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TMI Blog2023 (7) TMI 941X X X X Extracts X X X X X X X X Extracts X X X X ..... e material time, which is other than that covered under the assessment or quantification resulting in the claim for the refund either made separately or as reflected in the return furnished by the taxpayer. The taxpayer s remedies and claim in respect of any amount correctly applied in terms of Section 38(2) of the DVAT Act that is against other amounts due outside the rubric of the return furnished or its claim for the refund would follow a different trajectory. If the refund claimed by the taxpayer in his return is not paid on account of the assessment and reassessment framed under Sections 32 or 33 of the DVAT Act for the same tax period and the petitioner is successful in upsetting the same either pursuant to the objections filed under Section 74 of the DVAT Act, or in an appeal filed before the Appellate Authority under Section 76 of the DVAT Act, the self-assessment (return furnished) would stand confirmed and the assessee s claim would be required to be processed. This is so because, if the petitioner prevails in its objections under Section 74 of the DVAT Act, or appeals under Section 76 of the DVAT Act, that would amount to vindicating its stand that the assessments framed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was correct and that the subsequent assessments framed by the concerned authorities for the same tax period were erroneous or unjustified; it would follow that the taxpayer should have been refunded the amount claimed and that interest would be payable from the said date. In the present case, the petitioner had filed its revised return for the fourth quarter of the Financial Year 2013-14 on 31.03.2015. However, prior to that (on 15.05.2014 and 07.06.2014) default assessments under Section 32 and 33 of the DVAT Act were framed for various tax periods falling within the Financial Year 2012-13. The said default assessments were framed on 15.05.2014 and 07.06.2014. The petitioner had not filed any objections to the said assessments at the material time. In terms of Section 35 of the DVAT Act, the demands that were assessed in respect of the tax periods in the Financial Year 2012-13 were payable and outstanding. However, the refund due to the petitioner was not applied towards the dues pertaining to the amounts due against demands raised in respect of the tax periods in the Financial Year 2012-13, at the material time. Thus, the same were required to be disbursed. Insofar as the deman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,77,458/-, in its revised return of Value Added Tax for the fourth quarter of the Financial Year 2013-14, furnished on 31.03.2015. The petitioner claims that in terms of Section 42 of the Delhi Value added Tax Act, 2004 (hereafter the DVAT Act ), it is entitled to interest on the said amount of ₹54,58,897/- with effect from 01.06.2015, that is, two months after filing the revised return. FACTUAL CONTEXT 2. The petitioner is a limited company engaged in the business of development of the infrastructural sector and was awarded civil construction works for various projects in Delhi, namely, Mangolpuri DMSW Project, Narela Power Project, DSIIDC Residential Flats Project, Bawana Power Projects, and Najafgarh Drain Project, to name a few. 3. For the purposes of complying with his obligations under the DVAT Act as well as the Central Sales Tax Act, 1956 (hereafter the CST Act ), the petitioner applied for and was registered with the Department of Trade and Taxes, Delhi (hereafter the Department ) on 05.03.2007. The petitioner was assigned TIN 07510324123. 4. On 27.05.2014, the petitioner filed its return under the requisite form (Form DVAT 56) for the fourth quarter of the Financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections under Section 74 before the OHA on 10.10.2015, as claimed. 7. Since the petitioner s claim for refund was not processed, the petitioner filed a writ petition before this Court (being W.P.(C) No. 7324/2017 captioned Ramky Infrastructure Limited v. Commissioner of Trade and Taxes). The said petition was taken up for hearing on 08.09.2017. On the said date, the statement was made on behalf of the respondent that the petitioner s refund would be processed and the refund order would be issued within a period of four weeks from the said date. The said statement was noted and this Court, by an order dated 08.09.2017, directed that the refund along with interest be paid directly to the account of the petitioner within two weeks, thereafter. 8. The petitioner s claim was not processed within the period as stipulated in the aforementioned order dated 08.09.2017. Resultantly, the petitioner was constrained to file a Contempt Case (being Cont. Cas. 736/2017) under Section 11 read with Section 2(b) of Contempt of Courts Act, 1971. In the aforementioned contempt petition filed on 28.10.2017, the petitioner, inter alia, prayed that directions be issued for the refund of ₹2,64,77,458 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the petitioner. However, without considering the rival contentions, this Court granted liberty to the petitioner to file Form DVAT 21, claiming refund without prejudice to its rights and contentions. 14. In terms of the liberty granted by this Court, the petitioner made an application in Form DVAT 21 seeking refund of the amount of ₹54,58,897/- along with interest, for the fourth quarter of the Financial Year 2013-14. 