2011 (1) TMI 1283 - HC - VAT and Sales Tax

Whether assessing authority and the Tribunal have erred in refusing to refund the excess amount? Held that - Section 7D provides a lump sum payment in the form of compounding money in lieu of tax payable. Section 2(n) defines tax which includes composition money. The applicant applied under the compounding scheme issued by the G.O. dated December 5 2007 under the turnover slab of Rs. 200 crores. It was open to the assessing authority to accept the said application under the aforesaid slab or to reject it. In the present case the application has been accepted under the turnover slab of Rs. 200 crores. Under the compounding scheme for the turnover slab up to Rs. 200 crores the compounding money payable was Rs. 70 lacs only. Therefore the assessing authority is not entitled to treat and accept any other amount over and above Rs. 70 lacs as compounding money under the scheme. The assessing authority as well as the Tribunal have erred in treating the entire deposit of Rs. 1 crore as compounding money after accepting the compounding application for the slab below Rs. 200 crores. The assessing authority is only entitled to retain the compounding money which is legally due. Any amount deposited in excess of the compounding money which is not due under the scheme is the excess amount of tax and is liable to be refunded under section 29 of the Act. The assessing authority and the Tribunal have erred in refusing to refund the excess amount. Appeal allowed.

Summary

Issues:
- Interpretation of compounding scheme under section 7D of the U.P. Trade Tax Act, 1948.
- Refund of excess amount deposited by the applicant.
- Applicability of section 29 of the Act for refund.

Interpretation of Compounding Scheme:
The judgment revolves around the interpretation of the compounding scheme under section 7D of the U.P. Trade Tax Act, 1948. The applicant, engaged in the business of gold bullion, deposited a sum of &8377; 1 crore in anticipation of the compounding scheme. The compounding scheme introduced for the assessment year 2007-08 specified a compounding money of &8377; 70 lacs for a turnover slab below &8377; 200 crores. The applicant's turnover fell below &8377; 200 crores, and the assessing authority accepted the compounding application under this slab. The key contention was whether the assessing authority was entitled to retain any amount exceeding the specified compounding money.

Refund of Excess Amount:
The applicant sought a refund of the excess amount of &8377; 30 lacs, which was deposited prior to the issuance of the compounding scheme. The Additional Commissioner, Grade II (Appeals), Commercial Tax, Ghaziabad, allowed the appeal for refund. However, the Commissioner, Trade Tax, filed an appeal before the Tribunal, which overturned the decision, stating that the deposited amount was part of the compounding money and hence not refundable. The crux of the issue was whether the excess amount deposited should be refunded or treated as part of the compounding money.

Applicability of Section 29 for Refund:
The judgment delved into the applicability of section 29 of the Act for the refund of excess amount. The applicant argued that any amount deposited in excess of the compounding money legally due should be considered as excess tax and refunded under section 29. The court agreed with the applicant's interpretation, emphasizing that the assessing authority and the Tribunal erred in treating the entire deposit as compounding money and refusing to refund the excess amount. The court directed the assessing authority to refund the sum of &8377; 30 lacs along with interest as provided under section 29(2) of the Act.

In conclusion, the judgment clarified the interpretation of the compounding scheme, affirmed the right to refund the excess amount deposited, and upheld the applicability of section 29 for such refunds, setting aside the Tribunal's decision and directing the refund to the applicant.