Gujarat High Court
M/S Syngenta Crop Protection Pvt Ltd vs State Of Gujarat on 19 April, 2018
Author: Akil Kureshi
Bench: Akil Kureshi, B.N. Karia
C/SCA/23287/2017 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION No. 23287 of 2017
With
R/SPECIAL CIVIL APPLICATION No. 23288 of 2017
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M/s. SYNGENTA CROP PROTECTION PVT LTD
Versus
STATE OF GUJARAT
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Appearance :
Mr. D K TRIVEDI, Advocate for the PETITIONER(s) No. 1,2
Mr CHINTAN DAVE, AGP for the RESPONDENT(s) No. 1, 2,3,4,5
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CORAM:Â HONOURABLE Mr. JUSTICE AKIL KURESHI
and
HONOURABLE Mr. JUSTICE B.N. KARIA
19th April 2018
ORAL ORDER (PER : HONOURABLE Mr. JUSTICE AKIL KURESHI)
These petitions have been filed by the same petitioner and involve similar questions of law. We may separately record the facts. In Special Civil Application No. 23287 of 2017, following facts are involved. The petitioner is a private limited company and is a registered Dealer under the Central Sales Tax Act, 1969. For the Financial Year 2005-2006, the Assessing Officer carried out audit assessment in case of the petitioner by passing order of 11th December 2009 in which he raised a tax demand of Rs. 3,39,83,894/=. The petitioner filed an appeal against such order of assessment before the Deputy Commissioner of Commercial Tax Page 1 of 14 C/SCA/23287/2017 ORDER alongwith a stay petition on 20th February 2010. While appeal as well as stay petitions were pending, the Department coercively recovered the entire amount of tax of Rs. 3,39,83,894/= through attachment of the petitioner's bank accounts. A sum of Rs. 1,23,89,961/= was recovered from the petitioner's account with Duetsche Bank on 10th March 2010 and a further sum of Rs. 2,15,94,684/= was recovered from the petitioner's HSBC Bank on 20th March 2010.
On 23rd March 2015, Deputy Commissioner of Commercial Tax allowed the petitioner's appeal. By virtue of this order, therefore, the amount of Rs. 3,39,83,894/= recovered by the Department from the petitioner pursuant to the order of assessment became due and payable. The petitioner, therefore, on 16th September 2015 wrote to the Department and requested that such amount be refunded with interest.
Since there was no response from the Department, the petitioner again wrote letters on 1st July 2016; 22nd August 2016; 12th September 2016 and 19th September 2016. In such letters, he quantified the rate of interest at 9%, referring to the provisions of the Gujarat Sales Tax Act.
Finally on 6th February 2017, the Department passed an order of refund, however for sometime thereafter, there was no Page 2 of 14 C/SCA/23287/2017 ORDER actual payment. Finally, on 19th April 2017, the Department issued a cheque for a sum of Rs. 3,70,42,443/=. It appears that the petitioner had made some error in giving the bank account details, due to which, such cheque amount could not be credited in the petitioner's account. The petitioner corrected the error with the Department under letter dated 23rd May 2017. The refund was actually credited directly to the petitioner's bank account on 5th August 2017 under which a sum of Rs. 3,79,54,536/= came to be credited in the petitioner's bank account by the Department. We may record that this total amount comprises of the petitioner's principal amount of Rs. 3,39,83,894/= with interest as per the calculation of the Department and also takes care of the sum of Rs. 8,37,334/= which is subject matter of connected writ petition ie., Special Civil Application No. 23288 of 2017 which also arises in the similar background.
The petitioner contends that the Department has erred many in two ways - firstly, in not granting interest on the refund from the date of deposit with the Department till actual payment, instead, limiting the interest to the period after the Deputy Commissioner allowed the petitioner's appeal. Second limb of the petitioner's argument is that the interest should have been calculated @ 9% per annum instead of 6% per annum; as Page 3 of 14 C/SCA/23287/2017 ORDER apparently calculated by the Department.
