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2016 (7) TMI 477 - GUJARAT HIGH COURT

2016 (7) TMI 477 - GUJARAT HIGH COURT - TMI - Refund of amount deposited with the court against the purchase of property under auction - Cancellation of tax deferment certificate of the seller - violation of the scheme since the business was discontinued during the subsistence of the deferment period - Held that:- the first question that arises for consideration is the character of the amount deposited by the petitioner pursuant to the order passed by this court, as to whether it can be said to .....

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t is of the view that the respondents having elected to prefer stay applications against the impugned order passed by the Tribunal and having invited an order on merits, there was no justification in thereafter invoking the provisions of section 39(1) of the GVAT Act for withholding the refund which arose in the light of the order of the Tribunal. The impugned order dated 11.01.2016 passed under section 39(1) of the GVAT Act, therefore, cannot be sustained. - Special Civil Application No. 20489 .....

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ta, learned Assistant Government Pleader for the respondents. 2. Having regard to the submissions advanced by the learned counsel for the respective parties, the court is of the view that the matter requires consideration. Hence, issue Rule. Ms. Maithili Mehta, learned Assistant Government Pleader, waives service of notice of rule on behalf of the respondents. 3. Considering the nature of the controversy involved in the present case and with the consent of the learned counsel for the respective .....

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sortium of secured creditors under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. M/s Arunoday Mills Ltd. was a registered dealer and was holding sales tax deferment benefit certificate for its Morbi unit. The assessment came to be made in the case of M/s Arunoday Mills Ltd. for financial year 2005-06, which culminated into an order dated 30.11.2008 raising a demand of ₹ 33,40,497/- under the Central Sales Tax Act, 1956 (hereinafte .....

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n the ground that M/s Arunoday Mills Ltd. had discontinued business during the subsistence of the deferment period and had, therefore, violated the condition of the scheme. The above assessment orders and the order cancelling the deferment certificate came to be challenged by M/s Arunoday Mills Ltd. before the first appellate authority. However, such appeals came to be dismissed by an order dated 29.04.2009 on the ground of non-payment of predeposit by M/s Arunoday Mills Ltd. 5. For the years 20 .....

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ls Ltd. and on 30.03.2010, the petitioner company was directly served with a demand notice for recovery of sales tax dues of M/s Arunoday Mills Ltd. amounting to ₹ 6,95,87,721/- along with interest and penalty within two days from the receipt of the communication. The petitioner company after making inquiries, found that certain orders of assessment and reassessment had been made against M/s Arunoday Mills Ltd. for the years 2003-04, 2004-05 and 2005-06 and that the appeals had been prefer .....

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bove appeals, the petitioner paid an amount of ₹ 2,76,00,000/- towards tax liability of M/s Arunoday Mills Ltd. The petitioner also made further payment of ₹ 4,00,00,000/- as per the directions issued by this court by its order dated 29.04.2010 passed in Special Civil Application No.6639 of 2010, pursuant to which, the attachment of the property and the bank account of M/s Arunoday Mills Ltd. was removed. The court while disposing of the petition, made it clear that the order was pas .....

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terest and penalty on the sales tax dues of M/s Arunoday Mills Ltd. Being aggrieved, the State Government preferred appeals before this court being Tax Appeals No.345, 346 and 347 of 2015. Civil Applications for stay also came to be filed in the said appeals. By an order dated 05.08.2015, the applications came to be dismissed on the ground that staying the impugned order passed by the Tribunal would tantamount to allowing the main appeal which is admitted and pending for hearing. 6. It is the ca .....

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e present petition seeking a direction to the respondent authorities to refund the amount of interest and penalty paid by them towards the sales tax dues of M/s Arunoday Mills Ltd. 7. The record of the case reveals that this petition came to be filed on 15.12.2015 and came up for hearing on 17.12.2015, whereupon, the court issued notice returnable on 13.01.2016. The respondents No.1 and 2 came to be served on 23.12.2015 and the respondents No.3 and 4 came to be served on 31.12.2015. It appears t .....

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amendment seeking to challenge the order dated 11.01.2016 passed by the Assistant Commissioner of Sales Tax, Morbi, withholding the refund due to the petitioners, which came to be granted. 8. Mr. Devan Parikh, Senior Advocate, learned counsel with Mr. Kunal Nanavati, learned advocate for the petitioners, vehemently assailed the impugned order by submitting that against the order passed by the Tribunal, the respondents had approached this court by way of tax appeals wherein applications for stay .....

