Allowed

Ms Dhansar Engineering Co. Private Limited through Sanjay Kumar Sinha v. the State of Jharkhand through Its Secretary Department of Commercial Taxes

Jharkhand HC12 May 2023WPC/5315/2021

Case brief

AI extract

What is this about?

The High Court of Jharkhand allowed a writ petition seeking interest on a penalty amount refunded with undue delay. The court held the refund was immediate upon the tribunal's quashing order, directing interest payment from September 2013 despite the department's failure to issue a refund notice promptly.

What did the court decide?

Interest at 6% p.a. ordered to be paid on Rs. 15,36,120/- from 23 September 2013 till the date of actual refund.

Ms Dhansar Engineering Co. Private Limited through… — GST and Indirect Tax | Jharkhand HC (2023)

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IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P. (T) No. 5315 of 2021

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M/s. Dhansar Engineering Company Private Limited, a Company incorporated under the Companies Act, 2013, having its Registered Office at Amaghata, Govindpur, Dhanbad, P.O. & P.S. Govindpur, District Dhanbad; through its authorized signatory-cum-Manager, Finance, Sanjay Kumar Sinha, aged about 48 years, son of Late K P. Sinha, resident of Shastri Nagar, Dhowan Tand , P.O. & P.S. Bank More, Dhanbad, District Dhanbad( Jharkhand). .... Petitioner

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-VERSUS-

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1 The State of Jharkhand, through its Secretary, Department of Commercial Taxes, having its office at Project Building, Dhurwa, P.O. & P.S. Dhurwa, District Ranchi, PIN 834004-(Jharkhand).

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Commissioner of Commercial Taxes, having its office at Project Building, Dhurwa, P.O. and P.S.-Dhurwa, District Ranchi, PIN 834004 (Jharkhand).

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Joint Commissioner of Commercial Taxes (Administration), Dhanbad Division, Dhanbad, P.O. & P.S. Dhanbad, Town Dhanbad, District Dhanbad PIN 826001 (Jharkhand).

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Deputy Commissioner of Commercial Taxes, Dhanbad Circle, Dhanbad, P.O. and P.S. Dhanbad, Town Dhanbad, District Dhanbad, PIN 826001 (Jharkhand),

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Commercial Taxes Officer, Intelligence Bureau, Dhanbad Division, Dhanbad, P.O. and P.S. Dhanbad, Town Dhanbad District Dhanbad, PIN 826001 (Jharkhand).

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Deputy Commissioner of Commercial Taxes, Intelligence Bureau, Dhanbad Division, Dhanbad, P.O. and P.S. Dhanbad, Town Dhanbad, District Dhanbad, PIN 82600f (Jharkhand).- (impleaded in terms of Order dated 21.11.2022).

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Pawan Kumar-kedia son of Babu Chhedilal Kedia, at present posted as State Tax Officer, Dhanbad Circle, Dhanbad -(impleaded in terms of order dated 06.12 2022).

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….. Respondent s

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CORAM: HON'BLE MR. JUSTICE RONGON MUKHOPADHYAY, HON’BLE MR. JUSTICE DEEPAK ROSHAN

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For the Petitioner : Mr. Sumeet Gadodia, Advocate Mrs. Shilpi Sandil Gadodia, Advocate Mr. Ranjeet Kushwaha, Advocate Mrs. Akansha Mittal, Advocate For the Resp-State : Mr. Ashok Yadav, Sr. S.C.-1, Mr. Ritu Raj, A C. to Sr. S.C.-1, For the Resp. No.7 : Mr. Suraj Prakash, Advocate

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23/12.05.2023

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Per Deepak Roshan, J: The sole issue involved for determination in the instant writ

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application is “Whether Petitioner is entitled for interest on the refundable amount of Rs. 15,36,120/- deposited by the Petitioner pursuant to the penalty order passed by Respondent-Commercial Taxes Department?”

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2. Brief facts of the case as enumerated in the instant writ application is that the Petitioner purchased an Excavator from one M/s. Volvo India Private Limited

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after discharging tax liability under Section 8(1) of the Central Sales Tax Act, 1956 and the same was transported through Truck No. NL 01D 7904. Said transportation of Excavator was being undertaken through a valid Road Permit as required in terms of provisions of Section 72 of the Jharkhand Value Added Tax Act (in short ‘JVAT Act’) being Road Permit No. 341 dated 30.12.2009.

