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Judgment
A.B. Chaudhari, J.
Rule. Rule returnable forthwith. Heard finally by consent of the learned counsel for the parties. Following are the material facts:
The petitioner, who is a dealer in coal has put to challenge the demand notice dated August 16, 2013 calling upon the petitioner to pay interest in the sum of Rs. 22,02,221 purported to be under section 32 of the Maharashtra Value Added Tax Act, 2002 (for short, "the Act") for the period from April 1, 2009 to March 31, 2010.
The petitioner had filed value added tax (VAT) audited report in form No. 704 with the respondent on April 30, 2010 in which refund in the sum of Rs. 41,34,650 was claimed. By that time, the next financial year had already commenced and the petitioner had paid Rs. 68,928 on July 15, 2009 for the period from April 1, 2009 to April 30, 2009 while Rs. 193 on September 29, 2010 for February 1, 2010 to February 21, 2010 and the last amount, which is the subject-matter of the present petition in the sum of Rs. 41,34,650 on March 28, 2013 for April 1, 2009 to September 30, 2009. The petitioner had made an application on June 11, 2010 in form E501 for refund of excess taxes paid. The decision by refund officer was taken as late as on December 16, 2012. The adjustment, as per the said order dated December 16, 2012 was actually made by order dated March 21, 2013 in the sum of Rs. 41,34,650 by voucher dated March 20, 2013 by direct deposit. The demand for interest was projected by Assistant Commissioner of Sales Tax on the ground that the petitioner was liable to pay interest in accordance with section 32 of the Act since he defaulted in making payment of tax and that is why the demand in question was projected by the officer and even the bank account was frozen. In this context, the petition was heard.
Mr. Aditya Gohokar, learned counsel for the petitioner, submitted that the application for refund was made on June 11, 2010 under section 51 of the Act, which deals with grant of refunds. At it was before the amendment, effective from May 1, 2011, and the application being of June 11, 2010, the concerned Commissioner could have called such additional information from the dealer as he may think within one month of the receipt of the application and to decide the claim for refund within three months from the date of receipt of additional information. According to him, the application was made on June 11, 2010 and since no additional information at all was called within one month from date of the application for refund, the claim was required to be decided within three months from the date of the application, i.e., by September 10, 2010. He then submitted that contrary to the said provision, as late as after nine months additional information was called, which was not at all contemplated. He, therefore, submitted that the refund officer deciding the refund application would not be entitled to any additional time as per the amended provision since the application was filed by the petitioner before the amended provision was brought into force. According to him, at any rate, admittedly, the petitioner had, with the Department a sum of Rs. 41,34,650 claimed by way of refund. Therefore, the petitioner was entitled to the benefit of section 50 of the Act, which provides for refund of excess payment or cash payment or adjustment. He submitted that the petitioner was entitled to the adjustment as per section 50 of the Act, which was actually done, as earlier stated, as late as on March 21, 2013 pursuant to the refund order on December 16, 2012. He, therefore, submitted that the petitioner was not at all at fault since the amount, which was liable to be refunded, was lying with the Department and the Department was supposed to decide the refund application within three months and adjust the amount, in accordance with the provisions of section 50 of the Act. Further, taking recourse to section 30(2) of the Act, the petitioner was illegally treated as registered dealer failing to pay taxes within the time specified and it is under that wrong assumption, the demand was made. He, therefore, submitted that the impugned demand deserves to be quashed and set aside.
Per contra, Mr. Patil, learned Additional Government Pleader for the respondents-State, submitted that the Assistant Commissioner, Sales Tax, has filed affidavit-in-reply. The learned Additional Government Pleader has contended that even if the petitioner was entitled to refund as claimed by him that did not absolve him of his liability to pay taxes on regular basis and as and when due. In other words, even if the amount of refund was lying with the Department, there is no provision allowing exemption to the petitioner not to pay taxes on regular basis as and when it accrued. According to the learned Additional Government Pleader, the petitioner, admittedly did not pay major amount of tax but for Rs. 68,928 on regular basis and awaited for refund amount, which is not contemplated by law. According to the learned Additional Government Pleader, the liability to pay tax never stops and, therefore, the petitioner cannot get any benefit and must be held to be registered dealer having failed to pay tax for the year 2009-10 on regular basis. He, therefore, submitted that there was nothing wrong with the officer in demanding interest from the petitioner, in accordance with the provisions of section 30(2) of the Act. Since, according to Mr. Patil, the order of refund application can never be speculated inasmuch as it would go even against the petitioner. He, therefore, prayed for dismissal of the present writ petition.
