2024 (7) TMI 862 - HC - VAT and Sales Tax

Refund of tax with interest for the year 2011-2012 - adjustment of refund with the demand of tax for the earlier period - Settlement Scheme for the year 2010-2011 - HELD THAT - There is no dispute that Petitioner s liability under the Settlement Scheme is Rs. 8,46,84,821/- as against which the Respondents have recovered from the Petitioner Rs. 19,16,74,501/- thereby resulting into excess collection by Respondents to the extent of Rs. 10,69,89,606/-. The excess arose because on 13th May 2019, Petitioner, under the Settlement Scheme, paid Rs. 8,46,84,821/- and subsequently on 23rd May 2019, Respondents, without any authority of law, adjusted the refund for the year 2011-2012 amounting to Rs. 10,69,89,606/- against the demand for the year 2010-2011 which did not exist. This has not been disputed by Respondents. Therefore, even on this count, the claim of Petitioner for refund of Rs. 10,69,89,606/- is justified since it is a settled position that the State authorities cannot retain the excess amount which is not in accordance with law and same would be violative of Article 265 of the Constitution of India. On a reading Section 11 of the Settlement Scheme, the defect notice is issued when there is a shortfall in making the payment and not when an applicant has paid the correct amount. In the instant case, on a perusal of the defect notice it states that requisite amount payable is Rs. 66,17,057/-, whereas Petitioner has paid Rs. 8,46,84,821/- which is excess payment and not short payment. Therefore, even on this count, defect notice is contrary to Section 11 of the Settlement Scheme. Reliance placed by Respondents on Section 18 of the Settlement Scheme for not granting the refund is also misconceived. Section 18 provides that under no circumstances, shall the applicant be entitled to get refund of the amount paid under the Settlement Scheme. In the instant case, Petitioner is not seeking refund of Rs. 8,46,84,821/- which is the undisputed amount paid under the Settlement Scheme, but is seeking a refund of Rs. 10,69,89,606/- which is refund for the year 2011-2012 arising out of the appeal order for the said year and not an amount paid under the Settlement Scheme. There are no force in the submissions of Respondents to withhold the refund amount for the year 2011-2012 - Respondents are directed to refund to Petitioner a sum of Rs. 10,69,89,606/- alongwith interest at 6% per annum as per Section 52 read with Rule 88 of the MVAT Rules from 1st June 2019 till the date of payment. Petition disposed off.

Summary

Issues:
1. Refund of tax for the year 2011-2012
2. Adjustment of refund against demand for the year 2010-2011
3. Validity of the Settlement Scheme
4. Interpretation of Section 18 of the Settlement Scheme
5. Compliance with MVAT Rules in refund adjustment

Analysis:

Issue 1: Refund of tax for the year 2011-2012
The petitioner sought a refund of Rs. 10,69,89,606 for the year 2011-2012, which was allowed by the appellate authority. However, the Respondents adjusted this refund against the demand for the year 2010-2011, leading to the current dispute.

Issue 2: Adjustment of refund against demand for the year 2010-2011
The Respondents adjusted the refund for the year 2011-2012 against the demand for the year 2010-2011, even though the petitioner had already paid the amount due for 2010-2011 under the Settlement Scheme. This adjustment was found to be illegal as there was no outstanding due for 2010-2011 at the time of adjustment.

Issue 3: Validity of the Settlement Scheme
The Settlement Scheme allowed for the settlement of arrears of tax, interest, penalty, and late fees. The petitioner availed the scheme for the year 2010-2011, paid the specified amount, and communicated the same to the Respondents. The adjustment of the refund against a non-existent demand was deemed contrary to the Settlement Scheme.

Issue 4: Interpretation of Section 18 of the Settlement Scheme
Section 18 of the Settlement Scheme was cited by the Respondents to argue against the refund. However, the court found that the petitioner was not seeking a refund of the amount paid under the Settlement Scheme but rather the refund arising from the appeal order for the year 2011-2012.

Issue 5: Compliance with MVAT Rules in refund adjustment
The court found that the adjustment of the refund against the demand for the year 2010-2011 was not in compliance with Rule 60 of the MVAT Rules, which allows adjustments against demands of subsequent orders, not prior years. The defect notice issued by the Respondents was also found to be defective and not in accordance with the law.

In conclusion, the court held in favor of the petitioner, ordering the Respondents to refund the amount of Rs. 10,69,89,606 along with interest. The court also directed the Respondents to treat the amount paid under the Settlement Scheme for 2010-2011 as final settlement and to credit the refund amount to the petitioner's bank account promptly.