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However, the Truck carrying the Excavator was inspected by the officials of Commercial Taxes Department of the State of Jharkhand and since the Driver could not produce the Permit, Truck in question was seized and, thereafter, proceedings wets initiated under Section 72(6) of the JVAT Act, being in the nature of penalty proceedings. An order dated 22.01.2010 was passed by Commercial Taxes Officer, Intelligence Bureau, Dhanbad Division Dhanbad imposing penalty under Section 72(6) of the JVAT Act of an amount of Rs. 15,36, 120/- against the Driver namely S.K. Maqbul.

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Thereafter, an Appeal was preferred against the said order by the Driver through the present Petitioner. The Appellate Authority, vide its order contained in Memo No. 3103 dated 05.02.2011, set aside the order imposing penalty, but remanded the matter back to the authority, imposing penalty for determination of the claim afresh.

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The petitioner, being aggrieved by the remand order, filed a Revision Petition under Section 80(2) of the JVAT Act before Commercial Taxes Tribunal, Jharkhand, Ranchi primarily by contending, inter alia, that once an order of penalty itself was held to have been passed being not in accordance with law; there was no occasion to remand the matter afresh to the Adjudicating Authority for de novo adjudication. Said Revision Petition was numbered as DN 14 of 2011. Learned Commercial Taxes Tribunal, vide its judgment and order dated 23.09.2011 set aside the order of the Appellate Authority to the extent the matter was remanded back to the Adjudicating Authority and, admittedly, against the said order of Commercial Taxes Tribunal, no Writ Petition was preferred by the Department. 3. Since penalty order was set aside by the learned Tribunal, the petitioner, through its legal representative, filed a representation dated 03.10.2013 (Annexure-7 to the Writ Petition) before Joint Commissioner of Commercial Taxes (Administration), Dhanbad Division, Dhanbad requesting the said authority to immediately refund the penalty amount. However, no steps were taken by Respondent-authorities for refunding the penalty amount and, thereafter, reminder representations dated 22^nd August, 2021 and 24^th September, 2021 were filed by the Petitioner requesting the authorities to refund the amount towards penalty along with interest.

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Despite such representations being filed by the Petitioner, when neither penalty amount was refunded nor interest was paid, Petitioner approached this Court primarily praying therein for direction upon the Respondents to refund of

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the penalty amount of Rs. 15,36,120/- deposited by the Petitioner, and, further direction upon the respondents to pay statutory interest under Section 55 of the JVAT Act for not refunding the amount of penalty within the stipulated time. 4. In the instant writ application, initially, a Counter Affidavit was filed by respondent-State of Jharkhand which was sworn by one Pawan Kumar Kedia, son of Babu Chhedilal Kedia, posted as State Tax Officer, Dhanbad. In the said Counter Affidavit, Annexure-7 of the writ application, being refund application dated 03.10.2013, was described as a forged and fabricated document and it was contended in the Counter Affidavit that Respondent-Department received an application dated 03.10.2013 vide Receipt No, 2699 dated 07.10.2013 and the said application, which was received by the Department, was not towards claim of refund but Petitioner claimed set off of refundable amount from current liabilities by claiming that the amount may be adjusted against current liabilities of the Petitioner. Said document was annexed as Annexure-A to the Counter Affidavit.

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The aforesaid document annexed vide Annexure-A to the Counter affidavit, which was said to be photocopy of the application dated 3^rd October, 2013, received on 7^th October, 2013 by the office of the Deputy Commissioner of Commercial Taxes, Dhanbad Circle, did not bear any signature of the authorized representative of the Petitionercompany and there was an endorsement in the said application as ‘O/C’ (Office Copy). Petitioner even filed Rejoinder Affidavit to the said Counter Affidavit disputing and denying filing of the said application dated 3^rd October, 2013 being application seeking adjustment of penalty amount and the Petitioner vehemently contended that said application did not bear any signature of the representative of the Petitioner-company and was bearing an endorsement of ‘O/C’ (Office Copy), and, it is unconceivable as to how said application has been annexed by the Respondents in their Counter Affidavit.

