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TMI Blog2015 (3) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... e Authority has ordered for refund of the tax amount. However, as the interest was not awarded on such refund of the tax amount, the Assessee preferred second appeal before the Tribunal. The Tribunal, after considering the aspect of reasonable construction of the provisions of Section 41 of the Gujarat Sales Tax Act (hereinafter referred to as the 'Act') and after taking into consideration the principles of doctrine of merger, found that when the interest on the amount of refund of tax upon the assessment is available, such interest should be made available on the refund of the tax which has accrued on account of the order passed in appeal against the assessment orders. We may, for the ready reference, record that the Tribunal relied upon its earlier view in case of M/s.Saurashtra Chemical Ltd. V/s. State of Gujarat in Second Appeal No.603 of 2007 decided on 01.08.2014 wherein, following observations were made by the Tribunal which are also the basis in all the impugned orders passed by the Tribunal. The same read as under:- "(18) With regard to true nature and scope of section 54(1)(aa) of the Act, this Tribunal is of the view that the purpose of the provision is to grant interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d order of assessment. The restricted meaning of the word "an order of assessment u/s 41" will create discrimination between the situations of the matters of similar facts, one gets refund in original stage of assessment and another gets refund in appeal. The Hon'ble Supreme Court held that the interpretation, which leads discrimination, must be avoided. The restricted interpretation will give discretion to the first assessing authority to make available the interest to the assesses. Similar situation will take place in appeal, if the appeal is decided by remand to the first assessing authority who passes the order of assessment in form 39 following the direction and refund arises, the dealer is entitled to interest. However, instead of remanding the matter, the appellate authority decides the matter in appeal and passes modified order of assessment the appellant will be prevented from interest even though he gets refund. The interpretation, which makes the provisions unworkable, should be avoided. if the phrase "assessment order u/s 41 " is not interpreted reasonably and the narrow and restricted meaning as "original assessment order" is given, considerable chaos, confusion, uncer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily relied on the decision of this Tribunal in the case of M/s Gayatri Tiles vs State of Gujarat wherein this Tribunal has given strict meaning to the words "by virtue of an order of assessment u/s 41" and held that the said clause u/s 54 was inserted by Gujarat II Act of 1993, so, when the refund has arisen in appeal then the appellant is not entitled to interest as seen from the wording of section 54 of the Act. With respect, the said ratio laid down by this Tribunal does not seem to be correct in view of the above discussion and also in view of the fact that the provisions relating to interest on delayed payment of refund have been consistently held as beneficial and non-discriminatory. It is, therefore, held that the appellant is entitled to the interest on delayed payment of refund, irrespective of the fact whether such interest is payable by virtue of an order of assessment or even by virtue of an order passed in appeal or revision. It is, therefore, held that in case of M/s Mahavir Expo Chem Ltd. vs State of Gujarat, this Tribunal vide its order dated 22/4/02 passed in SA No. 335 & 336 of 2006 has adopted a very narrow meaning of the word used in section 54(1)(aa) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of the appellate order is arising from the assessment order and he submitted that in view of the clear language of the statute, the Tribunal ought not to have departured from the earlier view taken by it in case of M/s.Gayatri Tiles (supra). The learned A.G.P. further contended that unless there is a specific provision providing for entitlement of interest on refund on account of the appellate order, no interest would be available since equity has no role to play in taxation matter. He submitted that there is no express provision made for entitlement to the interest to the Assessee on account of refund due to appellate order passed by the appellate Authority and, therefore, even otherwise also, the Tribunal has committed error in awarding interest on the refund of the amount of tax ordered by the Appellate Authority. 10. 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 Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndvik Asia Ltd. V/s. Commissioner of Income Tax and others reported in (2006) 280 ITR 643 (SC) read with the subsequent decision of the Apex Court in case of Commissioner of Income Tax V/s. Gujarat Fluoro Chemicals reported in (2014)1 SCC 126 wherein, the Apex Court did maintain the aspect of interest by way of compensatory measure but did not approve the interest on such interest while considering the aspect of compensatory measure. At this stage, we may refer to the recent decision of this Court in case of Gujarat Flouro Chemicals Ltd. V/s. Commissioner of Income Tax and others in Special Civil Application No.12855 of 1994 decided on 30.01.2015 wherein, the matter was remanded by the Apex Court in view of its Larger Bench