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ner is entitled to is not under the order of the Tribunal, but in view of the order passed by this court in Special Civil Application No.6639 of 2010 whereby, this court while directing the respondents to lift the attachment on the lands purchased by the petitioner, had directed the petitioner to deposit an amount of ₹ 4,00,00,000/- (rupees four crores) with the Deputy Commissioner of Commercial Tax and had clarified that the order was only by way of an interim arrangement without going in .....

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State of Gujarat v. Essar Steel Ltd. rendered on 05.02.2016 in Special Civil Application No.18128 of 2015 and allied matters wherein, the court after considering the scheme of section 39 of the GVAT Act, had set aside the order passed by the respondent authorities. It was submitted that the above decision would be squarely applicable to the facts of the present case. 8.1 It was emphatically argued that the respondents are also prohibited from exercising powers under section 39(1) of the GVAT Act .....

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of the GVAT Act to withhold the refund amount. 8.2 In conclusion it was urged that the impugned order passed by the fourth respondent under section 39(1) of the GVAT Act, deserves to be quashed and set aside, and the respondents are required to be directed to forthwith refund the amount deposited by the petitioners by virtue of the order passed by this court in Special Civil Application No.6639 of 2010. 9. Vehemently opposing the petition, Ms. Maithili Mehta, learned Assistant Government Pleader .....

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mount of refund if the Commissioner is of the opinion that the grant of such refund is likely to adversely affect the revenue. It was submitted that two requirements for exercise of powers under section 39(1) of the GVAT Act are that there should be an order of giving rise to a refund which should be subject matter of appeal or further proceedings, and that the Commissioner should form an opinion that grant of such refund is likely to adversely affect the revenue. It was contended that in the fa .....

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and hence, the impugned order wholly meets with the ingredients of section 39(1) of the GVAT Act and therefore, there is no warrant for interference by this court. Under the circumstances, the petitioners are not entitled to any of the reliefs prayed for in the petition and that the petition being devoid of merits, deserves to be dismissed. 10. The facts as emerging from the record reveal that against the order passed by the first appellate authority, the petitioners had preferred appeals befor .....

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xtent of attachment of land in question. The court observed that it would be in the interest of justice if the petitioners are directed to deposit the amount of ₹ 4,00,00,000/- (rupees four crores) with the Deputy Commissioner, Commercial Tax, Rajkot and upon deposit of such amount, the attachment of the Sales Tax Department on the land in question as well as the bank account shall be removed. The court made it clear that the amount already paid to the Sales Tax Department, the amount now .....

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ove facts, it is evident that insofar as the payment of any amount for the purpose of hearing of the appeals as contemplated under section 73 of the GVAT Act is concerned, the Tribunal had already granted interim relief in favour of the petitioners by staying the recovery against them. However, since the petitioners wanted the attachment over the lands and the bank account to be lifted, this court had directed the petitioners to deposit further amount of ₹ 4,00,00,000/- (rupees four crores .....

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held that the petitioners are not liable to pay interest and penalty on the amount of tax referred to in certificate of deferment. The State of Gujarat, being aggrieved, has preferred the appeals before this court against the order passed by the Tribunal. Along with the appeals, the State had also preferred civil applications for stay being Civil Applications No.414, 415 and 416 of 2015. The said applications came to be rejected by an order dated 05.08.2015. However, the respondents, at the rele .....

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nts, the fourth respondent Assistant Commissioner of Commercial Tax issued a notice dated 08.01.2016 to the petitioners proposing to take action under section 39(1) of the GVAT Act and ultimately, before the returnable date, the impugned order dated 10.01.2016 came to be made under section 39(1) of the GVAT Act, withholding the refund of the amount deposited by the petitioners. 13. Section 73 of the GVAT Act makes provision for appeal. Sub-section (4) thereof prohibits entertaining of an appeal .....

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in the prescribed manner, security for such amount as the appellate authority may direct. 14. In the present case, a perusal of the record of the case reveals that the Tribunal has entertained the appeals preferred by the petitioners upon payment of a smaller sum and has granted stay against the recovery of the balance amount. Therefore, there was no question of recovery of the balance amount during the pendency of the appeals, nor was the petitioner obliged to pay any further amount till the fi .....

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drop, the first question that arises for consideration is the character of the amount deposited by the petitioner pursuant to the order passed by this court, as to whether it can be said to be payment of tax or penalty as envisaged in the proviso to section 73 of the GVAT Act. In the opinion of this court, the answer would be in the negative because in view of the order passed by the Tribunal granting stay against further recovery, the question of payment of any amount under the orders impugned .....