Consideration:
Upon hearing learned counsel for the parties, we find that the petitioner had raised a claim for refund for the year 2008-09, in respect of which the return was filed on April 30, 2010, which is not in dispute. Having filed return for the year 2008-09, he filed an application for refund on June 11, 2010, i.e., after almost 1 1/2 months. We, therefore, reject the submission that the application for refund was filed late. Once the application was filed on June 11, 2010, the provision of section 51 of the Act before amendment, stood attracted. Section 51 of the Act reads thus:
"51. Grant of refund.--(1) Where a registered dealer has in any return, fresh return or revised return shown any amount to be refundable and has not undertaken to adjust such amount against the amount due as per any return in accordance with section 50, the Commissioner shall, on an application made by the dealer and subject to rules, and the other provisions of this Act, grant refund of such amount to the said dealer:
Provided that, the Commissioner may, subject to such conditions and restrictions as may be prescribed, reduce the refund and grant only part of the refund claimed in such application.
(2)(a) The registered dealer may, after the end of the year to which the return, fresh return or revised return relates, make an application in the prescribed form for grant of refund of the amount claimed refundable as aforesaid. The Commissioner may, (on receipt of the application) call for such additional information from the dealer, as he may think necessary. The refunds relating to all the periods contained in one year may be granted by a single order.
(b)...
Provided that, where the return, fresh return or, as the case may be, revised return is filed after the date prescribed for filing the last return of the said year, then the period of six months shall be counted from the date of filing of the said return, fresh return or revised return.
...
(3)(a) Notwithstanding anything contained in sub-section (2), if a dealer is,--
(i) an exporter within the meaning of sub-section (1) or sub-section (3) of section 5 of the Central Sales Tax Act, 1956; or
(ii) a unit specified in the Explanation to sub-section (3) of section 8; or
(iii) a holder of a Certificate of Entitlement under any Package Scheme of Incentives except the New Package Scheme of Incentives for Tourism Projects 1999; or, a holder of an Identification Certificate issued to a mega unit covered under the Package Scheme of Incentives 2001, Package Scheme of Incentives-2007 or, as the case may be, Package Scheme of Incentives-2013; or
(iv)...
(v) the Canteen Stores Department or the Indian Naval Canteen (services; or)
(vi) selling the goods in the course of inter-State trade or commerce and turnover of the said inter-State sales in immediate previous year exceeds fifty per cent of his total turnover of sales for that year then he may apply in the prescribed form to the Commissioner after filing the return for grant of refund relating to the period covered by a return, fresh return or revised return.
Explanation.--For the purposes of sub-clause (i), the expression ''exporter'' shall mean a registered dealer whose turnover of exports during such period as may be prescribed, is not less than such percentage of the total turnover of his sales as may be prescribed in this behalf.
(b) The Commissioner, on receipt of the said application, may require the dealer to furnish such bank guarantee for such amounts from such banks, for such periods and to such authorities as may be prescribed.
(4) Save as otherwise provided in this section, the Commissioner shall grant the refund under this section within eighteen months from the end of the month containing the date of the receipt of the application for refund:
Provided that, where a dealer has filed an application for refund under this section on or before the 31st March 2011, then, notwithstanding anything contained in sub-section (4) as it existed prior to the date of commencement of the Maharashtra Tax Laws (Levy, Amendment and Validation) Act, 2011, the Commissioner shall,--
(a) in respect of the periods ending on or before the March 31, 2010, grant the refund to such dealer on or before the September 30, 2011, and
(b) in respect of the periods beginning with the April 1, 2010 and ending on the March 31, 2011, grant the refund to such dealer on or before the June 30, 2012.
(5) Notwithstanding anything contained in this section, if the dealer has furnished a bank guarantee for such amount, from such bank, for such period and to such authority as may be prescribed, the Commissioner shall grant the refund due under sub-section (2) or (3), within one month of the furnishing of the bank guarantee, irrespective of whether the additional information has been furnished or not.
(6)(a) If before the grant of refund under this section, a notice for assessment covering the period to which the return relates is issued or if any proceedings under sub-section (3) or sub-section (4) of section 64 are initiated in respect of the period to which the return relates, then,--
(i) if the dealer has not furnished a bank guarantee then no refund under this section shall be granted; and
(ii) if the dealer has furnished a bank guarantee then an amount equal to the guaranteed amount shall be refunded.
(b) If it is found as a result of any order passed under this Act that the refund granted under this section is in excess of the refund, if any, determined as per the said order, then the excess amount shall be recovered as if it is an amount of tax due from the dealer and the dealer shall be liable to pay simple interest at the prescribed rate per month or part thereof from the date of the grant of refund.
