TMI Blog2016 (11) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... ught to be achieved by the law - When the legislature frames a new provision which either creates or extinguishes existing rights, there is invariable requirement of making such a provision applicable from a certain date. Regarding Interest - When the Assessing Officer wanted to tax the petitioner by denying the set off on tax paid on purchase of raw materials for manufacture of goods which are sold outside the State, the petitioner relied on the decision of the Tribunal in case of Wood Polymers Ltd [1982 (3) TMI 231 - GUJARAT HIGH COURT] - Held that: - Till such appeal is decided, the Revenue would have to keep such an issue alive whenever it arises in case of other assesses - The fact, that the Revenue had carried the judgement of the Tribunal in appeal before the High Court and such appeal was pending, did not permit the Assessing Officer to ignore judgement of the Tribunal and compel the assessee to go in appeal. The Tribunal in view of the fact that the first appellate authority had proceeded ex parte merely remanded the proceedings before the first appellate authority for fresh consideration and disposal - Not on the ground that interest, as a matter of course, must b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside the State. 3. According to the petitioner, this stand of the Sales Tax authorities was contrary to the law laid down by the Gujarat Sales Tax Tribunal ['the Tribunal' for short] in case of M/s. Wood Polymer Ltd. This judgement of the Tribunal was brought to the notice of the Assessing authority. He, however, observed that this issue is sub judice. By an order dated 28.06.1980, he rejected the petitioner's claim ironically leaving the liberty open to the petitioner to agitate the issue further. 4. The petitioner filed appeals before the first appellate authority against such order of the Assessing authority on or around 02.08.1980. For no apparent reason, these appeals remained pending for years together. The appellate authority ultimately by an order dated 26.02.2004 rejected such appeals. The petitioner preferred second appeals before the Tribunal in the year 2009. The question of limitation therefore arose. The Tribunal, by its order dated 27.08.2009 first addressed to the question of limitation and observed that the first appellate order was passed without hearing the petitioner. Notice was never served to the petitioner. The petitioner came to know abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner, therefore, withdrew the appeals before the Tribunal on 16.06.2015 and filed the present petition. In this petition, as noted, the petitioner has prayed for two reliefs. One is for declaring that Section 54(1)(aa) of the GST Act is discriminatory and arbitrary insofar as the same denies interest on refunds concerning the period prior to 1993-94. The second prayer of the petitioner is for granting interest on the delayed refund concerning the petitioner's cases for the years 1974-75 to 1979-80. This prayer for interest is based on the petitioner's challenge to vires of Section 54(1)(aa) of the GST Act as also independent thereof. According to the counsel for the petitioner even in absence of any statutory provision granting such interest on the principal of compensation for wrongly withholding the petitioner's amount, interest should be paid. 6. Drawing our attention to Section 54(1)(aa) of the GST Act counsel submitted that such provision lays down an artificial cut off date for grant of interest. There is no basis for such cut off date which is chosen wholly arbitrarily. The said provision insofar as it denies interest for the period prior to 01.04.199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the constitutionality of any particular law attacked as discriminatory and -violative of the equal protection of the laws. (ii) In case of Kunnathat Thathunni Moopil Nair vs. State of Kerala and anr reported in AIR 1961 SC 552 in which, it was observed as under: 7. The most important question that arises for consideration in these cases, in view of the stand taken by the State of Kerala, is whether Art. 265 of the Constitution is a complete answer to the attack against the constitutionality of the Act. It is, therefore, necessary to consider the scope and effect of that Article. Article 265 imposes a limitation on the taxing power of the State in so far as it provides that the State shall not levy or collect a tax, except by authority of law, that is to say, a tax cannot be levied or collected by a mere executive fiat. It has to be done by authority of law, which must mean valid law. In order that the law may be valid, the tax proposed to be levied must be within the legislative competence of the Legislature imposing a tax and authorising the collection thereof and, secondly, the tax must be subject to the conditions laid down in Art. 13 of the Constitution. One of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether a particular tax could not have been imposed in a different way or in a way that the Court might think more just and equitable. The