TMI Blog2010 (11) TMI 874X X X X Extracts X X X X X X X X Extracts X X X X ..... 9108 of 2010 - - - Dated:- 3-11-2010 - RAO V.V.S. AND RAMESH RANGANATHAN , JJ. ORDER:- The order of the court was made by V.V.S. RAO J. An important recurring question concerning the authority of the State and its agents in the matter of refund of value added tax (VAT) (sales tax as well), again falls for consideration in this writ petition in which the fact of the matter is not at all disputed. The refund of duly paid VAT as certified by the competent tax authority, and the question of authorizing/approving such refund by an inferior authority also incidentally arises for consideration. The petitioner, a manufacturer of drugs, is a VAT dealer on the rolls of the Assistant Commissioner (LTU), Punjagutta Division, first respondent herein. The assessment for 2005-06 was completed resulting in refund of VAT. The petitioner filed an application in form No. 115 under section 40 of the Andhra Pradesh Value Added Tax Act, 2005 (the VAT Act) and rule 37 of the Andhra Pradesh Value Added Tax Rules, 2005 (the VAT Rules), claiming refund of about Rs. 3.53 crores. The first respondent conducted enquiry and while accepting the claim restricted the same to about Rs. 3 crores. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Chapter V, which is apparent and is given to understand the nature of the right. The conspectus of sections 38, 39 and 40 of the VAT Act read with rules 35 and 59 of the VAT Rules would reveal the following: The question of refund arises in two situations. First, in the case of a VAT dealer effecting sales under section 5(1) and (3) of the Central Sales Tax Act, 1956. In such a case, if the input-tax credit exceeds the amount of tax payable on condition of proving that the exports have been made outside the territory of India, the excess VAT shall be refunded within a period of 90 days. In the second category of cases, the VAT dealer can claim refund of excess tax credit available at the end of the second year after the commencement of the Act, and thereafter in the return to be filed in the month of March every year. Such cases of input-tax credit claimed as refund shall be refunded within 90 days from the date of receipt of the claim. In either case, it is for the VAT dealer to satisfy the authority prescribed by producing the accounts and records in substantiation of the claim. If the prescribed authority fails to make refund, in either of these situations, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue, the authority prescribed may, with the previous approval of the Deputy Commissioner, withhold the refund till such time as the Deputy Commissioner may determine. (3) Where any demand of tax or penalty or both is disputed by a VAT dealer or TOT dealer before any appellate authority or Sales Tax Appellate Tribunal or High Court and the demand becomes finally due either partly or fully an interest at the rate of one per cent per month shall be charged from the date such tax or penalty was originally due. Sections 38 and 39 of the VAT Act confer right to claim refund/adjustment of VAT and/or TOT subject to the power of the Commissioner or prescribed authority to adjust any amount due to be refunded against any tax, penalty and interest outstanding against a VAT/TOT dealer. Sub-section (2) of section 40 of the VAT Act confers power on the authority prescribed to withhold the refund if, the grant of refund is likely to adversely affect the Revenue . The order to withhold shall be made with prior approval of the Deputy Commissioner till such time he may determine. In the case on hand, indisputably the first respondent on the advice of the second respondent passed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation of an opinion that the grant of refund would adversely affect the Revenue . Dealing with the phrase adversely affect the Revenue appearing in section 33C of the Andhra Pradesh General Sales Tax Act (as in section 40(2) of the VAT Act), this court laid down thus (pages 604 and 605): The legislative intent underlying the conferment of the discretion (to order withholding of refund) is clear from the architecture of section 33C. If the legislative intent were that wherever an order giving rise to a refund is the subject-matter of appeal or further proceedings or other proceedings under the Act is pending, the provision would have clearly enjoined that no refund need be made till the conclusion of the appeal or further proceeding. Such is not the legislative prescription. The structural prescription that only when an order (giving rise to a refund) is the subject-matter of an appeal or further proceedings or where any other proceedings under the Act is pending, is to ensure legislative vitality to grant of power to withhold the refund. Article 265 of the Constitution enjoins that no tax shall be levied or collected except by authority of law. The taxing legislation, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... analyzing section 40 of the VAT Act, the Division Bench held (page 521 of VST): It is deplorable that the State, which is supposed to act fairly, has come out with a case that T.R.C. No. 245 of 2008 has been filed against the order of the S.T.A.T. in T.A. No. 1142 of 2007 and, therefore, the power under section 40(2) of the APVAT Act has been exercised. It is also pertinent to note that by not making payment of the refund, the respondent-authorities, who are litigants before this court in the TRC, wherein the validity of the order dated November 28, 2007 in T.A. No. 1142 of 2007 passed by the STAT has been challenged, have granted stay to themselves. A litigant cannot decide that he would not implement the order passed by a lawful authority because he has challenged the validity of the said order before a higher forum. Unless the higher forum stays implementation of the said order, the order passed by the concerned authority must be complied with. It is also pertinent to note that in the event of the State succeeding in the aforestated TRC, the petitioner will have to make payment of tax along with interest thereon and, therefore, in that event, the State is not to suffer a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n cannot be approved. The State Government would do well to prescribe a time schedule to ensure timeliness in granting approvals for refund of the amounts which it appears has been in place not by reason of the statute or the delegated legislation but only because of certain executive instructions. As there is no challenge to these instructions, we refrain from saying anything more. The argument that the delayed refund would attract interest at 12 per cent per annum is no answer if one appreciates the fact that no businessman or merchant would like the money to be locked up just for the sake of 12 per cent return on the refund, which might come long after the requirement for money is over. Keeping this in view, we direct the Government to pass appropriate orders in all pending refund matters within a period of six weeks. In the result, for the above reasons, the writ petition is allowed as prayed for. The respondents shall consider refunding the amount of Rs. 2,87,14,114 (rupees two crores eighty seven lakhs fourteen thousand one hundred and fourteen only) within a period of four weeks from the date of receipt of a copy of this order. - - TaxTMI - TMITax - CST, VAT & S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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