Refund under Section 38(3) of the Delhi Value Added Tax Act,2004 is mandatory: Supreme court while upholding the decision of high court
CASE TITTLE: COMMISSIONER OF TRADE AND TAXES. V. FEMC PRATIBHA JOINT VENTURE
CASE NO: Civil Appeal no. 3940 of 2024
ORDER ON: May 01, 2024
QUORUM: J.PAMIDIGHANTAM SRI NARASIM, J.PRASANNA BHALACHANDRA VARALE
FACTS OF THE CASE:
The facts which lead to the present appeal is that the Respondent is a joint venture engaged in the execution of works Contracts for the Delhi Metro Rail Corporation and makes Purchases for this purpose. It claimed refund of excess tax credit for the 4th quarter of 2015-16 Through revised return filed on 31.03.2017 and For the 1st quarter of 2017-18 through return filed on 29.03.2019, Along with applicable interest under Section 42 of the Act. The Appellant did not pay the refund even until 2022, pursuant to Which the respondent sent a letter dated 09.11.2022 for the Consideration of their refund. The Value Added Tax Officer passed An adjustment order dated 18.11.2022 to adjust the respondent’s Claims for refund against dues under default notices dated 30.03.2020, 23.03.2021, 30.03.2021, and 26.03.2022. The Respondent then filed a writ petition before the Delhi High Court For quashing the adjustment order and the default notices.By judgment dated 21.09.2023, impugned herein, the High Court quashed the adjustment order and directed refund for the 4th quarter of 2015-16 and for the 1st quarter of 2017-18, along with Interest as per Section 42 till the date of realisation. The present appeal is restricted to the issue of quashing the Adjustment order.
LEGAL ISSUES:
Whether the timeline for refund under Section 38(3) of the Delhi Value Added Tax Act,2004 must be mandatorily followed?
LEGAL PROVISIONS:
Section 38(a)(ii)of the Delhi Value Added Tax Act, 2004- refunds
Any amount Remaining after the application referred to in sub-section (2) of this section shall be at either –
(a) refunded to the person, –
(ii) within two months after the date on which the return was furnished or Claim for the refund was made, if the tax period for the person claiming refund is a Quarter
CONTENTIONS OF THE APPELANT:
The appellent through their Learned counsel submits that the timelines specified in Section 38(3) are only to ensure that interest is paid if the refund is delayed,Beyond the statutorily prescribed period. However, The timeline cannot be used to denude the power to adjust refund Amounts against outstanding dues under Section 38(2). The Refund can be adjusted as long as outstanding dues exist at the Time when the refund is processed, even if it is beyond the Stipulated timeline.
CONTENSIONS OF THE RESPONDENT:
The respondent through their learned counsel Supported the reasoning of the High Court and has placed reliance On several judgments of the Delhi High Court that affirm this Position of law.therefore, the counsel submits that there is no reason to interfere with the impugned judgment, Which follows the view that has been consistently adopted by the High Court.The finding of the High Court is based on the plain Language of Section 38 of the Act
COURT ANALYSIS AND JUDGEMENT:
The court on hearing both sides, observed that Sub-section (3) of sec 38, provides The assesse with the option of getting the refund or carrying it Forward to the next tax period as a tax credit. In case of refund, Section 38(3)(a) provides the timeline for refund from the date on which the claim for refund is made. Sub-section (4) Provides that if notice has been issued under Section 58 or Additional information has been sought under Section 59, then the Amount shall be carried forward to the next tax period as tax Credit. Sub-section (7) Provides certain exclusions while calculating the period under Sub-section (3), The language of Section 38(3) is mandatory and the Department must adhere to the timeline stipulated therein to fulfil the object of the provision, which is to ensure that refunds are Processed and issued in a timely manner. In the present case, Section 38(3)(a)(ii) is relevant as both the Refunds in the present case pertain to quarter tax periods. Therefore, as per Section 38(3)(a)(ii), the refund should have been Processed within two months from when the returns were filed, which comes up to 31.05.2017 and 29.05.2019. The default notices are dated 30.03.2020, 23.03.2021, 30.03.2021, and 26.03.2022. It is therefore evident That the default notices were issued after the period within which The refund should have been processed. Sub-section (2) only Permits adjusting amounts towards recovery that are “due under The Act”. By the time when the refund should have been processed As per the provisions of the Act, the dues under the default notices Had not crystallised and the respondent was not liable to pay the Same at the time. Therefore, the appellant-department is not Justified in retaining the refund amount beyond the stipulated Period and then adjusting the refund amount against the amounts Due under default notices that were issued subsequent to the Refund period. Further, the appellent contention that the purpose of the Timeline provided under sub-section (3) is only for calculation of Interest under Section 428 would go against the object And purpose of the provision. Therefore this contention is hence rejected. In view of the above,the court further dismissed the present appeal and affirm The impugned judgment directing the refund of amounts along With interest as provided under Section 42 of the Act
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Judgement Reviewed by:SOWMYA.R