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5. Under the aforesaid circumstances, this Court, vide order dated 1^st December, 2022, directed the original record to be produced before this Court by the officials of Commercial Taxes Department and, pursuant thereto; original record was produced before this Court. This Court perused the original record and it was found from the record of the original file relating to the Petitioner that a letter of the Petitioner of the same date was contained in the file bearing signature of the authorized signatory Mr. S.K. Sinha. This Court, on comparison of the original record and perusal of Annexure-A filed along with the Counter Affidavit, was prima facie of the opinion that Deponent of the Counter Affidavit i.e. Pawan Kumar Kedia, State tax Officer Dhanbad Circle, Dhanbad made false statement on oath and, accordingly, he was directed to be impleaded as Respondent No.7 in the writ application

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and was directed to show cause as to why he should not be proceeded against for swearing false Affidavit and trying to mislead this Court in the administration of justice. Said order was passed by this Court on 06.12.2022.

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6. Subsequent to the said order, Respondent No.7 initially filed a Show Cause reply, wherein although he tendered unconditional apology; but, on the same breath stated that he has sworn the Affidavit on direction of the superior officer, namely, Deputy Commissioner of State Tax, Dhanbad Circle, and, the document annexed along With the Counter Affidavit vide Annexure-A was provided to him by the Department.

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7. While this Court was in the process of examining truthfulness of the Affidavit filed by Pawan Kumar Kedia, State Tax Officer, Dhanbad Circle; it was submitted on behalf of the State that during pendency of the writ application, an Excess Demand Notice has already been issued in favour of the Petitioner bearing Memo No. 681 dated 28.09.2022 and if Petitioner makes necessary application, the amount of Rs. 15,36,120/-, which was paid by the Petitioner, would be refunded to it. Thereafter, admittedly, amount has been refunded to the Petitioner which is recorded in the order dated 27.03.2023.

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8. Further, this Court, after taking into consideration that the amount has already been refunded to the Petitioner and unconditional apology tendered by Pawan Kumar Kedia on 19.04.2023, decided not to proceed against the said person.

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It is in the aforesaid background of facts, the sole question which is now left for determination is as to “Whether Petitioner would be entitled for interest in terms of Section 55 of the JVAT Act and/or under inherent power of this Court under Article 226 of the Constitution of India, on the amount of penalty retained by Respondent-Department despite the orders passed by the Appellate Authority and Commercial Taxes Tribunal?”

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9. Mr. Sumeet Gadodia, learned counsel for the Petitioner, contended that once the order of penalty levied under Section 72(6) of the JVAT Act was set aside by the Appellate Court vide order dated 05.02.2011 and the said order was differed by Commercial Taxes Tribunal vide order dated 23.09.2011, penalty amount was automatically refundable to the petitioner being an amount collected in violation of Article 265 of the Constitution of India. In alternative, by placing reliance upon Section 42(2) of the JVAT Act, it was argued that even if “Excess Demand Notice” was to be issued, the same was required to be issued under Section 42(2) of the JVAT Act within two years from the date passing of the order by Commercial Taxes Tribunal, i.e., up to 22.09.2013, but said’ “Excess Demand Notice” has been issued as late as on 28.09.2022 due to sheer dereliction of duties on the part of Respondent-authorities and the legally refundable amount of the Petitioner has

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been retained by the Respondents, which was liable to be refunded to it. Reliance bas been placed by the Petitioner upon following decisions, namely:-

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(i) Commissioner of Sales Tax, U.P-vs -M/s Auriaya Chamber of Commerce, Allahabad, reported in (1986) 3 SCC 50 (relevant Paras 1 ,11 ,12, 13, 23, 31).

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(ii) Corporation Bank —vs – Saraswati Abharansala & Anr, reported in (2009) 1 SCC 540 (relevant Paras 19 & 20). (iii) Union of India –vs- Tata Chemicals Limited, reported in (2014)6 SCC 335 (relevant Para 38).

