Payment of Interest under the DVAT Act from Refund Deadline: Delhi HC
Fact and issue of the case
The petitioner has filed the present writ petition, inter alia, praying that the respondent be directed to refund the amount of ₹54,58,897/-, along with interest with effect from 01.06.2015. The said sum of ₹54,58,897/- as claimed by the petitioner, relates to the fourth quarter of the Financial Year 2013-14 and was included in the petitioner’s claim for refund of ₹2,64,77,458/-, in its revised return of Value Added Tax for the fourth quarter of the Financial Year 20 13-14, 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
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.
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 03.2007. The petitioner was assigned TIN 07510324123.
On 27.05.2014, the petitioner filed its return under the requisite form (Form DVAT 56) for the fourth quarter of the Financial Year 2013-14 claiming a refund of ₹2,59,88,302/-. Thereafter, the petitioner filed a revised return in Form DVAT 56 on 3 1.03.2015, enhancing its claim of refund to ₹2,64,77,458/-. The petitioner claims that on the date of filing of its return, there were no amounts due for any period either under the DVAT Act or the CST Act.
On 07.06.2014, and 15.05.2014 notices (in all twenty-four in number) for default assessments of tax and interest were issued under Sections 32 and 33 of the DVAT Act, for various tax periods falling during the Financial Year 2012-13. On 15.06.2015, notices for default assessments were framed for tax periods falling within the Financial Year 2013-14 by the Department. These default assessments were made alleging mismatch in the Input Tax Credit (ITC), due to mismatch between purchases made by the petitioner and sales shown by the registered selling dealer. The Department raised a demand of additional tax amounting to ₹54,58,897/- on account of the aforesaid count. In addition, the Department also imposed a penalty of ₹32,600/- on the
The petitioner claims that on 10.10.2015, the petitioner filed its objections in respect of the default assessments for the tax periods falling within the Financial Years 2012-2013 and 2013-2014, under Section 74 of the DVAT Act before the Objection Hearing Authority (hereafter ‘the OHA’). The petitioner claims that it simultaneously also pursued the Department for release of the refund as claimed by it in its revised return in, respect of the fourth quarter of the Financial Year 2013-14. There is a controversy as to whether the petitioner had filed the objections, on 10.10.2015 as claimed, or later. Although, it is contended on behalf of the Revenue that the objections were filed later; it is conceded that there is no material to substantiate the said contention. Mr Satyakam, learned counsel who appeared for the Revenue, states that the relevant records are not traceable and it is not possible to ascertain the date on which the objections were filed. He also clarified that the date of filing of the objections (30.09.2019) as reflected in the tabular statement set out in paragraph no. 5 of the Revenues application (CM No. 79 16/2023) is not the date of filing of the objections but the date of communications issued. We therefore, accept that the Petitioner had filed objections under Section 74 before the OHA on 10.10.2015, as claimed.
Since the petitioner’s claim for refund was not processed, the petitioner filed a writ petition before this Court (being 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 08.09.20 17, directed that the refund along with interest be paid directly to the account of the petitioner within two weeks, thereafter.
The petitioner’s claim was not processed within the period as stipulated in the aforementioned order dated 08.09.20 17. 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/- along with interest. While the said proceedings were pending, on 30.10.2017, the petitioner’s claim for refund was partly processed and the Department granted a refund of ₹2,40,32,088/-, which included interest amounting to ₹30,46,127/-. The refund amount was computed after adjusting an amount of ₹54,91 ,497/- (₹54,58,897/- on account of additional tax under the default assessment notices and ₹32,600/- on account of penalty). The contempt petition was, thereafter, dismissed by this Court by an order dated 16.07.2018.
The petitioner prevailed in its objections before the OHA impugning the additional demands raised pursuant to the default assessment of tax and interest for the various periods falling within the Financial Years 20 12-13 and 2013-14. By orders dated 12.07.2022, the OHA set aside the said demands. Copies of the orders dated 12.07.2022 placed on record also indicate that the OHA had reviewed the earlier assessments under Section 74B(5) of the DVAT Act.
Thereafter, the petitioner issued a letter dated 12.09.2022 claiming release of the amount of ₹54,58,897/- along with interest that had been withheld on account of the assessments under Sections 32 and 33 of the DVAT Act, as noted above.
The petitioner’s claim for refund was not processed. Aggrieved by the same, the petitioner has preferred the present writ petition.
It is relevant to note that in the meantime, the additional demands aggregating to ₹10,43,918/- have been raised relating to the Financial Year 2013-14 (demand of ₹6,50,434/- on account of tax and interest; and ₹3,93,484/- on account of penalty). These demands were reflected as raised on 04.09.2018. The petitioner claims that on 02.11.2018, it filed objections against the said demands and that the said objections are pending consideration.
