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IN THE HIGH COURT OF DELHI AT NEW DELHI
Yashwant Varma, Dharmesh Sharma, JJ.
Flipkart India Private Limited – Appellant
Versus
Value Added Tax Officer, Ward 300 & Ors. – Respondents
W.P.(C) 6430 of 2022
Decided On : 21-08-2023
The petitioner, a dealer under the Delhi Value Added Tax Act, 2004 (DVAT Act), filed a writ petition seeking the issuance of a direction commanding the respondents to process a refund application and give effect to a claim for refund of Rs.6,62,74,405/- in terms of Section 38 along with interest in terms of Section 42 of the DVAT Act. The petitioner had originally preferred the writ petition seeking the opening of a bank account in Delhi to facilitate the refund being duly processed and affected. The Court framed a direction calling upon the respondents to process the refund claim within a period of two weeks. However, the respondents passed an order dated 31 May 2022 negating the claim for refund as raised by the petitioner. The petitioner amended its writ petition questioning the validity of the impugned order dated 31 May 2022 and submitted that any claim for refund which had fructified in accordance with the timelines prescribed by Section 38(3)(a)(ii) of the DVAT Act could not have been nullified by any demand of tax that may have either sprung into existence post the period of two months from the filing of the return nor could such an adjustment have been effected during the pendency of objections made by the petitioner with reference to Section 35 of the DVAT Act. The petitioner contended that Section 35(2) of the DVAT Act restrains the respondents from enforcing the payment of any amount of tax which formed subject matter of contestation before the Objection Hearing Authority (OHA) and thus such an amount cannot be viewed as an amount due and payable under the DVAT Act as envisaged in terms of Section 38(2). The Court held that the time limits prescribed in Section 38 of the DVAT Act are mandatory and not discretionary. The Court also held that a pre-deposit does not partake the character of a tax or duty. Those are sums which are deposited by an assessee solely for the purposes of pursuing its remedy of appeal. The Court further held that the respondents were neither entitled in law to retain the pre-deposit amount of Rs.1,00,00,000/- nor could it have been utilized for adjustment purposes. The Court allowed the writ petition, quashed the impugned order dated 31 May 2022, and directed the respondents to refund the amount of Rs.6,62,74,405/- along with interest from the date it fell due.
Fact of the Case:
The petitioner, a dealer under the Delhi Value Added Tax Act, 2004 (DVAT Act), filed a writ petition seeking the issuance of a direction commanding the respondents to process a refund application and give effect to a claim for refund of Rs.6,62,74,405/- in terms of Section 38 along with interest in terms of Section 42 of the DVAT Act. The petitioner had originally preferred the writ petition seeking the opening of a bank account in Delhi to facilitate the refund being duly processed and affected. The Court framed a direction calling upon the respondents to process the refund claim within a period of two weeks. However, the respondents passed an order dated 31 May 2022 negating the claim for refund as raised by the petitioner. The petitioner amended its writ petition questioning the validity of the impugned order dated 31 May 2022 and submitted that any claim for refund which had fructified in accordance with the timelines prescribed by Section 38(3)(a)(ii) of the DVAT Act could not have been nullified by any demand of tax that may have either sprung into existence post the period of two months from the filing of the return nor could such an adjustment have been effected during the pendency of objections made by the petitioner with reference to Section 35 of the DVAT Act. The petitioner contended that Section 35(2) of the DVAT Act restrains the respondents from enforcing the payment of any amount of tax which formed subject matter of contestation before the Objection Hearing Authority (OHA) and thus such an amount cannot be viewed as an amount due and payable under the DVAT Act as envisaged in terms of Section 38(2).
Finding of the Court:
The Court held that the time limits prescribed in Section 38 of the DVAT Act are mandatory and not discretionary. The Court also held that a pre-deposit does not partake the character of a tax or duty. Those are sums which are deposited by an assessee solely for the purposes of pursuing its remedy of appeal. The Court further held that the respondents were neither entitled in law to retain the pre-deposit amount of Rs.1,00,00,000/- nor could it have been utilized for adjustment purposes. The Court allowed the writ petition, quashed the impugned order dated 31 May 2022, and directed the respondents to refund the amount of Rs.6,62,74,405/- along with interest from the date it fell due.
Issues: 1. Whether the time limits prescribed in Section 38 of the DVAT Act are mandatory or discretionary? 2. Whether a pre-deposit partakes the character of a tax or duty? 3. Whether the respondents were entitled in law to retain the pre-deposit amount of Rs.1,00,00,000/-? 4. Whether the respondents could have utilized the pre-deposit amount of Rs.1,00,00,000/- for adjustment purposes?
Ratio Decidendi: 1. The time limits prescribed in Section 38 of the DVAT Act are mandatory and not discretionary. 2. A pre-deposit does not partake the character of a tax or duty. 3. The respondents were neither entitled in law to retain the pre-deposit amount of Rs.1,00,00,000/- nor could it have been utilized for adjustment purposes.
