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TMI Blog2023 (9) TMI 1429X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 38(3)(a)(ii) of the Act which apply to the petitioner here. The ambit of Section 38(2) of the Act is explained and it is held that an adjustment against a refund claim could only be made in respect of a tax demand which is due and enforceable . On a conjoint reading of the said provision along with Section 35(2) of the Act, it is concluded that till such time as objections are pending before the OHA, the tax demand cannot be said to have crystalised so as to be adjusted against the refund as claimed. In the facts of the present case it is found that not only have adjustments been made contrary to the mandate of Section 38 of the Act, the demand as raised for FY 2010-2011 and which has been adjusted against the refund as claimed is additionally liable to be set aside on grounds resting on the provisions contained in Section 74 of the Act. The position which therefore emerges is that not only would the Hearing Notice of 24 May 2022 be rendered unsustainable in law, even the adjustments which have been made in the Refund Order of 29 April 2022 would be contrary to the provisions of the Act. It is concluded that since it is manifest that insofar as the demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and set aside the impugned hearing notice dated 24.5.2022 issued by the Spl. Commissioner-I for the same being non-est and without the authority of law; b) declare and hold that the deeming fiction as envisaged u/s 74(9) had come into play on the failure of the OHA to make the decision against the objections of 2010-11 within a period of 15 days form the service of notice in DVAT-41 on 4.5.2022; c) set aside the demand of tax and interest of Rs.8,80,89,920/- and penalty of Rs. 4,66,96,421/- as framed through DVAT-24 DVAT-24A respectively on 29.3.2017; d) set aside the adjustment of Rs.13,47,86,341/- made in the refund order issued in DVAT-22 on 29.4.2022 in consequence of coming into play of Sec 74(9); e) held and declare the petitioner to be entitled to refund of Rs.13,47,86,341/- along with interest which has been adjusted while granting refund for the first quarter of 2016-17; 3. As would be manifest from the aforesaid reliefs, the first challenge is laid to a Hearing Notice dated 24 May 2022 and which pertains to the objections which were filed by the petitioner before the Objection Hearing Authority OHA in respect of the Assessment Order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d have been made in light of Section 38(3)(a)(ii) of the Act. 6. We note that insofar as the first submission is concerned, the petitioner also seeks to draw sustenance from the judgment rendered by the Court in Combined Traders v. Commissioner of Trade and Taxes 2019 SCC OnLine Del 9351 and which had interpreted the statutory fiction as constructed in terms of Section 74(9) of the Act as well as the procedure liable to be followed in light of Section 74(8) of the Act. 7. For the purposes of answering the questions that stand posited, the following essential facts may be noticed. An Assessment Order for FY 2010-2011 came to be framed on 29 March 2017. The said assessment order created a total demand of Rs. 13,47,86,341/- which represented the assessed liability towards tax along with interest and penalty payable. The petitioner is stated to have filed objections before the OHA in respect of the said assessment order on 29 May 2017. Undisputedly, those objections had not been disposed of by the Commissioner at least till the issuance of the Hearing Notice dated 24 May 2022 which stands impugned in W.P.(C) 8352 of 2022. It becomes pertinent to note that while the said object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity in dispute cannot be enforced. The significance of the procedure as structured in terms of Section 35 of the Act was highlighted by this Court in its decision in Flipkart India Private Limited v. Value Added Tax Officer, Ward 300 Ors. 2023 SCC OnLine Del 5201 and where the legal position was explained as under:- 41. The respondents also cannot possibly seek to justify the retention of the refund claim on account of the default assessment notices which were issued on 15 May 2014 and 07 June 2014. This since the petitioner had duly filed objections before the OHA and in terms of Section 35(2) of the DVAT Act, and the demand as raised in terms thereof could not have been enforced. 42. We note that Section 38(2) of the DVAT Act uses the expression recovery of any other amount due under this Act . The Commissioner in terms of Section 38(2) is thus entitled to apply any amount found to have been paid by an assessee in excess of the amount due from him before making a refund only if there exists an enforceable demand against that assessee. As is manifest on a conjoint reading of Section 35(2) and 38(2) of the DVAT Act, as long as objections remain pending with the OHA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed forward to the next tax period as a tax credit in that period. (5) The Commissioner may, as a condition of the payment of a refund, demand security from the person pursuant to the powers conferred in Section 25 of this Act within forty-five days from the date on which the return was furnished or claim for the refund was made. (6) The Commissioner shall grant refund within 15 days from the date the dealer furnishes the security to his satisfaction under subsection (5). (7) For calculating the period prescribed in clause (a) of sub-section (3), the time taken to (a) furnish the security under sub-section (5) to the satisfaction of the Commissioner; or (b) furnish the additional information sought under Section 59; or (c) furnish returns under Section 26 and Section 27; or (d) furnish the declaration or certificate forms as required under Central Sales Tax Act, 1956, shall be excluded. (8) Notwithstanding anything contained in this section, where (a) a registered dealer has sold goods to an unregistered person; and (b) the price charged for the goods includes an amount of tax payable under this Act; (c) the dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave adjustments been made contrary to the mandate of Section 38 of the Act, the demand as raised for FY 2010-2011 and which has been adjusted against the refund as claimed is additionally liable to be set aside on grounds resting on the provisions contained in Section 74 of the Act. 15. Section 74 of the Act stands framed in the following terms:- 74 Objections (1) Any person who is dis-satisfied with (a) an assessment made under this Act (including an assessment under section 33 of this Act); or (b) any other order or decision made under this Act; may make an objection against such assessment, or order or decision, as the case may be, to the Commissioner; PROVIDED that no objection may be made against a non-appealable order as defined in section 79 of this Act: PROVIDED FURTHER that no objection against an assessment shall be entertained unless the amount of tax, interest or penalty assessed that is not in dispute has been paid failing which the objection shall be deemed to have not been filed: PROVIDED ALSO that the Commissioner may, after giving to the dealer an opportunity of being heard, may direct the dealer to deposit an amount deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in whole or in part and take appropriate action to give effect to the acceptance (including the remission of any penalty assessed either in whole or in part); or (b) refuse the objection or the remainder of the objection, as the case may be; and in either case, serve on the person objecting, a notice in writing of the decision and the reasons for it, including a statement of the evidence on which it is based : PROVIDED that where the Commissioner within three months of the making of the objection notifies the person in writing, he may continue to consider the objection for a further period of two months: PROVIDED FURTHER that the person may, in writing, request the Commissioner to delay considering the objection for a period of up to three months for the proper preparation of its position, in which case the period of the adjournment shall not be counted towards the period by which the Commissioner shall reach his decision. (8) Where the Commissioner has not notified the person of his decision within the time specified under sub-section (7) of this section, the person may serve a written notice requiring him to make a decision within fifteen days. (9) If th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... May, 2018 of the OHA passed under Section 74(7) of the Act. 23. In reply, Mr. Shadan Farasat, learned counsel for the Respondent, first submitted that after the order dated 17th May, 2018 had been passed by the OHA rejecting the earlier objections, the question of three months period again reviving in terms of Section 74(6) read with Section 74(8) did not arise. According to him, after the order dated 28th September, 2018 of this Court restoring the Petitioner's objections to the file of the OHA for a fresh disposal, there was no time limit as such for the OHA to dispose of the objections. 24. This Court is unable to agree with the above submissions of Mr. Farasat. xxx xxx xxx 28. Learned counsel for the Petitioner is right in his contention that this three-months period not having been adhered to, the procedure under Section 74(8) of the DVAT Act would kick in. The Respondent has not controverted the assertion of the Petitioner that despite best efforts service of notice under DVAT-41 could not be effected in person on the OHA and was ultimately served on the Commissioner on 4th January 2019. Admittedly, the objections were not decided within fifteen da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act in the CRU would not be compliant with the statutory requirements. Even this submission was negated. 19. The position which therefore emerges is that not only would the Hearing Notice of 24 May 2022 be rendered unsustainable in law, even the adjustments which have been made in the Refund Order of 29 April 2022 would be contrary to the provisions of the Act. We come to this conclusion since it is manifest that insofar as the demand for FY 2010-2011 is concerned, the objections would be deemed to have been accepted and granted by the Commissioner upon the expiry of 15 days when computed from 04 May 2022. The demand as created in terms of the assessment order as framed would thus clearly not survive. This clearly in light of the legal fiction which stands placed in that provision and as a consequence of which the Commissioner would stand denuded of the jurisdiction to adjudicate upon those objections once the statutory fiction comes into effect. Section 74(9) in that sense not only accords a closure but commands us to hold that the objections preferred by the assessee would be deemed to have been accepted. 20. Turning then to the adjustments which have been made with res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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