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2016 (10) TMI 941 - GUJARAT HIGH COURT

2016 (10) TMI 941 - GUJARAT HIGH COURT - TMI - Withholding of Refund claim, which is already crystallised - whether the refund amount can be adjusted against the recoverable amount from the petitioner? - section 39 of the Gujarat Value Added Tax Act, 2003 - Power to withhold refund in certain cases - Held that: - A perusal of section 39(1) would show that refund payable to a dealer can be withheld if the order giving rise to such refund is subject matter of appeal or further proceeding or an oth .....

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ld the refund for such tax demand would frustrate the stay order. In effect the department would be recovering the amount in respect of which stay has been granted by the appellate authority against the recovery. Such indirect recovery in the guise of withholding of refund cannot be permitted. Power under section 39(1) of the Act would not empower the authority to frustrate stay order granted by the competent authority or Court. - There appears to be a clear non application of mind on part o .....

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ents to invoke the power to withhold the amount of refund are not available on record, such action is not possible to be confirmed and, therefore, the stand taken by the counsel for the Revenue is not possible to be accepted. - The respondent authority directed to release the amount of refund which has already been sanctioned in favour of the petitioners within a period of eight weeks - petition disposed off - decided in favor of petitioner. - SPECIAL CIVIL APPLICATION NO. 15527 of 2016 With .....

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of law and facts are arising, both these petitions are dealt with and disposed of by this common judgement and order. For the purpose, by treating Special Civil Application No.15527/2016 as a lead matter, we hereunder deal with the issues entangled in both the petitions. 2. The petition is filed against an order dated 5.7.2016 passed by respondent no.2 authority whereby despite the fact that the amount of refund is crystallized, the same has not been paid for the reason that it may be adjusted t .....

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cotton seeds, cake and cotton seed oil. The case of the petitioners is that it was entitled to input tax credit for a period commencing from 1.7.2015 to 31.7.2015 to the extent of ₹ 45,23,230/. However, since the same was not made available, an application came to be filed on 14.12.2015 seeking refund. According to the petitioner, the reason for such accumulation of input tax credit was due to the fact that the rate of tax attracted towards inputs is higher than the rate of tax paid toward .....

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petitioner no.2 company. 5. On 5.7.2016, respondent no.2 passed the impugned order wherein it is observed that a refund aggregating to 90% of ₹ 42,75,707/which comes to ₹ 38,48,000/is required to be granted and sanctioned to petitioner no.2. However, it had been further stated in the order that amount of refund being huge, same shall not be be given in cash but be adjusted against the recoverable amount from the petitioner. It is this order passed by respondent no.2 which the petitio .....

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titioners once having been sanctioned. Therefore, the order in question is without the authority of law and in no circumstances, the amount of refund which has been crystallized and sanctioned, can be permitted to be withheld. It was further contended that there are no outstanding dues payable by the petitioners. It was pointed out that against the assessment order dated 30.3.2016, substantive appeal is already filed before the appellate authority and on the merits of the case, the appellate aut .....

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dues which may be payable by the petitioners. It was pointed out by the counsel that ₹ 10 lacs which are ordered to be paid by the appellate authority while granting stay, has already been deposited and hence there is no default made by the petitioners in any manner. In this context, learned counsel submitted that if the amount of refund which has already been sanctioned by the authority, is allowed to be withheld, same would frustrate and would have adverse effect on the orders which are .....

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the said statutory provision since are not prevailing or establishing on record, it is not open for the respondent authority to make any resort to such statutory powers. Counsel for the petitioner relied on the decision of a Division Bench of this Court in case of Ganesh Sales Corporation and ors. v. State of Gujarat and ors. decided on 8.3.2016 in Special Civil Application No.10966/2015 to contend that action on part of respondent authority cannot be stated to be justified and permissible. In t .....

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herefore, the authority is justified in withholding the amount of refund. Referring to the affidavit in reply filed by the authority and particularly, paragraph (6), wherein aforestated eventuality has been stated, he contended therefore, that action on part of the respondent authority is just, proper and permissible in law, therefore, the petition may not be entertained. Drawing our attention to relevant provisions, particularly, section 73(4) of the Act which deals with powers of appellate aut .....

