We are of the view that there is no legal justification for withholding the amount referred to above, which is otherwise refundable to the writ applicants in passing of any assessment orders for the relevant assessment years. It could be said that such withholding of the refund is contrary to the provisions of the Section 36 of the VAT Act, 2003.
We may refer to and rely upon the decision of this Court rendered in the case of Shilpa Industries Vs. State of Gujarat [SCA/540/2020], decided on 22.01.2020. We quote the relevant observations as under –
The stand taken by the respondent No.2 in the affidavit in reply is clearly a bureaucratic approach and redtapism, whereby the citizen of this country has to approach this court for getting legitimate refund. It is expected from the State machinery not to harass the citizen of this country in such a manner compelling them to approach to the Highest Court of the State for getting refund amount, which otherwise cannot be withheld for a minute without there being any authority with the respondent.
In the overall view of the matter, we are convinced that the writ application deserves to be allowed and is hereby allowed. The respondents are directed to pay to the writ applicants an amount of Rs.14,61,850/ together with the statutory interest @ 6 % within a period of six weeks from the date of communication of this order.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
By this writ application under Article 226 of the Constitution of India, the writ applicants have prayed for the following reliefs :-
“A. Your Lordships may be pleased to admit this petition;
B. Your Lordships may be pleased to allow this petition;
C. Your Lordships may be pleased to issue a writ of Mandamus or any other appropriate writ, order or direction holding the action of non-grant of refund of the amount collected without raising formal demand thereof by passing an order as illegal and arbitrary and Your Lordships may direct the Respondent No.3 to immediately pay refund of Rs.14,61,850/along with interest at commercial rate for the period from the date it was recovered from the petitioner uptil the date on which the said amount is paid to the petitioner.”
2. The writ applicant No.1 is a partnership firm and the writ applicant No.2 is one of the partners of the said firm.
3. The writ applicants seek to challenge the decision of the respondent No.4 in declining to grant the refund of the amount recovered during the search for the period between F.Y. 201213 and 201516 to the tune of Rs.14,61,850/, which according to learned counsel for the writ applicants has not been appropriated by passing the audit assessment orders and the same now having become time barred.
4. It appears from the materials on record that the writ applicants are engaged in the business of excavation and grinding of black trap stones and sale of the products like grit, rubbles etc.
5. We have heard Mr. D.K.Trivedi, the learned counsel appearing for the writ applicants and Mr. Chintan Dave, the learned AGP appearing for the respondents.
6. The stance of the respondents in the present litigation as reflected from the averments made in para 6 of the reply, reads as under:
“6. It is further submitted before this Hon’ble Court that the respondent authorities have initiated assessment proceedings in case of the petitioner for Financial year 201213, 201314, 201415. The respondent authorities had also initiated penalty proceedings for Financial Year 201516. In this regard, notices in Form No.302, 304 and 309 for initiation of assessment proceedings under section 34 (2) of the Gujarat Value Added Tax Act, 2003 came to be served upon the petitioner on 28/12/2015 itself. The petitioner was called upon to remain present with all the materials that the petitioner would rely in the course of assessment proceedings before the respondent authorities on 13/01/2016. However, it appears that the neither the petitioner nor any of its authorized representatives appear before the respondent authorities on 13/01/2016 for conducting assessment proceedings. Therefore, the respondent authorities were constrained to pass ex parte assessment orders in absence of the petitioner. Copies of the notices issued by the respondent authorities as well as the assessment orders passed in this regard are annexed hereto and marked as ANNEXUREA (colly).”
7. In answer to what has been stated in para 6 of the reply referred to above, the following has been stated in para 5.1 of the Rejoinder filed by the writ applicants to the reply :
“5.1 In regard to para 06 of Affidavitin Reply,it is submitted that it is mentioned therein that respondent authorities had initiated penalty proceedings for F.Y. 201516. However, same is partially true, as provisional assessment along with penalty proceedings were initiated for F.Y. 201516. As far as F.Y. 201213 to 201415 are concerned, a perusal of the notices (Form 302) annexed at page Nos.50 to 52 (Annexure ‘A’ to the Affidavit inReply) would show that the same are for audit assessment u/s. 34 (2) (supra). As far as F.Y.201516 is concerned, a perusal of notices (Form 301) annexed at page Nos.65 to 66 (Annexure ‘A’ to the Affidavit inReply) would show that the same is for provisional assessment u/s. 32 (supra). As against that on perusing all the orders annexed from page Nos.67 to 94 (Annexure ‘A’ to the Affidavit in Reply), it may be observed that they all are in Form 304 being passed for provisional assessment u/s. 32 ((supra)). Thus, although notice for audit assessment was issued for F.Y. 201213 to 201415, order is passed for provisional assessment in line with order for F.Y.201516. Instead of making regular assessment for F.Y. 201213333 to 201415, provisional assessment is made and that too without making any regular assessment which is mandatory.”
8. We are of the view that there is no legal justification for withholding the amount referred to above, which is otherwise refundable to the writ applicants in passing of any assessment orders for the relevant assessment years. It could be said that such withholding of the refund is contrary to the provisions of the Section 36 of the VAT Act, 2003.
9. In the aforesaid context, we may refer to and rely upon the decision of this Court rendered in the case of Shilpa Industries Vs. State of Gujarat [SCA/540/2020], decided on 22.01.2020. We quote the relevant observations as under
6. Having heard the learned advocates for the respective parties and having gone through the materials on record, we are at pain to pass this order directing the respondents to pay the sum of Rs.63,843/ as far no rhyme or reason, the respondents are withholding the amount, which otherwise is refundable to the petitioner in absence of any assessment order for the year 20112012.