judgment in case of Gujarat Flouro Chemicals (supra). In the said matter, the contention was raised by the counsel for the Revenue that unless the interest was expressly provided on any amount of refund, interest cannot be awarded by way of compensation. After considering the said contention, this Court, in the abovereferred decision, at paragraph Nos.11 to 17 observed thus:- "11. In the case of Sandvik Asia Limited Vs. Commissioner of Income Tax & Others (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of Section 35F of the Central Excise Act, 1944 and 129E of the Customs Act, 1962. The Circular is reproduced hereunder: "Refund/Return of deposits made under Section 35F of CEA, 1944 and Section 129E of Customs Act, 1962 - Clarifications The issue relating to refund of predeposit made during the pendency of appeal was discussed in the Board Meeting. It was decided that since the practice in the Department had all along been to consider such deposits as other than duty, such deposits should be returned in the event the appellant succeeds in appeal or the matter is remanded for fresh adjudication. 2. It would be pertinent to mention that the Revenue had recently filed a Special Leave Petition against Mumbai High Court's order in the matter of NELCO LTD, challenging the grant of interest on delayed refund of pre-deposit as to whether : (i) the High Court is right in granting interest to the depositor since the law contained in Section 35F of the Act does in no way provide for any type of compensation in the event of an appellant finally succeeding in the appeal, and, (ii) the refunds so claimed are covered under the provisions of Section 11B of the Act and are governed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the fiscal authority, tribunal, court by a superior court. The Department has very clearly stated in the above circular that the delay beyond the period of 3 months in such cases will be viewed adversely and appropriate disciplinary action will be initiated against the concerned defaulting officers, a direction was also issued to all concerned to note that defaulter will entail a interest liability if such liability accrue by reason of any orders of the Tribunal/Court such orders will have to be complied with and it may be recoverable from the concerned officers. All the Commissioners were advised implementation of these instructions and ensure their implementation through a suitable monitoring mechanism. It is also specifically mentioned that the Commissioners under respective jurisdiction should be advised that similar matters pending in the High Courts must be withdrawn and compliance reported and that the Board has also decided to implement the orders passed by the Tribunal already passed for payment of interest and the interest payable shall be paid forthwith. The facts and the law referred to in paragraph (supra) would clearly go to show that the appellant was undisputab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge 918 as follows: "An act which a Court orders to be done, or money which a Court orders to be paid, by a person whose acts or omissions have caused loss or injury to another in order that thereby the person damnified may receive equal value for his loss, or be made whole in respect of his injury; the consideration or price of a privilege purchased; some thing given or obtained as an equivalent; the rendering of an equivalent in value or amount; an equivalent given for property taken or for an injury done to another; the giving back an equivalent in either money which is but the measure of value, or in actual value otherwise conferred; a recompense in value; a recompense given for a thing received recompense for the whole injury suffered; remuneration or satisfaction for injury or damage of every description; remuneration for loss of time, necessary expenditures, and for permanent disability if such be the result; remuneration for the injury directly and proximately caused by a breach of contract or duty; remuneration or wages given to an employee or officer." There cannot be any doubt that the award of interest on the refunded amount is as per the statute provisions of law as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt which included the statutory interest and therefore, directed the Revenue to pay compensation for the same not an interest on interest. 14. The aforesaid shows that in the latter decision of the Larger Bench, it was held that the decision in the case of Sandvik Asia Limited Vs. Commissioner of Income Tax & Others (supra) cannot be read to mean that Revenue is obliged to pay interest on interest in the event of its failure to refund the interest payable within the statutory period. The Apex Court further held that in the peculiar facts and circumstances of the case of Sandvik Asia Limited Vs. Commissioner of Income Tax & Others (supra) the Court had come to the conclusion that there was inordinate delay on the part of the Government to refund certain amount, which includes statutory interest and, therefore, directed the Revenue to pay compensation for the same, but not interest on interest. 15. In our view, as per the above referred observations of the Apex Court in the case of Commissioner of Income Tax, Gujarat Vs. Gujarat Fluoro Chemicals (supra), obligation on the part of the Government to pay compensation for nonpayment of the statutory interest by way of interest on inter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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