(7) No refund under this section shall be granted unless an application as provided is made and no application under this section shall be entertained unless it is made within (eighteen months) from the end of the year containing the period to which the return relates."
It is not in dispute that by amendment to section 51 by Maharashtra Act No. 15 of 2011 with effect from May 1, 2011, words "within one month of the receipt of the application" have been substituted.
It is clear from the reading of the said provision that the application, in the present case, was made on June 11, 2010 for refund and the Commissioner, within one month of receipt of the application, could have called for such additional information from the dealer as he may think fit. In the present case, admittedly, additional information was called by the Commissioner after nine months of the receipt of the application, which could not have been done after the expiry of one month.
The next provision is that order of refund was requested to be passed within a period of three months of the receipt of the application or receipt of additional information whichever is later. The question of calling additional information after nine months in this case did not arise and, therefore, the Commissioner was under a legal obligation to make order of refund or otherwise on or before September 10, 2010. However, in the present case, order of refund was made on December 16, 2012, i.e., after more than three years, for which there is absolutely no explanation and for which the dealer cannot be held guilty for non-payment.
Surely, therefore the concerned Commissioner was at fault in not adhering to the limitation provided by law. It is because of the late making of the order by the concerned Commissioner, the litigation has arisen and, therefore, it would be appropriate for the Government to find out the concerned officer/Commissioner who has failed in his legal/statutory duty to act according to the provisions of law and proceed against him in accordance with law.
The next provision is section 50 of the Act, which reads thus:
"50. Refund of excess payment.--(1) Subject to the other provisions of this Act and the rules made thereunder, (the Commissioner shall by order refund to a person the amount of tax, penalty, interest, security deposit deposited under section 16 and fee except when the fee is paid by way of court-fee stamp,) if any, paid by such person in excess of the amount due from him. The refund may be either by deduction of such excess from the amount of tax, penalty, amount forfeited and interest due, if any, in respect of any other period or in any other case, by cash payment:
Provided that, the Commissioner shall first apply such excess towards the recovery of any amount due in respect of which a notice under sub-section (4) of section 32 has been issued, or, as the case may be, any amount which is due as per any return or revised return but not paid and shall then refund the balance, if any.
(2) If a registered dealer has filed any returns, fresh returns or revised returns in respect of any period contained in any year and any amount is refundable to the said dealer according to the return, fresh return or revised return, then subject to rules, the dealer may adjust such refund against the amount due as per any return, fresh return or revised return for any period contained in the said year, filed under this Act or the Central Sales Tax Act, 1956 or the Maharashtra Tax on the Entry of Goods into Local Areas Act, 2002:
Provided that, for the period commencing on or after the April 1, 2012, a dealer whose refund claim in a year is rupees five lakh or less, may, carry forward such refund to the return or revised return for immediate succeeding year to which such refund relates."
At this stage, we quote section 30 as well in order to harmonise the two provisions.
"30. Interest payable by a dealer or person.--(1) A dealer who is liable to pay tax in respect of any year, and who has failed to apply for registration or has failed to apply for registration within the time as required by or under this Act, shall be liable to pay by way of simple interest, in respect of each of such years, in addition to the amount of tax payable in respect of such year, a sum calculated at the prescribed rate on the amount of such tax for each month or part thereof for the period commencing on the 1st April of the respective year to the date of the payment of tax. The amount of such interest shall be calculated by taking into consideration the amount of, and the date of, such payment, when the payment is made on different dates or in parts or is not made. When, as a result of any order passed under this Act, the said amount of tax is reduced, the interest shall be reduced accordingly and where the said amount is enhanced, (the interest on the enhanced amount shall be calculated mutatis mutandis up to the date of such order):
Provided that, in respect of any of such years, [the amount of interest payable] under this sub-section shall not exceed the amount of tax found payable for the respective year.
(2) A registered dealer who has failed to pay the tax within the time specified by or under this Act, shall be liable to pay by way of simple interest, in addition to the amount of such tax, a sum calculated at the prescribed rate on the amount of such tax for each month or part thereof after the last date by which he should have paid such tax:
Provided that, in relation to the tax payable according to the return, fresh return or as the case may be, fresh return or revised return, the said dealer shall, notwithstanding anything contained in any other provision of this Act, be deemed not to have paid the amount of such tax within the time he is required by or under the provisions of this Act to pay it if he has not paid the full amount of such tax on or before the last date prescribed for furnishing of such return and accordingly, if he has not paid the full amount of such tax or has paid only the part of the amount of such tax by such date, he shall be liable under this clause for payment of interest after such date on the full or part, as the case may be, of the amount of tax which has not been paid by such date and where a dealer has furnished a fresh return or revised return and the amount of tax payable as per the fresh return or revised return exceeds the amount of tax payable as per the original return, then for the purposes of this sub-section, the dealer shall be deemed to have been required to pay the excess amount of tax at the time he was required to pay the tax as per the original return and accordingly he shall be liable to pay interest under this sub-section on the said excess amount of tax.
