2024 (10) TMI 797 - HC - VAT / Sales Tax

Interest alongwith interest on refunds of excess amount deposited - non-furnishing of declaration forms - said amount not reflected in the returns filed for the relevant period, nor adjusted against the demands - no revised return filed within one year to claim the refund as envisaged under Section 28 of the DVAT Act - refund has been claimed after a gap of more than five years - HELD THAT - It is clear from the language of Section 28 of the DVAT Act that if there is any discrepancy in the return furnished for the tax period, the assessee is liable to furnish a revised return. It is not the case of the respondent that there was any discrepancy in the return furnished by the petitioner and therefore the petitioner was not under any obligation to file the revised return under Section 28 of the DVAT Act, inasmuch as, the amount of Rs. 3,50,00,000/- deposited by the petitioner was not a tax but an amount deposited with the department, out of which, tax amount, if any, was to be deducted. As is manifest on a conjoint reading of Section 35 (2) and 38 (2) of the DVAT Act, as long as objections remained pending with OHA, any amount claimed by the respondent would clearly not answer the description of an amount due or payable as contemplated under Section 38 (2). Respondent, therefore, cannot possibly seek to justify the retention of the refund claim on account of being barred by limitation. The delay in processing the refund is endemic to the DVAT authorities and if the same is considered, the delay, even if any, on the part of the petitioner approaching the authorities is not long. Respondent cannot possibly seek to justify the retention of refund claim on account of its having been deposited voluntarily or being barred by limitation. It is a clear case of unjust retention of the money of petitioner. Respondent clearly appeared to have acted arbitrarily in illegally depriving the petition of the refund as claimed, in flagrant violation of the mandate of Section 38 of the DVAT Act. Grant of interest on refund - HELD THAT - Interest is the return or compensation for use or retention of another s money. The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under the circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest. Section 42 of the DVAT Act deals with the payment of interest - In terms of Section 42 of the DVAT Act, a person is entitled to interest from the date the refund was due to be paid or the date when the amount was over paid by the person, whichever is later - A harmonious reading of Section 38 and 42 makes it clear that the interest is payable to the petitioner from the date when it accrued in terms of Section 38 (3) (a) (ii) of 2004 Act - petitioner would also entitled to interest along with refund of Rs. 3,50,00,000/- in terms of Section 42 (1) of the DVAT Act. The impugned Refund Rejection Order dated 31.10.2023 is hereby quashed. Respondent is consequently directed to refund the amount of Rs. 3,50,00,000/- along with statutory interest as also the interest on refunds for the 1st, 2nd, 3rd and 4th quarters of AY 2012-13 from the date it fell due - Petition allowed.

Issues Involved:

1. Entitlement to refund of Rs. 3,50,00,000/- and excess amount of Rs. 16,81,460/-.
2. Legality of the Refund Rejection Order dated 31.10.2023.
3. Applicability of limitation period for claiming refunds under the DVAT Act.
4. Entitlement to interest on delayed refunds under Section 42 of the DVAT Act.

Detailed Analysis:

1. Entitlement to Refund:

The petitioner, a manufacturer of motor vehicles, deposited Rs. 3,50,00,000/- with the respondent department as per the latter's request to meet revenue targets. This was done without any formal demand or due process, and the petitioner later sought a refund of this amount. Additionally, after adjustments in assessment proceedings, the petitioner was entitled to a refund of Rs. 16,81,460/-. The court noted that the petitioner had filed the necessary applications in Form DVAT-21 to claim these refunds and had sent multiple reminders to the respondent. The court found that the petitioner was entitled to the refund of Rs. 3,50,00,000/- as it was not a tax but an amount deposited with the department.

2. Legality of the Refund Rejection Order:

The Refund Rejection Order dated 31.10.2023 was challenged by the petitioner. The court quashed this order, finding it unjustified. The court emphasized that the amount deposited by the petitioner was not reflected in the returns because it was not a tax but an advance payment. The court held that the respondent acted arbitrarily in retaining the petitioner's money without legal grounds, as the refund claim was not barred by limitation.

3. Applicability of Limitation Period:

The respondent argued that the refund claim was barred by limitation due to a delay of more than five years. However, the court clarified that the DVAT Act does not prescribe a limitation period for claiming refunds of amounts collected as advances. The court noted that the petitioner filed for a refund soon after the Special Objection Hearing Authority (SOHA) order, and there was no inordinate delay attributable to the petitioner. The court ruled that the delay in processing the refund was due to the respondent's inaction, not the petitioner's delay in filing the claim.

4. Entitlement to Interest on Delayed Refunds:

The court highlighted that under Section 42 of the DVAT Act, a person entitled to a refund is also entitled to interest from the date the refund was due or the date the overpaid amount was paid, whichever is later. The court found that the petitioner was entitled to interest on the delayed refund of Rs. 3,50,00,000/- as well as on the refunds for the 1st, 2nd, 3rd, and 4th quarters of AY 2012-13. The court emphasized that the interest is compensation for the use or retention of another's money and is payable from the date the refund was due.

Conclusion:

The court allowed the writ petition, quashed the Refund Rejection Order dated 31.10.2023, and directed the respondent to refund the amount of Rs. 3,50,00,000/- along with statutory interest. The court also ordered the payment of interest on the refunds for the 1st, 2nd, 3rd, and 4th quarters of AY 2012-13. The respondent was instructed to effect the refund within four weeks from the date of the decision.

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