Act has, therefore, to be examined with reference to the attack based on Art. 14 of the Constitution. (iii) In case of The State of A.P and anr vs. Nalla Raja Reddy and ors reported in AIR 1967 SC 1458 in which, it was observed as under: 23. On the said facts the question is whether ss. 3 and 4 of the Act offend Art. 14 of the Constitution. The scope of Art. 14 has been so well-settled that it does not require further elucidation. While the article prohibits discrimination, it permits classification. A statute may expressly make a discrimination between persons or things or may confer power on an authority who would be in a position to do so. Official arbitrariness is more subversive of the doctrine of equality than statutory discrimination. In respect of a statutory discrimination one knows where he stands, but the wand of official arbitrarianess can be waved in all directions indiscriminately. A statutory provision may offend Art. 14 of the Constitution both by finding differences where there are none and by making no difference whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovides for interest on delayed refunds. By amending Act 11 of 1993 the same was brought into force w.e.f. 01.04.1993. The cut off date of 01.04.1993, therefore, was chosen with specific purpose. It would not be possible to grant interest on all pending cases. The legislature, therefore, provided that such interest should be granted only in case of assessments pertaining to the period from 01.04.1993 onwards. Such choice of the date therefore, is neither arbitrary nor discriminatory. 10. In this context, counsel relied on the following decisions: (i) In case of Union of India and anr vs. M/s. Parameswaran Match Works and ors reported in (1975) 1 SCC 305 in which, the Supreme Court observed: 10. The concessional rate of duty can be availed of only by those who satisfy the conditions which have been laid down under the notification. The respondent was not a manufacturer before September 4, 1967 as it had applied for licence only on September 5, 1967 and it could not have made a declaration before September 4, 1967 that its total clearance for the financial year 1967-68 is not estimated to exceed 75 million matches. In the matter of granting concession or exemption from tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... force from April 1, 1973. Two Ordinance were promulgated to give effect to the provisions of the Bill. The Bill was passed soon after and received the Governor's assent on April 2, 1978. It cannot therefore be said with any justification that in choosing April 1, 1973 as the date for the levy of the tax, the Legislature acted unreasonably, or that it was wide of the reasonable mark. (iii) In case of Union of India vs. P.N.Menon and ors reported in (1994) 4 SCC 68 in which, the assessee in the context of making a contributory family pension scheme noncontributory with effect of a particular date which was challenged as violative of Article 14 of the Constitution, the Supreme Court held that merely because of the fact that such cut off date did not entitle the persons who have retired prior to such date to refund of the contribution already made, would not render the scheme violative of Article 14 of the Constitution. It was observed as under: 8. Whenever the Government or an authority, which can be held to be a State within the meaning of Article 12 of the Constitution, frames a scheme for persons who have superannuated from service, due to many constraints, it is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... They cannot go beyond the provisions of the statute. Learned Counsel for the petitioner has fairly conceded that the Act and the Rules framed thereunder did not make any provision whatsoever for payment of interest in respect of alleged or proved unlawful recovery of amount of excise duty. The Act and the Rules only provide in certain circumstances for refund of the amount of duty wrongly collected. The Act and the Rules did not provide for payment of interest on such wrongful collection of amount of tax. Therefore the order passed by the Assistant Collector of Central Excise cannot be said to be in any way unlawful. 12. We may first advert to the question of vires to the statutory provision. Clause (aa) to sub section (1) of Section 54 of the GST Act was inserted by the Gujarat Act 11 of 1993. It was brought with effect from 01.04.1993 and reads as under: 54(1)(aa) Where refund of any amount becomes due to the dealer by virtue of an order of assessment under section 41, for the specified year, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest at the rate of twenty four per cent per annum, on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of such class and that the same is based on rational relation to the object sought to be achieved by the law. 14. It is equally well settled that there is a presumption of constitutionality of the legislature. The onus is on the person who ascertains that the same is unconstitutional to establish it by providing necessary material on record. A reference in this respect can be made to the decision of Supreme Court in case of The State of Jammu Kashmir vs. Triloki Nath Khosa and ors reported in AIR 1974 SC 1. 