15. The petitioner s claim for refund was considered and the Joint Commissioner of the Department of Trade and Taxes, passed an order on 01.02.2023 in Form DVAT 22 granting a refund of the amount of ₹44,14,979/- after adjustment of an amount of 10,43,918/-. The petitioner s claim for interest was partly allowed to the extent of ₹7,983/- being the interest on the amount of ₹44,14,979/- computed from 15.01.2023 (that is, two months from the date of filing of Form DVAT 21), till the date of the order. 16. Whilst the petitioner claims that it is entitled to an interest on the refund of tax with effect from 01.06.2015, that is, on expiry of two months from the date of filing of the revised return; the respondent claims that the petitioner is ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended that in such cases, the petitioner s claim for refund would arise directly as a result of the orders passed by the OHA under Section 74 of the DVAT Act and not on account of the return furnished by the assessee. He also submitted that similarly, if the petitioner became entitled to the refund on prevailing in the appeals either before the Appellate Tribunal under Section 76 of the DVAT Act or before this Court under Section 81 of the DVAT Act; the petitioner s entitlement to the refund would get instituted pursuant to the said orders. In terms of Rule 57 of the DVAT Rules, the refund so payable, is required to be processed in accordance with Rule 34 of the DVAT Rules. REASONING AND CONCLUSION 20. At the outset, it would be relevant to refer to Section 38 of the DVAT Act, which contains provisions regarding refunds. The relevant extract of the said Section is set out below: 38 Refunds (1) Subject to the other provisions of this section and the rules, the Commissioner shall refund to a person the amount of tax, penalty and interest, if any, paid by such person in excess of the amount due from him. (2) Before making any refund, the Commissioner shall first apply such excess tow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res that the amount remaining after adjustments under Sub-section (2) of Section 38 of the DVAT Act be either refunded to the person in terms of Clause (a) of Sub-section (3) or, at the option of the taxpayer, be carried forward as tax credit, to the next tax period in terms of Clause (b) of Sub-section (3) of Section 38 of the DVAT Act. 22. It is also relevant to refer to Rule 34 of the DVAT Rules, which provides for refund of excess payment. Rule 34 of the DVAT Rules is set out below: 34. Refund of excess payment (1) A claim for refund of tax, penalty or interest paid in excess of the amount due under the Act (except claimed in the return) shall be made in Form DVAT- 21, stating fully and in detail the grounds upon which the claim is being made. (2) Only such claim shall be made in Form DVAT-21 that has not already been claimed in any previous return. A claim for refund made in Form DVAT-21 shall not be again included in the return for any tax period. (3) The Commissioner may, for reasons to be recorded in writing, issue notice to any person claiming refund to furnish security under sub-section (5) of section 38, in Form DVAT -21A, of an amount not exceeding the amount of refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ishing the return or making the claim of the return. In the event the taxpayer furnishes a return reflecting a refund of tax paid, for any period, he is not required to make further claim for such refund by filing Form DVAT 21. This is clear from the plain language of Rule 34(2) of the DVAT Rules. 25. There are two facets to the controversy in this case. The first relates to the requirement of adjusting the pending dues from the amount of refund due to a tax payer. The question being, whether in cases of such an adjustment, a tax payer is required to make a fresh claim notwithstanding, that he had furnished a return claiming such a refund. The second relates to the date when the amount of refund is payable for the purposes of Section 42 of the DVAT Act. 26. The language of Section 38(2) of the DVAT Act indicates the scheme of application of an amount refundable to a person towards the outstanding dues. It requires the Commissioner to apply the excess amount due to a taxpayer towards recovery of any other amount due under the DVAT Act or under the CST Act. Clearly, if there is a crystalized demand, which is due and payable by any taxpayer, the Commissioner is required to first apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... timelines. 31. By virtue of Section 37 of the DVAT Act if the amount of refund payable or part thereof, is applied for the payment of any other amount due under the DVAT Act, the liability in respect of the said due would stand discharged to the extent that the amount refundable has been so applied. The word apply as used in Section 38(2) of the DVAT Act denotes the payment and discharge of the said liability to the extent that the amount refundable, or part thereof, is so applied. Application of the amount refundable against any other amounts due is in the nature of recovery of the said amount and in a manner of speaking, amounts to set off of the amount due payable to a person against a crystalized debt, recoverable from him. 32. If the taxpayer is aggrieved by the determination or assessment of the amount recoverable from