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10. Per contra, Mr. Ashok Yadav, Sr. Standing Counsel-1, appearing for the State submitted that the amount towards penalty has been immediately refunded to the Petitioner after issuance of “Excess Demand Notice” dated 28.09.2022 and, hence, there is no question of payment of interest to the Petitioner under Section 55 of the JVAT Act and/or in exercise of inherent power of this Court under Article 226 of the Constitution of India. Reliance was placed upon Rule 19(2) of the JVAT Rules to contend, inter alia, that Petitioner was required to make an application within 90 days from the date of receipt of “Excess Demand Notice” and, since the Petitioner did not make any application for refund earlier, there was no occasion to refund the said amount, and, immediately after issuance of Excess Demand Notice, the amount has been refunded to the Petitioner and, hence, there is no liability towards interest.

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11. We have carefully considered the rival contentions of the parties and examined the relevant documents annexed with the respective affidavits and the averments made therein including the concerned original record and also the relevant provisions of the JVAT Act and Rules.

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12. Article 265 of the Constitution of India reads as under:

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“265. Taxes not to be imposed save by authority of law .—No tax shall be levied or collected except by authority of law.”

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13. Article 265 of the Constitution of India mandates that no tax shall be levied or collected except by authority of law. In terms of the said provision, therefore, all acts relating to imposition of tax providing, inter alia, for the point at which the tax is be collected, the rate of tax as also its recovery must be carried out strictly in accordance with law.

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14. In the instant case, levy of penalty was held to be illegal and, thus, in terms of Article 265, levy and collection of penalty itself became without any authority of law and, thus, automatically became refundable to the Petitioner. If a tax has been paid in excess of the tax specified, save and except the cases involving the “principles of unjust enrichment”,

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excess tax must be refundable and the State is furthermore bound to act reasonably having regard to equality clause contained in Article 14 of the Constitution of India [reference Corporate Bank versus Saraswati Abharansala & Anr. (supra)].

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15. The State, in the instant case; has-not pleaded that if the amount of penalty is refunded to the Petitioner, the same would lead to unjust enrichment and, in fact, the State itself, subsequent to filing of the writ application, has refunded the amount to the Petitioner. However, there has been inordinate delay of around a decade in refunding the amount to the Petitioner.

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16. We agree with the submissions made by counsel for the Petitioner that once penalty order has been quashed/set aside by the Appellate Court vide order dated 05.02.2011 and confirmed by Commercial Taxes Tribunal vide its Judgment and order dated 23.09.2011, the amount of penalty paid by the Petitioner was refundable on the date of passing of the order by Commercial Taxes Tribunal itself i.e., on 23.09.2011 and, accordingly, the amount should have been immediately refunded thereafter to the petitioner.

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However, even if we consider the provisions of Section 42(2) of the JVAT Act, which provides for circumstances for giving effect to a finding rendered by the Court or Tribunal, then also, it was incumbent on Respondent-Department to pass an order in terms of the order of the learned Tribunal by issuance of Excess Demand Notice within two years from the date of passing of the order by the Tribunal. Reference in this regard may be made to Section 42(2) of the JVAT Act which is quoted herein-under:

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“42. Power of Reassessment in certain cases.—(1) xxxxxx

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(2) Where any Court or Tribunal passes an order in appeal or revision to the effect that any tax assessed under this Act or the Central Sales Tax Act, 1956 should have been assessed under the provision of a law other than that under which it was assessed, then in consequence of such order or to give effect to any finding or direction. Contained in such order such turnover part thereof, may be assessed or reassessed, as the case may be, to a tax at any time within two years from the date of such order notwithstanding any limitation period which would otherwise be applicable to, the assessment or reassessment made.”

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17. Admittedly; in order to give effect to the order passed by the Tribunal, if Excess Demand Notice was required to be issued to the Petitioner, the same was required to be issued within two years i.e., latest by 22^nd September, 2013. However, as noted above, Excess Demand Notice has been issued after a lapse of more than ten years i.e, on 28.09.2022.

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18. We are not at all impressed with the arguments of the Respondents upon Rule 19(2) of the JVAT Rules. For the sake of ready reference, Rule 19(2) of the JVAT Ruled is quoted herein-under:-

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“19. Refund and Provisional Refund .(1) xxxxx xxxxx (2) (a) The claim for refund under Section 52 of the Act, shall be made by a VAT dealer in Form JVAT 206, within ninety days from the date of receipt of excess demand notice.”