So far as Special Civil Application No. 23288 of 2017 is concerned, facts are very similar. Only difference being that in this case, we are concerned with much smaller amount of refund claimed, which as noted earlier is Rs. 8,37,334/=. Such refund claim also arises out of similar background where, pursuant to the order of audit assessment, pending the petitioner's appeal before the appellate authority alongwith stay application, the entire amount was recovered which came to be refunded alongwith refund claim of Special Civil Application No. 233287 of 2017 with interest for the truncated period and at the rate of 6% per annum.
In view of such background, learned advocate for the petitioner submitted that the dues pertain to the assessment period when the Gujarat Sales Tax Act, 1969 was in operation. Section 54 of the Sales Tax Act would therefore cover the field. As per the said provision interest would begin to run till the actual refund is made. The rate of interest is also statutorily prescribed at 9% per annum. The authorities have committed serious error in applying the provisions of the Gujarat Value Added Tax Act, 2003 and in reducing the rate of interest @ 6% and further in providing interest only after the order of appellate authority was passed. In this context, counsel relied on certain judgments, to which we Page 4 of 14 C/SCA/23287/2017 ORDER would refer at appropriate stage.
On the other hand, learned AGP opposing the petitions contended that [a] as per Section 54 of the Gujarat Sales Tax Act and Section 38 of the Gujarat Value Added Tax Act, interest would be payable only from the date of appellate order and not from the date of recovery by the Department. He further submitted that the rate of interest prescribed under the Gujarat Value Added Tax Act is 6% per annum. The petitioner is not correct in claiming such interest @ 9% per annum. He lastly contended that the petitioner itself was responsible for providing incorrect details of the Bank account. Only after such details were correctly supplied by the petitioner, the Department could transfer money directly to the petitioner's account. For such period, the Department could not be burdened with interest liability.
Section 54 of the Gujarat Sales Tax Act pertains to interest of delayed refund. Relevant portion of which reads as under :-
"54. Interest on delayed refund :
[1] Where refund of any amount becomes due to the Dealer by virtue of an order of assessment under Section 41, for the specified year, he shall, subject to the provisions of this Section, be entitled to receive, in addition to the said amount, simple interest at the rate of nine per cent, per annum on, the said amount from the date of immediately following the date of closure of the accounting year to which the said amount relates to the date of order of assessment :Page 5 of 14 C/SCA/23287/2017 ORDER
Provided that where dealer has paid any amount after the closure of the accounting year and such amount is required to be refunded, no interest shall be payable for the period from the date of closure of such accounting year to the date of payment of such amount :
Provided further that no interest shall be payable on the amount of refund which does not exceed rupees one hundred :
[Explanation : "For the purposes of this clause, the expression "specified year" means -
(i) the financial year commencing from the 1st April 1993;
(ii) the calender year commencing from the 1st January 1993;
(iii) Samvat year 2049 commencing from the Kartak Sud Ekam; or
(iv) Cooperative year commencing from 1st October 1993, or
(v) any such year thereafter].
[(a) where an amount required to be refunded by the Commissioner to any person by virtue of an order of assessment under Section 41 is not so refunded to him within a period of thirty five days of the date of order, or
(b) Where an amount required to be refunded by the Commissioner to any person by virtue of any other order made under this Act is not so refunded to him within a period of ninety days of the date of the order, the State Government shall pay to such person simple interest at nine percent per annum on the said amount from the date immediately following the expiry of the period specified in clause (a) or, as the case may be, clause (b) to the date of the refund." Page 6 of 14 C/SCA/23287/2017 ORDER Under these provisions, thus, where refund of any amount becomes due by virtue of an order of assessment, the Dealer would be entitled to receive simple interest @ 9% per annum on such amount, from the date immediately following the date of closure of the accounting year concerning the order of assessment. However, if the amount is deposited after the closure of the accounting year, interest will not be payable for the period from the date of closure of the accounting year to the date of payment of such amount. As per clause (a) of sub-section [1], where amount of refund; by virtue of an order of assessment is not refunded within thirty five days of the order, liability to pay interest @ 9% per annum would continue till the actual payment. Clause (b) of sub-section [1] provides that where an amount is required to be refunded by the Commissioner by virtue of any other order made under the Act and is not refunded within ninety days of the order, the liability to pay simple interest @ 9% per annum would arise.