15. When the legislature frames a new provision which either creates or extinguishes existing rights, there is invariable requirement of making such a provision applicable from a certain date. As long as the choice of the date is not arbitrary, the same would not be open to the vice of the unconstitutionality merely on the ground that the cut off date excludes a certain class of persons or events from the fold of the statutory provision. In the present case, the provision recognizing interest on delayed refund was inserted in the statute for the first time w.e.f. 01.04.1993. The most natural date therefore would be the said date for granting such benefit. In order ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am) Our attention was, however, drawn by Mr Sen to two cases. Even in those cases, CIT v. M. Chandra Sekhar and Central Provinces Manganese Ore Co. Ltd. V. CIT, all that the Court pointed out was that provision for charging interest was, it seems, introduced in order to compensate for the loss occasioned to the Revenue due to delay. But then interest was charged on the strength of a statutory provision, may be its objective was to compensate the Revenue for delay in payment of tax. But regardless of the reason which impelled the Legislature to provide for charging interest, the Court must give that meaning to it as is conveyed by the language used and the purpose to be achieved. Therefore, any provision made in a statute for charging or levying interest on delayed payment of tax must be construed as a substantive law and not adjectival law. So construed and applying the normal rule of interpretation of statutes, we find, as pointed out by us earlier and by Bhagwati, J. in the Associated Cement Co. case, that if the Revenue s contention is accepted it leads to conflicts and creates certain anomalies which could never have been intended by the Legislature. 17. In case of Orient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n our considered view, the aforesaid judgment has been misquoted and misinterpreted by the assessees and also by the Revenue. They are of the view that in Sandvik case (supra) this Court had directed the Revenue to pay interest on the statutory interest in case of delay 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. 8. Further it is brought to our notice that the Legislature by the Act No. 4 of 1988 (w.e.f. 01.04.1989) has inserted Section 244A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right to receive interest would accrue even in case of refund arising out of an appellate order. The Court held that appeal is a continuation of the original proceedings. The order of assessment would merge with that of the appellate order. In essence, what the appellate authority would be doing would be to correct the order of assessment. Primarily on these grounds, the department s appeals were dismissed. While doing so, the Division Bench also examined whether such interest should be paid on the basis of compensatory measure. The Court referred to the decision of Supreme Court in case of Gujarat Fluoro Chemicals and held that such interest would be payable even otherwise. These observations of the Division Bench should be seen as passing remarks since such an issue directly arise before the Court in the said appeals. As noted, what was the center of the controversy before the Court was whether interest under section 54 (1) (aa) of the GST Act would be available if refund arose out of an appellate order and not the original order of assessment. The Court answered the question in the affirmative. Once therefore the right to receive interest was traced to the statutory provision, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice for demand, that it came to know that the appeals were dismissed. The appellate authority while dismissing the appeals ex parte proceeded to decide the same on merits, nevertheless did not trouble himself to find out as to what had happened to the department s appeal in the High Court in case of Wood Polymer (supra). The High Court had decided such appeals by judgement dated 05.03.1982. The first appellate authority therefore when dismissed the petitioner s appeal on 26.02.2004, the law sofar as the State is concerned was laid down by the judgement of the High Court. It was the duty of the appellate authority to ascertain this position. This issue was reflected in the assessment order itself. The assessing authority had recorded that the issue is decided in favour of the assessee by virtue of the judgement of the Tribunal but the same is sub judice. Least that the appellate authority was expected to do was to verify the result of the department's appeal before the High Court. Without taking such basic care, the first appellate authority without issuance of notice of hearing to the petitioner, dismissed the appeals ex parte. Even after disposing of the appeals, no communic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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