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posit. It is merely an amount deposited by the petitioners under the directions of the court as a condition for lifting the attachment over the lands of the petitioners. In terms of the order of the court, if the petitioners succeeded, the amount was required to be returned to them. Since such amount is not in the nature of tax or penalty or even pre-deposit, in the opinion of this court, the respondent authorities have no authority to withhold the same. 17. At this juncture, reference may be ma .....

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application would be required to be made under the provisions of the GVAT Act which would be decided in accordance with law. It would, therefore, be apposite to refer to the relevant provisions for refund as contained in the GVAT Act. 18. Section 36 of the GVAT Act provides for refund of excess payment and lays down that subject to the other provisions of the Act and the rules, the Commissioner may refund to a person the amount of tax, penalty and interest, if any, paid by such person in excess .....

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ires an application to be made prior to refund of any amount by a person. Moreover, what section 36 of the Act contemplates is refund of any amount of tax, penalty and interest paid by a person in excess of the amount due from him. In the facts of the present case, the amount paid by the respondent is by way of a pre-deposit pursuant to the above order passed by this court, which in terms of the said order, would enure till the final disposal of the appeals. Therefore, such amount cannot be term .....

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Act is pending and the Commissioner is of the opinion that grant of such refund is likely to adversely affect the revenue, he may, after giving the dealer an opportunity of being heard, withhold the refund till such time as he may determine. Sub-section (2) thereof provides that where a refund is withheld under sub-section (1), the dealer shall be entitled to interest as provided under section 38, if as a result of the appeal or further proceeding, he becomes entitled to refund. 20. Thus, what .....

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e is a payment of tax. Though the expression refund may also be used for returning the amount of pre-deposit, there is a clear distinction between the character of the amount paid by way of tax and by way of pre-deposit pending the appeal. This court is in agreement with the view taken by the Bombay High Court in the case of Nelco Limited v. Union of India (supra) that the amount deposited as a condition precedent for hearing an appeal, does not bear the character of duty but bears the character .....

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een made out by the petitioner for withholding the amount deposited by the respondent Company. 18. In the opinion of this court, the above decision would be squarely applicable to the facts of the present case. In fact, the petitioner stands on a stronger footing, inasmuch as, in this case, the amount deposited is not even in the nature of pre-deposit but simply a deposit as a condition for lifting the attachment. Besides, the facts reveal that the petitioner has succeeded before the Tribunal. T .....

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together with the appeals, had also filed stay applications on which this court has passed orders in the following terms: Considering the prayer made in this civil application, it appears that staying the impugned order passed by the learned Tribunal would tantamount to allowing the main tax appeal, which is admitted and pending for hearing. Hence, this Civil Application is dismissed. 20. Thus, the court, while dismissing the stay applications filed by the State of Gujarat, has categorically obs .....

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the GVAT Act. Besides, the sequence of events that have unfolded as noticed hereinabove, also indicate mala fide intention on the part of the officers of the respondents to avoid refund of the amount payable to the petitioner under one pretext or the other. As noticed earlier, despite the fact that the order passed by the Tribunal in the second appeals is dated 22nd February, 2015, against which, tax appeals came to be preferred before this court and stay applications came to be rejected on 05. .....

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he respondents that, by a notice dated 08.01.2016 the petitioner was called upon to explain as to why the proposed action under section 39(1) of the GVAT Act should not be taken. The time given to the petitioner for answering the notice dated 08.01.2016 was till 11.01.2016. Considering the short span of time granted to it, the petitioner, obviously was not in a position to respond to the notice properly. However, in undue haste, on 11.01.2016, just two days before the returnable date, the order .....

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rovision for power to withhold refund in certain cases. Sub-section (1) thereof provides that where an order giving rise to a refund is the subject matter of (i) appeal, or (ii) further proceeding, or (iii) where any other proceeding under the Act is pending, and the Commissioner is of the opinion that grant of such refund is likely to adversely affect the revenue, he may, after giving the dealer an opportunity of being heard, withhold the refund till such time as he may determine. Therefore, be .....

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the statute in the order under section 39(1) of the GVAT Act is not sufficient compliance of the provisions thereof. Adverting to the facts of the present case, the petitioner has claimed refund pursuant to the decision of the Tribunal rendered in Second Appeals No.405, 406 and 407 of 2010, whereas, against the order of the Tribunal, the Government has preferred appeals which are still pending. Since, the proceedings of the appeals are pending and, grant of refund is likely to adversely affect .....

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