According to learned AGP, case of the petitioner would fall under Clause (b) since the refund claim arises out of an order of appellate authority and not an order of assessment. However, such a question was examined by the Division Bench of this Court in the case of State of Gujarat v. Doshi Printing Press, [2015] 82 VST 384 [Gujarat] wherein, the Court held and observed as under : Page 7 of 14 C/SCA/23287/2017 ORDER
"9. In our view, once an order is passed by the competent authority for assessment and the appeal is preferred before the Appellate Authority against such order of assessment, and the Appellate Authority modifies the order of assessment, the principles of doctrine of merger would squarely apply. Once the order of assessment merges with the order of the Appellate Authority in appeal, one may say that the assessment is finalized by the Appellate Authority in the appeal. Same would be the situation if such circumstances arise in the Second Appeal or in any further appeal, expressly provided by the statute and the order of assessment of assessing authority or the first Appellate Authority is modified. One may say that the consequence in law would be the assessment made by the first authority and further modified by the first Appellate Authority and further modified by the second Appellate Authority or the third Appellate Authority as the case may be but, the ultimate determination of assessment is made by the Appellate Authority in appeal. Under these circumstances, it cannot be said that while giving effect to Section 54(1)(aa) of the Act, the effect would be available to the assessment made by the assessing authority only and not the further modification made by the first Appellate Authority or thereafter, the second Appellate Authority or even third Appellate Authority as the case may be. The interpretation canvassed by the Revenue of Section 54(1) (aa) of the Act, if accepted, would run counter to the basic principles of doctrine of merger which is well accepted doctrine incorporated in the system of administration of justice.
10. Apart from the above, it may also result into discriminatory treatment to the extent that one, who Page 8 of 14 C/SCA/23287/2017 ORDER succeeds in the assessment and is entitled to the refund, would get interest on refund but the one, who has carried the matter in appeal and becomes entitle to get the refund on account of order of the Appellate Authority, would not get interest.
11. It is true that in taxing statute, principles of equity may have little role to play but at the same time, any statute in taxation matter should also meet with the test of constitutional provision."
This judgment in case of Doshi Printing Press [Supra] was followed by Division Bench of this Court in the case of State of Gujarat v. Unjha Pharmacy, reported in 2016 [341] ELT 211 (Guj).
We are conscious that the Division Bench in case of Doshi Printing Press [Supra] has also in the latter portion of the decision discussed the compensatory nature of interest to be paid and the Department is in appeal before the Supreme Court. However, as far as first portion of the judgment; reproduced hereinabove, we have no hesitation in respectful concurrence. When the statutory appellate authority allows the appeal of an assessee, it only corrects the order of assessment. In other words, he gives legal shape to the contours of the matter, which in any case the Assessing Officer should have adopted. In terms of Section 54 [1] of the Gujarat Sales Tax Act, therefore, in such a situation, it cannot be stated that the Page 9 of 14 C/SCA/23287/2017 ORDER refund claim of the assessee arises out of an order other than an order of assessment. The appellate authority while allowing the appeal merely corrects the assessment. It is such corrected assessment which would prevail. The refund claim of the assessee, therefore, cannot be stated to have arisen other than from the order of assessment.
Somewhat similar provisions have been made in the Gujarat Value Added Tax Act concerning interest under Section 38. The said Section reads as under :
"38. Interest on refund (1) Whether refund of any amount of tax becomes due to the dealer by virtue of an order of assessment under Section 34, he shall subject to the provision of this section be entitled to receive in addition to the amount of tax, simple interest at the rate of six percent per annum on the said amount of tax from the date immediately following the date of the closure of the accounting year to which the said amount of tax relates [till the date of payment of amount of such refund] Provided that where the dealer has paid any amount of tax after the closure of the accounting year and such amount is required to be refunded, no interest shall be payable for the period from the date of closure of such accounting year to the date of payment of such amount.Page 10 of 14 C/SCA/23287/2017 ORDER
(2) A registered dealer to refund in pursuance of any order other than referred to under sub-section (1) or in pursuance of any order by any court, shall subject to rules, be entitled to receive, in addition to the refund, simple interest at the rate of six percent [per annum on the amount of such refund from the date immediately following the date of closer of the accounting year to which the said amount of refund relates till the date of payment of amount of such a refund. The interest shall be calculated on the amount of refund due after deducting there from any tax, interest, penalty or any other dues under this Act, or under the Central Act. If, as a result of any order passed under this Act, the amount of such refund is enhanced or reduced, such interest shall be enhanced or reduced accordingly.