him, it is open for him to avail such remedies as available to call into question such assessment or quantification. But he cannot resist recovery of the amount that is due and payable by him by adjustment, in terms of Section 38(2) of the DVAT Act, from the amounts refundable to him. This is, obviously, subject to the Commissioner making such recovery strictly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h cases, the taxpayer s claim for the refund arises out of the appellate orders and therefore does not relate back to the date when it was made, either under a return or otherwise, is erroneous, and we reject the same. 38. The taxpayer s remedies and claim in respect of any amount correctly applied in terms of Section 38(2) of the DVAT Act that is against other amounts due outside the rubric of the return furnished or its claim for the refund would follow a different trajectory. As stated above, in such cases the taxpayer s remedies would proceed on the basis that the amounts due and payable have been paid by the taxpayer. If the taxpayer succeeds in his remedies in setting aside the liability (either partly or in whole) against which the amounts refundable (or part thereof) have been correctly applied in terms of Section 38(2) of the DVAT Act; he would be entitled to the consequential relief of a refund in respect of that amount due, to the extent that the same was satisfied by appropriating an amount refundable to him. In such cases, it follows that the taxpayer s refund would arise from such orders setting aside the cause for the outstanding demand and not from the return furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the DVAT Act. If the refund claimed by the taxpayer in his return is not paid on account of the assessment and reassessment framed under Sections 32 or 33 of the DVAT Act for the same tax period and the petitioner is successful in upsetting the same either pursuant to the objections filed under Section 74 of the DVAT Act, or in an appeal filed before the Appellate Authority under Section 76 of the DVAT Act, the self-assessment (return furnished) would stand confirmed and the assessee s claim would be required to be processed. This is so because, if the petitioner prevails in its objections under Section 74 of the DVAT Act, or appeals under Section 76 of the DVAT Act, that would amount to vindicating its stand that the assessments framed are erroneous and the refund claimed under the return should have rightly been paid within the time as stipulated under Section 38(3)(a) of the DVAT Act. Even in cases where the assessments are reviewed under Section 74B of the DVAT Act and as a consequence, the refund as reflected in the return is required to be made, the refund would be traceable to the return furnished by the taxpayer. 42. There is merit in Mr Satyakam s contention that if a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is attributable to the said person, whether wholly or in part, the period of the delay attributable to him shall be excluded from the period for which the interest is payable. (2) When a person is in default in making the payment of any tax, penalty or other amount due under this Act, he shall, in addition to the amount assessed, be liable to pay simple interest on such amount at the annual rate notified by the Government from time to time, computed on a daily basis, from the date of such default for so long as he continues to make default in the payment of the said amount. (3) Where the amount of tax including any penalty due is wholly reduced, the amount of interest, if any, paid shall be refunded, or if such amount is varied, the interest due shall be calculated accordingly. (4) Where the collection of any amount is stayed by the order of the Appellate Tribunal or any court or any other authority and the order is subsequently vacated, interest shall be payable for any period during which such order remained in operation. (5) The interest payable by a person under this Act may be collected as tax due under this Act and shall be due and payable once the obligation to pay interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een sustained by the authorities or the Court in the subsequent proceedings, was not payable at the material time when the taxpayer had made a claim. 47. The Revenue s interpretation of Section 42(1)(a) of the DVAT Act would clearly lead to arbitrary and unjustified results. The taxpayer whose return is erroneously rejected and an unjustified assessment has been made, which is subsequently set aside would be placed in a disadvantageous position viz-a viz the taxpayer, whose return is correctly processed. It would accord premium to unjustified action of the concerned authorities in framing erroneous assessments and a corresponding penalty on the taxpayer. Clearly, this is not the legislative intent of Section 42(1) of the DVAT Act. It is also relevant to refer to the second proviso to Section 42(1) of the DVAT Act, which also clarifies that if the amount of refund is enhanced or reduced as the case may be, the interest shall be enhanced or reduced accordingly. The second proviso makes it amply clear that an assessee is entitled to interest from the date when the amount ought to have been paid to him. If the amount of refund is reduced or denied and the taxpayer succeeds in the subse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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