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TMI Blog2015 (6) TMI 541X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed by the Division Bench in Tax Appeal No. 87 of 2015 is extracted below: "1. As in all the appeals, common question arises for consideration, they are being considered simultaneously. 2. In all matters, the Revenue has preferred the appeal mainly on the following question of law:- Whether the Honble Tribunal has erred in holding that the dealer is entitled to interest under Section 54(1)(aa) on the refund arising from the appellate order? 3. We have heard Mr.Dave, learned A.G.P. appearing in all the appeals. 4. The common facts in the appeals are that the Assessee has succeeded in the proceedings of the first appeal before the Appellate Authority and the Appellate 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to interest. Appeal proceedings are continuing single proceedings of assessment. Therefore, order passed in appeal is an order of assessment u/s 41. The intention is of paying interest on refund arises in order of assessment u/s 41 and the modified assessment order passed in appeal is also covered under the clause (aa). The close scrutiny of clause (aa) reveals that the dealer is eligible for interest on refund arises in the assessment proceedings carried out u/s 41 of the Act. It is further held that the appeal is continuing proceedings of assessment and therefore the provisions applicable to the original order of assessment are also applicable to the modified 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 Honble 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, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate order is merely a rectification or correction in original order. It is simply a merger as there cannot be more than one operative order governing the same subject matter. The strict interpretation of section 54(1)(aa) as was done earlier by this Tribunal leads to manifest unjust result which could never have been intended by the State Legislature and therefore, it is necessary to put a construction which modifies the meaning of the words used in section 54(1)(aa) of the Act so as to grant interest even if, refund becomes due to a dealer as a result of order passed in appeal or revision. 24) We are mindful of the fact that the department has heavily 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal, one for entitlement of interest on the appellate order and another for non-entitlement of interest on the appellate order for refund, we may instead of examining the aspect of consistency to be observed by the Tribunal, we may further examine the aspect as to whether the subsequent view taken by the Tribunal in case of M/s.Saurashtra Chamical Ltd.(supra) or the earlier view taken in case of M/s.Gayatri Tiles (supra) is appropriate or not?. 9. The learned A.G.P. contended that as per the provisions of Section 54(1)(aa) of the Act, there is reference upon the assessment order and, therefore, it cannot be interpreted to mean that the refund on account 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 provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same time, any statute in taxation matter should also meet with the test of constitutional provision. 13. In addition to the above, the principles of compensatory measure may apply if the taxing statute is silent about the said aspect. The Legislature may control quantification of interest or the entitlement of interest on refund subject to meeting with the test of constitutional provision. But, when the legislature is silent about entitlement of interest on refund of the tax amount already paid by the citizen, the interest can be considered by way of a compensatory measure. The reference may be made to the decision of the Apex Court in case of Sandvik 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be unsustainable or erroneous by the Courts it follows that the authority has acted wrongfully in the sense of not in accordance with law and compensation to the party deprived must follow. If the decision of the High Court is upheld it would mean that there can never be any wrongful retention by an authority until this Court holds that their stand is not in accordance with law. Therefore, that on this issue as well, the impugned judgment cannot be sustained and ought to be reversed. In the present context, it is pertinent to refer to the Circular on Trade Notice issued by the Central Excise Department on the subject of refund of deposits made in 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 succe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity to interest on delayed refunds shall be viewed strictly. 5. All the trade associations may be requested to bring the contents of this circular to the knowledge of their members and the trade in general. 6. Kindly acknowledge receipt. [Source : M.F.(D.R.) F.No. 275/37/2KCX. 8A, dated 212002]" A close scrutiny of the contents of the Circular dated 2.1.2002 would disclose as to the modalities for return of predeposits. It again reiterated that in terms of the Supreme Court order such predeposit must be returned within 3 months from the date of the order passed by the Tribunal, Court or other fiscal authority unless there is a stay on the order 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y due to that as has happened in the instant case. It is a case of the appellant as set out above in the instant case for the assessment year 197879, it has been deprived of an amount of Rs. 40 lakhs for no fault of its own and exclusively because of the admittedly unlawful actions of the Income Tax Department for periods ranging up to 17 years without any compensation whatsoever from the Department. Such actions and consequences, in our opinion, seriously affected the administration of justice and the rule of law. COMPENSATION: The word 'Compensation' has been defined in P. Ramanatha Aiyar's Advanced Law Lexicon 3rd Edition 2005 page 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 eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the payment. In other words, the interpretation placed is that the Revenue is obliged to pay an interest on interest in the event of its failure to refund the interest payable within the statutory period. 7. As we have already noticed, in Sandvik case (supra) this Court was considering the issue whether an assessee who is made to wait for refund of interest for decades be compensated for the great prejudice caused to it due to the delay in its payment after the lapse of statutory period. In the facts of that case, this Court had come to the conclusion that there was an inordinate delay on the part of the Revenue in refunding certain amount 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstantial question of law since such aspect is already covered by the principles of doctrine of merger well settled in the system of administration of justice and also in the abovereferred decision of the Apex Court as well as of this Court. 16. When the Tribunal has taken the view in case of M/s.Saurashtra Chemical (supra) inconsonance with the abovereferred view taken by us and thereafter, if the Tribunal has made departure from its earlier view taken in M/s.Gayatri Tiles (supra), we do not find that the later view, which is supported by our view as well as the abovereferred decision of the Apex Court and of this Court, should be deprecated or further examined which is on the mere principles of consistency to be maintained by the Tribunal and we find that no useful purpose would be served in further examination thereto. 17. Under the circumstances, we find that no substantial question of law would arise for consideration in the present Tax Appeals, as sought to be canvassed. 18. Under the circumstances, we do not find any case for interference to the impugned orders passed by the Tribunal. Hence, all the appeals are meritless and, therefore, dismissed. Order in OJCA Nos.84, 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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