This petition was listed before this Court on 15.11.2022. This Court had briefly noted the petitioner’s grievances and issued notice. Mr Satyakam, learned counsel had appeared on behalf of the Department on advance notice and had accepted the notice. He had sought time to take instructions and also contended that in terms of Rule 57 read with Rule 34 of the Delhi Value Added Tax Rules, 2005 (hereafter ‘the DVAT Rules’), the petitioner was required to apply for the refund in Form DVAT
This was contested by the learned counsel 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.
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.
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.
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 entitled to an interest only with effect from two months, after filing an application for the refund in Form DVAT According to the respondent, no interests were payable on the amounts as adjusted, on account of the outstanding demands, notwithstanding that the same were set aside subsequently.
The only controversy, that is, required to be addressed by this Court is whether the petitioner’s claim for interest on the refund is required to be reckoned with reference to the date of filing its revised return.
SUBMISSIONS
Mr Rajesh Jain, learned counsel appearing for the petitioner referred to the decision of the Co-ordinate Bench of this Court in ITDITD Ltd CEM JV v. Commissioner of Trade and Taxes: 2019 SCC Online Del 9568 and on the strength of the said decision submitted that the demands raised subsequent to the claim for refund cannot adversely affect the petitioner’s claim for refund. He also relied on the decision in the case of IJM Corporation Berhad & Ors. v. Commissioner of Trade and Taxes: (2017) SCC Online Del 11864. He further submitted that the controversy involved in the present case was covered by the decision of the Co-ordinate Bench of this Court in Corsan Corviam Construction S.A-Sadbhav Engineering Ltd. JV v. Commissioner of Trade and Taxes: 2021 SCC OnLine Del 3788.
Mr Satyakam, learned counsel appearing for the respondent countered the aforesaid submissions. He submitted that the claim for the refund could be processed only once the petitioner had made an application in Form DVAT
He submitted that the default assessment orders would supersede the petitioner’s returns and the same could no longer be considered as assessments for the purposes of processing the refund or the interest, thereon. He submitted that the petitioner’s claim for the refund would arise pursuant to the orders setting aside the said default assessments and therefore, in terms of Rule 34(4) of the DVAT Rules, the petitioner would require to claim the refund in Form DVAT 21 along with a certified copy of a judgment of a Court or an order setting aside the default assessments. He also referred to the decision in the case of IJM Corporation Berhad & Ors. v. Commissioner of Trade and Taxes (supra). He submitted that setting aside of the default assessments pursuant to the orders passed by the OHA under Section 74 of the DVAT Act does not revive the returns. He contended 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.
Observation of the court
In the present case, the petitioner had filed its revised return for the fourth quarter of the Financial Year 2013-14 on 3 1.03.2015. 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 20 12-13. 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 20 12-13, at the material time. Thus, the same were required to be disbursed. Insofar as the demands for assessments for the Financial Year 2013-14 are concerned, the assessments under Sections 32 and 33 of the DVAT Act were framed subsequent to the last date of processing the petitioner’s claim for refund and the refund could not have been withheld at the material time.
The petitioner had objected to the said assessments framed under Sections 32 and 33 of the DVAT Act by filing objections under Section 74 of the DVAT Act, on 10.10.2015. In terms of Section 35(2) of the DVAT Act the recovery of the said demands, thereafter, were required to be suspended. The petitioner had prevailed in its objections in respect of the said demands and the same were, subsequently, reviewed and set aside by an order dated 12.07.2022.
As stated above, there is no dispute that the petitioner’s refund was required to be paid within a period of two months from the date of filing the revised return. The respondent had clearly failed to act in accordance with Section 38 of the DVAT Act as it had not processed the petitioner’s claim within the stipulated period of two months.
The withholding of the amount due to the petitioner was in breach of Section 38 of the DVAT Act. Thus, interest would be payable to the petitioner on the said amount from 01.06.2015, as claimed.
Whilst the Department has processed the petitioner’s claim for the refund of ₹44,14,979/-. The Department has withheld a sum of ₹10,43,918/- [₹6,50,434/- as tax and interest and ₹3,93,484/- on account of penalty] for the tax period covered under the Financial Year 20 13- 14. The demand for the same was raised on 04.09.2018. However, the said amount is not recoverable as the petitioner had filed its objections against the said demands on 02.11.2018. As stated above, it is impermissible to withhold refund towards demands which are not recoverable.
In view of the above, we consider it apposite to direct the concerned authority to refund the remaining withheld amount of amount ₹10,43,918/- along with interest with effect from 01.06.2015 and recomputed the interest for the amount of ₹44, 14,979/- as refunded in terms of the order dated 01.02.2023 and refund the interest due after adjusting the amount of ₹7,983/- already disbursed.
The petition is allowed in the aforesaid terms.
Conclusion
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
Read the full order from here
Ramky-Infrastructure-Limited-Vs-Commissioner-of-Trade-Taxes-Delhi-High-Court-2