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nal refund to the extent of ₹ 38,48,000/to the extent of 90% of ₹ 42,75,707/and, therefore, for the period commencing from 1.7.2015 to 31.7.2015, this provisional amount of refund is crystallized by the authority itself. b) It is also appearing from the record that against the assessment order which has been passed on 30.3.2016, under both the Acts, substantive appeals are pending before the appellate authority. Learned counsel has drawn our attention to the memo of the appeal along .....

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s and challans for the same is annexed with the compilation to the petition at page66. Upon the petitioner fulfilling the condition of depositing ₹ 10 lacs, remaining demand stands stayed. d) It also appears from the record that the petitioners have cogently explained as to under which circumstances, the input tax credit has not been possible to be exhausted and, therefore, while determining the amount of provisional refund, the authority appears to have considered this aspect also and onl .....

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sanctioned by the authority itself. 10. An attempt is made by the counsel for the Revenue to justify the stand of the authorities that by virtue of statutory provisions, it is open for the authorities to withhold the refund and referring to the said statutory provisions, the authority has conveyed that to secure the possible liability which may accrue against the petitioners, it was necessary for the authority to withhold the amount of refund. The reason which is assigned in the impugned communi .....

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ns precedent which are supposed to be prevailing is missing in the present case. The perusal of the said section 39 indicates that the background of the facts in case on hand may not permit the authority to withhold the refund which has already been ascertained and sanctioned by the authority. For immediate perusal, we may reproduce section 39 of the Act which reads as under : Power to withhold refund in certain cases. (1) Where an order giving rise to a refund is the subject matter of an appeal .....

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to refund. 12. A perusal of section 39(1) would show that refund payable to a dealer can be withheld if the order giving rise to such refund is subject matter of appeal or further proceeding or an other proceeding under the Act is pending and the Commissioner is of the opinion that grant of refund is likely to adversely affect the Revenue. It is true, that in the present case, for other period, the assessing authority has passed orders against the petitioners raising tax demands. However, such .....

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r under section 39(1) of the Act would not empower the authority to frustrate stay order granted by the competent authority or Court. 13. At this juncture, we may refer the proposition of law propounded in almost similar background in decision in case of Ganesh Sales Corporation and ors.(supra), wherein Division Bench of this Court upon analysis of and interpretation of section 39 has stipulated that if conditions precedent, as referred to above, are not satisfied, it would not be open for the a .....

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any other proceeding under the Act should be pending. It is only if both these conditions precedent are satisfied then resort can be made to the provisions of section 39 of the GVAT Act. Testing the facts of the present case in the light of the above statutory provision, the first condition precedent, viz., an order giving rise to a refund is satisfied, inasmuch as, the order of provisional refund does give rise to a refund. Insofar as the second condition precedent is concerned, the learned Ass .....

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ond condition precedent for invoking section 39 of the GVAT Act is satisfied in the present case. Clearly, therefore, the impugned order has been passed without the conditions precedent for exercise of such power being satisfied and therefore, lacks jurisdiction. Under the circumstances, the contention that the petitioner should be relegated to avail of the remedy of appeal under section 73 of the GVAT Act does not merit acceptance, inasmuch as, it is by now well settled that when an order is wi .....

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olding the refund, the Commissioner is required to form an opinion that the grant of refund is likely to adversely affect the revenue. The fact regarding formation of such opinion, therefore, should be reflected in the order passed under section 39 of the GVAT Act withholding the refund. In this regard, a perusal of the impugned order clearly shows that there is not even a whisper therein as regards any opinion as envisaged in the section being formed. Consequently, in the absence of formation o .....

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vailable to the petitioner under the wrong premise that considering the circumstances stipulated in section 39 are established on record or not. Hence, there appears to be a clear non application of mind on part of the authority just to withheld the amount which is lawfully payable to the petitioner. One may notice that this amount which has been determined by the authority is by way of provisional refund amount and the same is determined to the extent of 90% of the original amount which was to .....

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