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Shanti Exports Pvt Ltd. Versus State of Gujarat & 3

2016 (7) TMI 477 - GUJARAT HIGH COURT

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 be payment of tax or penalty as envisaged in t .....

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lected 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 of 2015 - Dated:- 22-4-2016 - Harsha Devani An .....

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he 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 parties, the matter was taken up for final hea .....

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isation 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 (hereinafter referred to as the CST Act ) and a demand of .....

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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 2003-04 and 2004-05, the Deputy Commissioner, Ci .....

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any 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 preferred by the assessee, viz., M/s Arunoday Mills .....

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₹ 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 passed only by way of interim arrangement and wit .....

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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 case of the petitioner that in view of the fact .....

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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 that in the meanwhile, on 08.01.2016, notice ca .....

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d 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 of the order passed by the Tribunal had been .....

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he 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 into the merits of the matter and that if the pe .....

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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 by virtue of the doctrine of election, inasmu .....

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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 for the respondents submitted that the petiti .....

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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 facts of the present case, the respondents had p .....

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th 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 before the Tribunal. Pending the appeals, the Tribu .....

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ourt 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 being deposited pursuant to that order, and th .....

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ayment 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) with the respondent authorities for the purp .....

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y 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 relevant time, did not deem it fit to pass any ord .....

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ner 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 by an appellate authority unless such appeal i .....

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ount 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 final disposal of the appeals. However, this cou .....

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deration 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 before the Tribunal would not arise. Therefore .....

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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 made to the unreported decision of this court in .....

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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 of the amount due from him. Provided that, the .....

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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 termed as an amount of tax paid as envisaged under .....

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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 section 39 of the GVAT Act contemplates is tha .....

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efund 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 only of a security deposit, being a condition .....

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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. Therefore, as on date, there is an order of the .....

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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 observed that allowing the application would tant .....

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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 05.08.2015, at no point of time the respondents t .....

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016 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 under section 39(1) of the GVAT Act came to be .....

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in 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, before passing an order under section 39(1) of t .....

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