Final Decision: The Court allowed the writ petition, quashed the impugned order dated 31 May 2022, and directed the respondents to refund the amount of Rs.6,62,74,405/- along with interest from the date it fell due.
JUDGMENT
Yashwant Varma, J. The present writ petition had been originally preferred seeking the issuance of a direction commanding the respondents to process a refund application dated 24 August 2020 and give effect to a claim for refund of Rs.6,62,74,405/- in terms of Section 38 along with interest in terms of Section 42 of the Delhi Value Added Tax Act, 2004 [DVAT Act].
2. From the record, it would appear that when the matter was taken up on 22 April 2022, the petitioner had agreed to the opening of a bank account in Delhi to facilitate the refund being duly processed and affected. It was in the aforesaid light that the Court framed a direction calling upon the respondents to process the refund claim within a period of two weeks. However, and by the time the matter was taken up next, the respondents had proceeded to pass an order dated 31 May 2022 negating the claim for refund as raised by the petitioner. On the passing of the aforesaid order, the petitioner amended its writ petition questioning the validity of the aforenoted order in addition to the reliefs originally sought.
3. The claim for refund is principally based on the assertion of the petitioner that its application of 31 March 2015 was liable to be decided within the statutory timeframe as prescribed in Section 38(3)(a)(ii) of the DVAT Act. It had asserted that in the absence of any valid claim in respect of an amount due existing at the time when the said application was made, the respondents were bound to acknowledge the same and ensure that the refund was granted within two months. The petitioner also questions the validity of the impugned order dated 31 May 2022 and submits that any claim for refund which had fructified in accordance with the timelines prescribed by Section 38(3)(a)(ii) of the DVAT Act could not have been nullified by any demand of tax that may have either sprung into existence post the period of two months from the filing of the return nor could such an adjustment have been effected during the pendency of objections made by the petitioner with reference to Section 35 of the DVAT Act. The petitioner contends that Section 35(2) of the DVAT Act restrains the respondents from enforcing the payment of any amount of tax which formed subject matter of contestation before the Objection Hearing Authority [OHA] and thus such an amount cannot be viewed as an amount due and payable under the DVAT Act as envisaged in terms of Section 38(2).
4. In order to appreciate the question which stands raised, it would be pertinent to note the following salient facts. On 09 May 2014, the petitioner submitted a return for the quarter ending 31 March 2014. The self assessment return claimed a refund of Rs.11,40,96,384/- on account of excess Input Tax Credit. On 15 May 2014 and 07 June 2014, the respondents proceeded to issue notices for default assessment of tax referable to Section 32 of the DVAT Act for the period commencing from April 2012 to March 2013. The default assessment notices raised a demand of Rs.3,10,97,964/- inclusive of interest and penalty. The petitioner is stated to have filed objections in respect of the aforesaid notices before the OHA in terms of Section 74 of the DVAT Act.
5. On 31 March 2015, the petitioner submitted a revised return for the quarter ending 31 March 2014. In terms of the revised return, it sought a refund of Rs.11,40,97,349/-. It is the case of the petitioner that bearing in mind the provisions of Section 38(3)(a)(ii) of the DVAT Act, the refund application was liable to be granted within two months from the submission of the revised return and thus latest by 31 May 2015. It was further averred that in the absence of any enforceable demand in respect of an "amount due" existing between 31 March 2015 and 31 May 2015, the respondents were not entitled to adjust the amount claimed as refundable against any other tax demand that came to be raised subsequently.
6. On 15 June 2015, the respondents proceeded to issue default assess
The main legal point established is that the refund under the DVAT Act should be processed within the stipulated period, and interest is payable from the date the refund was due to be paid.
Adherence to time limits for processing refunds and conditions for withholding refunds under Section 38 of the DVAT Act.
State authorities are mandatorily required to pay interest on delayed tax refunds at the prescribed rate once the statutory limit for processing passes. Procedural failures in notification or record-....
Appellant entitled to interest on delayed refund as per Sections 11B and 11BB of the Central Excise Act, which specifically governs the timing and rate of interest applicable.
The requirement of a formal application for refund under Section 11B of the Central Excise Act, 1944, is a statutory mandate, and interest on a delayed refund is payable from the date of receipt of s....
The main legal point established in the judgment is that the right to interest on a refunded amount accrues to the assessee on the date specified in Section 38(3)(a)(ii) of the Delhi Value Added Tax ....
In tax matters, entitlement to interest on delayed refunds, including on interest accrued, is affirmed, highlighting the principle that overdue amounts accrue additional interest.
The court emphasized that orders passed by administrative or quasi-judicial authorities are required to stand or fall on their own and subsequent explanations by way of affidavit(s) cannot be permitt....
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