2016 (3) TMI 1074 - HC - VAT and Sales Tax

Seeking direction to disburse the refund along with the interest forthwith in terms of the provisional refund orders - Petitioner purchased cigarettes of various brands from the State of Gujarat and availed input tax credit in terms of section 11(3) of the GVAT Act as the same were purchased for the purpose of re-sale in the State of Gujarat and in the course of inter-state trade and commerce. Held that - for the purpose of invoking section 39 of the Act the condition precedents that are required to be satisfied are firstly that there should be an order which gives rise to a refund; and secondly that such order should be subject matter of (i) appeal or (ii) further proceeding or (iii) any other proceeding under the Act should be pending. It is only if both these conditions precedent are satisfied then resort can be made to the provisions of Section 39 of the GVAT Act. In the present case the first condition precedent viz. an order giving rise to a refund is satisfied inasmuch as the order of provisional refund does give rise to a refund. Insofar as the second condition precedent is concerned the respondent was not in a position to point out that any of the three eventualities specified in the section are satisfied. Thus it is an admitted position that the order of provisional refund is not subject matter of appeal nor is there any further proceeding in connection therewith nor is any other proceeding under the Act pending. Therefore none of the three contingencies constituting the second condition precedent for invoking Section 39 of the GVAT Act is satisfied. Therefore clearly the impugned order has been passed without the conditions precedent for exercise of such power being satisfied and therefore lacks jurisdiction. Under the circumstances the contention that the petitioner should be relegated to avail of the remedy of appeal under Section 73 of the GVAT Act does not merit acceptance inasmuch as it is by now well settled that when an order is without jurisdiction it is permissible for the aggrieved party to invoke the extraordinary jurisdiction of this court under Article 226 of the Constitution of India. The provisions of section 39 of the GVAT can be invoked provided the circumstances referred to hereinabove exist. If such circumstances exist the Commissioner is empowered to withhold the refund provided he is of the opinion that such refund is likely to adversely affect the revenue. Thus before withholding the refund the Commissioner is required to form an opinion that the grant of refund is likely to adversely affect the revenue. The fact regarding formation of such opinion therefore should be reflected in the order passed under section 39 of the GVAT Act withholding the refund. in the absence of formation of any opinion that the refund is likely to adversely affect the revenue the question of withholding the refund would not arise. Thus none of the requirements for resorting to the power conferred by section 39 of the GVAT Act are satisfied in the present case. The impugned order therefore suffers from lack of jurisdiction and hence cannot be sustained. Therefore in the absence of formation of any opinion that the refund is likely to adversely affect the revenue the question of withholding the refund would not arise. Thus as none of the requirements for resorting to the power conferred by section 39 of the GVAT Act are satisfied the impugned order cannot be sustained suffers from lack of jurisdiction. The respondents are directed to forthwith disburse the refund along with interest to the petitioner in terms of the provisional refund orders. - Decided in favour of petitioner

Summary

Issues Involved:
1. Legality of withholding the provisional refund order.
2. Jurisdiction and authority under Section 39 of the GVAT Act.
3. Compliance with procedural requirements for withholding refunds.
4. Availability and adequacy of alternative remedies.

Issue-wise Detailed Analysis:

1. Legality of withholding the provisional refund order:
The petitioner challenged the order dated 3.7.2015 by the Deputy Commissioner of Commercial Tax, which withheld the refund sanctioned provisionally on 18.2.2015 and 10.3.2015. The petitioner argued that once a provisional refund order is passed, there is no provision for its review under the GVAT Act. The court found that the conditions for invoking Section 39 of the GVAT Act were not satisfied, as the order of provisional refund was not subject to appeal, further proceedings, or any other pending proceedings under the Act. Therefore, the impugned order lacked jurisdiction and was illegal.

2. Jurisdiction and authority under Section 39 of the GVAT Act:
Section 39 of the GVAT Act allows withholding a refund if the order giving rise to it is under appeal, further proceedings, or any other pending proceedings, and if the Commissioner believes that granting the refund would adversely affect the revenue. The court determined that none of these conditions were met in this case. The provisional refund order was not under appeal or any other pending proceedings, and there was no recorded opinion that the refund would adversely affect the revenue. Thus, the authority to withhold the refund under Section 39 was not validly exercised.

3. Compliance with procedural requirements for withholding refunds:
The court noted that the procedural requirements under Section 39 were not followed. The impugned order did not reflect any opinion that the refund would adversely affect the revenue, which is a prerequisite for withholding a refund. The absence of such an opinion rendered the order procedurally defective and without jurisdiction. The court emphasized that the formation of such an opinion should be evident in the order, which was not the case here.

4. Availability and adequacy of alternative remedies:
The respondents argued that the petitioner should have appealed under Section 73 of the GVAT Act instead of filing a writ petition. However, the court held that when an order is without jurisdiction, the aggrieved party can invoke the extraordinary jurisdiction of the court under Article 226 of the Constitution of India. Given that the impugned order was found to be without jurisdiction, the availability of an alternative remedy did not preclude the petitioner from seeking relief through a writ petition.

Conclusion:
The court quashed the impugned order dated 3.7.2015 and directed the respondents to disburse the refund along with interest as per the provisional refund orders dated 18.2.2015 and 10.3.2015. The petition was allowed, and the rule was made absolute with no order as to costs.