(3) In the case of a registered dealer, in whose case, any tax other than the tax on which interest is leviable under sub-section (2) has remained unpaid up to one month after the end of the period of assessment, such dealer shall be liable to pay by way of simple interest, [a sum calculated at the prescribed rate on the amount of such tax] for each month or part thereof from the date next following the last date of the period covered by an order of assessment till the date of the order of assessment and where any payment of such unpaid tax whether in full or part is made on or before the date of the order of assessment, the amount of such interest shall be calculated by taking into consideration the amount and the date of such payment. If, as a result of any order passed under this Act, the said amount of tax is reduced, then the interest shall be reduced accordingly and where the said amount is enhanced, then interest on the enhanced amount shall be calculated mutatis mutandis up to the date of such order from the said date next.
(4) If,--
(a) after the commencement of,--
(i) audit of the business of the dealer in respect of any period, or
(ii) inspection of the accounts, registers and documents pertaining to any period, kept at any place of business of the dealer, or
(iii) entry and search of any place of business or any other place where the dealer has kept his accounts, registers, documents pertaining to any period or stock of goods,
(b) in consequence of any intimation issued under sub-section (7) of section 63, the dealer files one or more returns, or, as the case may be, revised returns in respect of the said period, then he shall be liable to pay by way of interest, in addition to the amount of tax, if any, payable as per the return or, as the case may be, revised return, a sum equal to 25 per cent of the additional tax payable as per the return or, as the case may be, revised return:
Provided that, interest under this sub-section shall not be payable on account of the additional tax liability arising due to non-production of declarations or, as the case may be, certificates:
Provided further that, if the amount of tax paid as per revised return is less than ten per cent of the aggregate amount of tax paid as per the original returns, in respect of the corresponding period, then no interest under this sub-section shall be payable.
Explanation.--For the purpose of this sub-section the expressions,--
(i) ''tax paid as per original returns'' shall be deemed to include the amount of tax paid, as per the revised returns, filed before the commencement of proceedings specified in clause (a) or before the receipt of intimation specified in clause (b) of sub-section (4);
(ii) ''tax paid'' shall mean the amount of tax paid by such person or dealer, after the adjustment of set-off."
Section 30 of the Act and in particular sub-section (2) provides for levy of interest on registered dealer who has failed to pay taxes within time specified by or under this Act. The concerned officer has treated the petitioner as a person who failed to pay taxes in the year 2009-10 by holding that the adjustment of Rs. 41,31,650 which was made on March 28, 2012 was in the nature of failure on the part of the petitioner. Thus, the concerned officer has held the petitioner guilty of failure to deposit the refund amount which was ultimately credited or adjusted directly rather than refunding the same. Section 30(2) if read with section 50 of the Act, in our opinion, will clearly show that the petitioner was entitled to credit in respect of refund that was not ordered as required by section 51 of the Act on or before September 10, 2010 and that being so, he could not be termed as the dealer failing to pay taxes in 2009-10. Thus, by not making refund within time-limit prescribed by law, i.e., within three months, the Refund Officer has violated law and, therefore, when the Department itself made the direct credit as late as on March 28, 2013, the present officer has treated him as defaulter within the meaning of section 30(2) forgetting that the refund officer had himself violated the law. Thus, the refund officer as well the concerned Assistant Commissioner both have put the petitioner to a double whammy. It is preposterous, in our opinion, and a retrograde step. In our opinion, section 30(2), therefore, will have no application in the present case. The petitioner cannot be blamed for not making payment and it is the concerned officer, who did not pass order within three months and created the entire chaos. Thus we hold that the respondent-concerned Assistant Commissioner, Sales Tax, who has issued demand notice is deemed to be aware of this factual and legal position since the order of refund was communicated to him and the petitioner is not at fault since the refund officer himself did not act according to law. Without thinking so, the Assistant Commissioner, issued the demand notice which, in our opinion, is a reckless act. We, therefore, think that the petitioner must be compensated by the Department by an order of compensatory costs to be recovered by the Department from the officer who is at fault. In the result, we pass the following order:
ORDER
(i) Rule is made absolute in terms of prayer clause (A).
(ii) The prayer made in prayer clause (b) is rejected.
(iii) Respondents shall pay cost in the sum of Rs. 10,000 to the petitioner within a period of four weeks from today and shall recover the amount of costs from the concerned officer, who is at fault.
Rule made absolute in the above terms.