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TMI Blog2023 (1) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... f India, challenges the order passed by the respondents granting refund of only principal amount without interest, which according to the petitioner is contrary to law. The prayer sought for, is as follows: "7. The petitioner, therefore, prays that this Hon'ble Court be pleased to issue a writ of mandamus or a writ in the nature of mandamus or a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, direction or order and be pleased to : (a) command the Respondent/s to pay interest to the petitioner at 6% p.a. on Rs.76,00,879/- from 1.4.2005 on Rs.34,39,839/- from 6.9.2008 and Rs.1,05,40,021/- from 13.7.2009 till the date of actual refund on the total amount of Rs.2,15,80,739/-; and/or (b) any other and further relief deemed just and proper be granted in the interest of justice; (c) to provide for the cost of this petition." 2. We have heard learned Senior Advocate Mr.S.P.Soparkar assisted by Mr.Monaal Davawala, learned Advocate for the petitioner, who has drawn the attention of this court to decision rendered in the case of very petitioner in Special Civil Application No.18379 of 2018 for the Assessment Year 1997-98, wherein the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en Lakh Eight Thousand Seven Hundred Thirtynine Only) for the Financial Year 2004- 2005, which was duly processed by the respondent No.3 on 18.11.2017. However, no interest on this refund of Rs.2,15,80,739/- (Rupees Two Crore Fifteen Lakh Eighty Thousand Seven Hundred Thirty-nine Only) had been provided. 5.3 According to the petitioner, he is entitled to the interest from the year 2005 on the refund for which he sent repeated reminders to various authorities and multiple communications starting from 23.10.2018 upto 13.04.2002 fell on deafears. 5.4 The petitioner, is therefore, before this Court urging the Court that under Section 54 of the Act the interest from the year 2005 as required under the law is required to be granted. 6. It would be apt to refer to Section 54 of the Act: "54.Interest on Delayed Refunds: (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 said amount from the date immediately following th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be determined by the Commissioner whose decision shall be final." 6.1 Section 54 of the Act thus clearly speaks of entitlement of dealer of an amount which becomes due to the dealer by virtue of the order of assessment under Section 41, for the specified year. In addition to the said amount, the simple interest at the rate of nine percent per annum, on the amount from the date immediately following the date of closure of the accounting year to which the said amount relates. 6.2 The proviso to this states that if the amount has been paid after the closure of the accounting year and such amount is required to be refunded, no interest shall be payable for the period from the date of closure of such accounting year to the date of payment of the amount. 6.3 The second proviso also states that no interest shall be payable on the amount of refund which does not exceed rupees one hundred. 6.4 This will apply to the refund which has been granted beyond the period of 30 days of the date of order. It also provides that the amount which is to be refunded if has not been refunded within a period of 90 days from the date of order. The rate of interest to be paid is nine percent per annum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t shall be payable also for any period during which such order remained in operation. 8. This Court in case of State of Gujarat vs. Doshi Printing Press (Tax Appeal No.87 of 2015) was required to consider this very aspect and it has held that once the order is passed by the competent authority for assessment and the appeal is preferred before the Appellate Authority against such order, the principles of doctrine of merger would squarely apply and once the order of assessment merges with the order of the Appellate Authority in appeal, the assessment is finalized by the Appellate Authority in appeal. In the situation that would arise, the argument would not be available to the respondent that while giving effect to Section 54(1)(aa) of the GVAT Act, the effect would be given to the assessment made by the Assessing Authority and not to the further modification made the First Appellate Authority or thereafter by the Second Appellate Authority or even the Third Appellate Authority, as the case may be. 8.1 The Court has held that, it may also result into discriminatory treatment to the extent that the person, who succeeds in the assessment if is otherwise found entitled to the refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esses. Very large number of assesses are dversely affected inasmuch as the Income Tax Department can now simply refuse to pay to the assesses amounts of interest lawfully and admittedly 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preted 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly barred by the statute or that the taxing statute is silent about the same." 6. Therefore, since the issue is covered by the decision of this Court dated 9.2.2015 rendered in Tax Appeal No.87 of 2015 and allied matters, we see no reason to deviate from the same. In the present tax appeals, no question of law arises and hence, both the tax appeals are dismissed." 