[xxx] (2) Where the realization of any amount remains stayed by the order of any court or authority and such order is subsequently vacated, interest shall be payable also for any period during which such order remained in operation."
In this section also, thus, there is a mandate for granting interest @ 6% per annum from the date of closure of the accounting year, or from the date of payment of the amount by the Dealer till the date of payment of amount of refund, if such refund becomes due and payable by virtue of an order of assessment. This Page 11 of 14 C/SCA/23287/2017 ORDER section therefore also recognizes the right of a dealer to receive refund with interest at the prescribed rate from the date of payment or from the date of closure of accounting year; whichever is later, till the actual refund is made.
Undoubtedly, therefore, the petitioner was required to be refunded the recovered amount, pursuant to the order of assessment from the date of its refund till the actual payment - whether applying Gujarat Sales Tax Act or Gujarat Value Added Tax Act provisions. Section 100 of the Gujarat Value Added Tax Act is the repeal and saving provision, relevant portion of which reads as under:
100. Repeal and Savings :
(1) The Gujarat Sales Tax Act, 1969, the Bombay Sales of Motor Spirit Taxation Act, 1958 and the Gujarat Purchase Tax on Sugarcane Act, 1989 are hereby repealed.
Provided that such repeal shall not affect the previous operation of the said Acts or any right, title, obligation or liability, already acquired, accrued or incurred there under and subject thereto, anything, done or any action taken including any appointment, notification, notice, order, rule form or certificate in exercise of any powers conferred by or under the said Act shall be deemed to have been done or taken in exercise of the powers, conferred by or under this Act, as if this Act were in force on the date on which such thing was done or action was taken, and all arrears of tax and other amount due at the commencement of this Act may be recovered as if they had accrued under this Act." Page 12 of 14 C/SCA/23287/2017 ORDER In terms of sub-section (1) of Section 100 of Gujarat Value Added Tax Act, 2003, thus, the Legislature while repealing the Gujarat Sales Tax Act, 1969 made a saving provision providing that such repeal shall not affect the previous operation of the Act, the obligations and liabilities arising and all actions shall be deemed to have been done or taken in exercise of the powers conferred by the VAT Act; as if the Act were in force on the date on which such thing was done or action was taken and all the arrears of tax and other amount due at the commencement of the Act would be recovered as if they had accrued as on the date of the Act. Thus, with the repeal of the Gujarat Sales Tax Act, 1969 and its substitution by the Gujarat Value Added Tax Act, 2003 the petitioner would be covered by the provisions of the VAT Act concerning the assessment, recovery and refund of the tax; including the prescribed rate of interest for refund. The amounts were recovered from the petitioners only in the month of February 2010, that is long after the VAT Act was brought in force. The petitioner cannot seek interest on the refund at the rate prescribed under the repealed Gujarat Sales Tax Act merely because the amount involved was in relation to a period when the Gujarat Sales Tax Act was in force. To this extent, the petitioner's contention must be negatived.
Page 13 of 14 C/SCA/23287/2017 ORDER
Addressing the last surviving issue of the petitioner providing incorrect details of his bank account, the period as such is very short, the burden of interest is not very high. At best, the petitioner can be faulted for a period of one month during which this confusion of the bank details prevailed.
Under the circumstances, we hold that the petitioner would be entitled to interest from the date amounts in question were recovered till the actual payment was made with simple interest @ 6% per annum. Deficient interest would be paid latest by 30th May 2018.
Both the petitions are disposed of with the above directions.
[Akil Kureshi, J.] [B.N Karia, J.] Prakash Page 14 of 14