Court immediately after the refund of tax became due, we are unable to accept that the same disentitles the petitioner from claiming what is rightfully due - this Court directs the respondents to process the petitioner s claim for interest in accordance with law. Petition disposed off.

Summary

Issues:
1. Refund claim for the fourth quarter of the year 2013-14 with interest.
2. Delay in processing the refund claim.
3. Entitlement to interest for the period prior to the last three years.
4. Exclusion of delay period for computing interest.
5. Applicability of the decision in Union of India v. Tarsem Singh.
6. Pending refund claims and processing delays by DVAT authorities.

Analysis:
1. The petitioner sought a refund of Rs. 59,56,772/- for the fourth quarter of 2013-14 and claimed interest on the outstanding amount. The return was filed initially on 09.05.2014, revised on 15.01.2015, but not processed promptly. A notice under Section 59(2) was issued on 19.10.2015, leading to a default assessment in 2018, raising a demand of Rs. 34,582/- due to differences in tax liabilities.

2. The petitioner contended that despite the additional liability, the refund claim should not be withheld. The court acknowledged the entitlement to the refund and interest but deliberated on the period for which interest should be payable, considering the delay in processing the claim.

3. Citing the IJM Corporation Berhad case, the court clarified that interest is payable from the due date of refund payment or overpaid amount date, not from the return filing date. The petitioner's counsel highlighted that any delay attributable to the petitioner should exclude the interest period, which was not evidenced in this case.

4. The respondent argued for excluding the delay in approaching the court from the interest calculation, citing a Supreme Court decision. However, the court found this argument inapplicable due to the nature of the case and the absence of evidence suggesting petitioner-caused delays.

5. The court emphasized that the petitioner's right to interest should not be denied due to processing delays common in DVAT authorities. The court directed the respondent to process the interest claim as per the law, acknowledging the petitioner's entitlement to interest from a specific date till the refund date.

6. Considering the pending refund claims and the burden of interest on the exchequer due to delays, the court urged the Department of Trade and Taxes to expedite processing all pending refund claims. Despite the delay in approaching the court, the petitioner was deemed entitled to the interest rightfully due, emphasizing the importance of timely processing of refund claims to avoid unnecessary burdens.