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A bare perusal of the said Rule would reveal that application for refund was required to be filed within 90 days from the date of receipt of Excess Demand Notice . In the instant case, Excess Demand Notice was never issued and, in fact, when two years expired in terms of Section 42(2) of the JVAT Act, Petitioner specifically filed an application dated 03.10.2013, wherein Petitioner stated that the amount should be refunded to it after issuance of Excess Demand Notice and/or, in alternative, it was stated that the amount was automatically refundable to the Petitioner even without issuance of any Excess Demand Notice. After filing of refund application by the Petitioner, no steps were taken by the Department for refund of the amount. Under the said circumstances, Rule 19(2) of the JVAT Rules has no application in the present case.

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19. The power of Constitutional Court to grant interest does not require any deliberation and it has been now well settled by series of decisions that interest is compensatory in nature and “compensation” for what has been lost, and to grant such relief, is the inherent jurisdiction of the Court under Article 226 of the Constitution of India. It would be profitable to quote the observations of the Hon'ble Apex Court in the case of Union of India Vs. Tata Chemicals Lid. (supra ), which reads as under:

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“38. Providing for payment of interest in case of refund of amounts paid as tax or deemed tax or advance tax is a method now statutorily adopted by fiscal legislation to ensure that the aforesaid amount of tax which has been duly paid in prescribed time and provisions in that behalf form part of the recovery machinery provided in a taxing statute. Refund due and payable to the assesse is debt-owed and payable by the Revenue. The Government, there-being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the diductors lawful monies with the accrued interest for the period of undue retention of such monies, The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest. Whenever money has been received by a party which ex ae quo et bono ought to be refunded, the right to interest follows, as a matter of course.^,,

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20. The Hon’ble Apex Court has held that the State having received money without right and having retained and used it; is bound to make the party good the said money and the obligation to refund money received and retained without right implies and carries with it the right of interest. Thus, we hold that Petitioner is entitled for the claim of interest.

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21. Now, the question which arises for consideration is that from which date the Petitioner would be entitled for interest and what would be the rate of interest payable to the Petitioner?

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22. Section 55 of the JVAT Act provides for refund of the tax collected from a registered dealer in pursuance of order of any Court and, further provides for simple interest @ six percent per annum for the period commencing after ninety days of the application claiming refund in pursuance to such order till the date on which the refund is granted. In this regard Section 55(1) of the JVAT Act is quoted herein-under:

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“55. Interest —(1) A registered dealer entitled to refund in pursuance of any order under this Act (including assessment under Section 35, Section 36 or Section 37) or in pursuance of any order by any Court, shall be entitled to receive, in addition to the refund, simple interest at the rate of six percent per annum for the period commencing after ninety days of the application claiming refund in pursuance to such order till the date on which the refund is granted"

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23. In the instant case, since we have already held that Petitioner was entitled for refund immediately pursuant to the order passed by Commercial Taxes Tribunal, in our opinion, interest would have ordinarily accrued in terms of the principles laid down in the case of Tata Chemicals Ltd. (supra) from the date of order of the Tribunal and even no application was required for such refund.

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24. However, since petitioner itself, after expiry of two years from the date of the order of the learned Tribunal, filed an application for refund on 03.10.2013 praying therein for refund of the amount and/or for issuance of Excess Demand Notice , we are of the considered opinion that taking in view the provisions of Section 42(2) of the JVAT Act, which provides for two years limitation for passing of reassessment order to give effect of the order of higher forum i.e., Court or Tribunal, Respondent-authorities were duty bound to pass an order of refund issuing Excess Demand Notice to the Petitioner latest by 22^nd September, 2013, which has been ultimately issued on 28^th September, 2022.

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25. Under the said circumstances, we direct that interest should be paid to the Petitioner with effect from 23^rd September, 2013 till the date of refund actually made to the petitioner, on the amount of Rs. 15,36,120/- at simple interest @ six percent per annum. The State Tax authority is directed that the said amount of interest would be calculated and paid to

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the petitioner within a period of three months from the date of receipt/production of the copy of this order.

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26. As a result, the instant application is allowed on contest, however there is no order to cost. Pending I.A., if any, is also disposed of.

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(Rongon Mukhopadhyay, J.)

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(Deepak Roshan, J.)

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Amardeep/