8.4 Relevant findings and observations in M/s.Syngenta Crop Protection Pvt. Ltd. vs. State of Gujarat are as follow: "xxx Section 54 of the Gujarat Sales Tax Act pertains to interest of delayed refund. Relevant portion of which reads as under :- "54. Interest on delayed refund : [1] 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 nine per cent, per annum on, the said amount from the date of immediately following the date of closure of the accounting year to which the said amount relates to the date of order of assessment-Provided that where dealer has paid any amount after the closure of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... According to learned AGP, case of the petitioner would fall under Clause (b) since the refund claim arises out of an order of appellate authority and not an order of assessment. However, such a question was examined by the Division Bench of this Court in the case of State of Gujarat v. Doshi Printing Press, [2015] 82 VST 384 [Gujarat] wherein, the Court held and observed as under : "9. In our view, once an order is passed by the competent authority for assessment and the appeal is preferred before the Appellate Authority against such order of assessment, and the Appellate Authority modifies the order of assessment, the principles of doctrine of merger would squarely apply. Once the order of assessment merges with the order of the Appellate Authority in appeal, one may say that the assessment is finalized by the Appellate Authority in the appeal. Same would be the situation if such circumstances arise in the Second Appeal or in any further appeal, expressly provided by the statute and the order of assessment of assessing authority or the first Appellate Authority is modified. One may say that the consequence in law would be the assessment made by the first authority and further m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment. The appellate authority while allowing the appeal merely corrects the assessment. It is such corrected assessment which would prevail. The refund claim of the assessee, therefore, cannot be stated to have arisen other than from the order of assessment. Somewhat similar provisions have been made in the Gujarat Value Added Tax Act concerning interest under Section 38. The said Section reads as under : "38. Interest on refund (1) Whether refund of any amount of tax becomes due to the dealer by virtue of an order of assessment under Section 34, he shall subject to the provision of this section be entitled to receive in addition to the amount of tax, simple interest at the rate of six percent per annum on the said amount of tax from the date immediately following the date of the closure of the accounting year to which the said amount of tax relates [till the date of payment of amount of such refund] Provided that where the dealer has paid any amount of tax after the closure of the accounting year and such amount is required to be refunded, no interest shall be payable for the period from the date of closure of such accounting year to the date of payment of such amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing authority only and not the further modification made by the first appellate authority or thereafter, the second appellate authority or even third appellate authority, as the case may be. The court held that the interpretation canvassed by the revenue of section 54(1) (aa) of the Act, if accepted, would run counter to the basic principles of the doctrine of merger which is a well accepted doctrine incorporated in the system of administration of justice. Relying upon the above decision, the court held that when the statutory appellate authority allows the appeal of an assessee, it only corrects the order of assessment. In other words, he gives legal shape to the contours of the matter, which in any case the Assessing Officer should have adopted. Therefore, in terms of section 54(1) of the Gujarat Sales Tax Act, in such a situation, it cannot be stated that the refund claim of the assessee arises out of an order other than an order of assessment. The appellate authority while allowing the appeal merely corrected the assessment. It is such corrected assessment which would prevail. The refund claim of the assessee, therefore, cannot be stated to have arisen from an order other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. Civil Application No.776 of 2020 in Special Civil Application No.1876 of 2018) where the Court has in contempt jurisdiction on dated 28.03.2022 has directed the amount to be refunded. "Learned counsel appearing for the complainant submit that order alleged to have been violated has since been complied. Placing his submission on record, contempt proceedings stands closed. Notice is discharged." 14. It is thus clear that the First Court directed the amount to be deposited when the challenge before the Apex Court had already been made. The State has accepted this order without a murmur. It is also to note that the case which has been followed for the purpose of seeking the refund, no stay has been granted by the Apex Court and couple of matters are still at a diary stage. 15. In that view of the matter, the request on the part of the petitioner for the interest on the amount of delayed refund deserves to be allowed, following the decision in case of M/s Syngenta Crop Protection Pvt. Ltd. v. State of Gujarat (supra). The petitioner thus would be entitled to the interest on the delayed refund at the rate of 6% per annum. It is thus made clear in all the decisions which have b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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