7. The respondents have withheld the refund contrary to the provisions of Section 36 of the VAT Act, 2003. In the facts of the case, the petitioner was compelled to deposit Rs.83,106/, pursuant to the inspection of the business premises of the petitioner on 30th January 2013 towards tax, penalty and interest for two assessment years i.e. 20112012 and 20122013, prior to the assessment of tax penalty or interest payable by the petitioner for the respective years.
7.1. There is no provision in the VAT Act, 2003, whereby the assessee may be compelled to deposit any amount during the course of search or inspection. It appears that the petitioner in his bona fide belief waited for the expiry of the period prescribed under the provisions of Section 34 of the VAT Act, 2003 for the assessment to be made under Subsection (2), (5), (6) or (7) up to 4 years and assessment under sub Section (8) upto 8 years.
7.2. Subsections 9 and 10 of Section 34 which provides for time limit for completion of assessment read as under :
“34. Audit assessment.
(9) No assessment under sub sections (2), (5),(6) or (7) shall be made after the expiry of four years from the end of the year in respect of which of part of which the tax is assessable.
(10) No assessment under subsection (8) shall be made after the expiry of eight years from the end of the year in respect of which or part of which the tax is assessable:
Provided that where any assessment is required to be made in pursuance of an order of any court or authority, such fresh assessment shall be made at any time within two years from the date of such order: Provided further that in computing the period of limitation for the purpose this section, any period during which assessment proceedings are stayed by an order or injunction of any court or authority shall be excluded.”
7.3. Admittedly, the respondents have not passed any order of assessment for the year 20112012, raising any demand against the petitioner. Therefore, the respondent authorities cannot retain the balance amount of Rs.63,843/(Rs.83106Rs.19263).
7.4. Section 36 of the VAT Act, 2003, which provides for refund of excess payment reads as under : “36. Refund of excess payment
(1) Subject to other provisions of this Act and the rules, the Commissioner may 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.
Provided that, the Commissioner shall first apply such excess towards the recovery of any amount due under this Act or the earlier laws and shall then refund only the balance amount, if any:
Provided further that no adjustment under the provision shall be made towards a recovery of an amount due that has been stayed by an appellate authority.
(2) Where any refund due to any dealer, according to the return furnished by him for any period, such refund may provisionally be adjusted by him against the tax due and payable as per the returns furnished under section 29 for any subsequent period in the year. Provided that the amount of tax, or penalty, interest or surety forfeited or all or any of them due from and payable by the dealer on the date of such adjustment, shall first be deducted form such refund before making the adjustment.”
7.5. On perusal of the aforesaid provision, it appears that, in absence of any assessment for the year 20112012 and more particularly, when the time period for completion of assessment is over as prescribed under the provisions of Section 34(9) and 34(10) of the Act, 2003, the respondents are not entitled to withhold the refund.
7.6 It would also necessary to consider power to withhold the refund in certain cases as prescribed in Section 39 of the VAT, 2003, which reads as under :
“39. Power to withhold refund in certain cases.
(1) Where an order giving rise to a refund is the subject matter of an appeal or further processing or where any other processing under this Act is pending and the Commissioner is of the opinion that grant of such refund is likely to adversely affect the revenue, he may, after giving the dealer an opportunity of being heard, withhold the refund till such time as he may determine.
(2) Where a refund is withheld under subsection (1), the dealer shall be entitled to interest as provided under section 38, if as a result of the appeal or further proceeding he becomes entitled to refund.”
7.7. Thus, in view of above provision also the respondents cannot withhold the refund of amount deposited by the petitioner.
7.8. Reliance placed by the respondents on sub- section (8A) of Section 34 is also misplaced in the facts of the case as subsection 8A of section 34 is applicable only when, if the prescribed authority is satisfied that the tax has been evaded etc. The provisions of Section 34 (8A)(a) reads as under :
“34. Audit assessment.
[(8A)(a) During the course of any proceedings under this Act, if the prescribed authority is satisfied that the tax has been evaded or sought to be evaded or the tax liability has not been disclosed correctly or excess tax credit has been claimed by any dealer in respect of any period or periods by not recording or recording in an incorrect manner, any transaction of sale or purchase, or that any claim has been incorrectly made, then in such a case notwithstanding any notice for assessment has been issued under other provisions of this section or any other section of this Act, the prescribed authority may, after giving such dealer a reasonable opportunity of being heard, initiate assessment of the dealer in respect of such transaction or claim:”
7.9. In the facts of the case, no notice has been issued till date by the respondent authority invoking provisions of Section 8(A)(a) of Section 34 of the VAT Act, 2003.
7.10. Therefore, in contemplation of invoking such provision for assessment without there being any satisfaction of the prescribed authority that the tax has been evaded etc. by the petitioner, the refund cannot be withheld.
8. The stand taken by the respondent No.2 in the affidavit in reply is clearly a bureaucratic approach and redtapism, whereby the citizen of this country has to approach this court for getting legitimate refund. It is expected from the State machinery not to harass the citizen of this country in such a manner compelling them to approach to the Highest Court of the State for getting refund amount, which otherwise cannot be withheld for a minute without there being any authority with the respondent.
9. In view of foregoing, the petition succeeds and is accordingly allowed. The respondents are directed to pay to the petitioner amount of Rs.63,843/ together with 6% interest forthwith and latest by 31st January 2020. Rule is made absolute to the aforesaid extent. No order as to costs. Direct service is permitted.”
10. In the overall view of the matter, we are convinced that the writ application deserves to be allowed and is hereby allowed. The respondents are directed to pay to the writ applicants an amount of Rs.14,61,850/ together with the statutory interest @ 6 % within a period of six weeks from the date of communication of this order.
11. With the above, this writ application stands disposed of.