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In the Gujarat Value Added Tax Tribunal
at Ahmedabad
Before: Hon 'ble Mr. Justice, KA.Puj, President
Shri Y.P.Bhatt, Member
Shri N.A.Acharya, Member
Shri Apurva Mehta, Learned Advocate for the appellant
Shri Y.A.Radhanpura, Learned Government Representative for the
Date:04/08/20 14
Per Mr. Justice, K.A.Puj. President :_
The appellant has filed this appeal against the order passed by the
learned Deputy Commissioner of Commercial Tax, Appeal-2, Audit,
Ahmedabad on 31.7.2013 whereby the appeal filed before him came to be
partly allowed. As a result of the order passed by the learned Deputy
Commissioner, the appellant was entitled to refund of Rs. 5,26,577/-. The
learned Deputy Commissioner has however, not granted interest on such
refund by considering the provision contained in Section 54(1)(aa) of the
Gujarat Sales Tax Act, 1969. The appellant has therefore challenged the
said issue of non-granting of interest on the refund due to the appellant, in
the present appeal.
This appeal came up for preliminary hearing before this Tribunal
on 15.11.2013 and after hearing Mr.Apurva Mehta, the learned advocate
appearing for the appellant and Mr. C.B .Patel, the learned government
representative appearing for the respondent, this appe.1 was admitted and
the office was directed to place this appeal for regular hearing along with
Essar Group.
It is the case of the appellant that the appellant is a manufacturer of
various industrial components having its unit at Rajkot. The appellant was
duly registered as a dealer at the appropriate point of time under the
provisions of the Gujarat Sale Tax Act, 1969. The appellant was assessed
by the Commercial Tax Officer (3), Division-4, Rajkot for the fmancial
year 2005-06.
During the Course of assessment proceedings, the
Commercial Tax Officer by an order dt. 17.3.2009 disallowed certain
claims of set off amounting of Rs. 5,97,934/- on the ground that the said
claims were not in accordance with the Rules and as such, solely because
of directions of pre-audit authorities. Consequently, the appellant could
not receive refund of Rs. 5,26,5771-, which it was otherwise entitled to
receive with interest
accordance with law. Being aggrieved and
dissatisfied by the aforesaid order of the learned Commercial Tax Officer,
the appellant preferred first
before the
learned Deputy
Commissioner of Commercial Tax, Appea-7, Rajkot, who vide his order
dt. 31.7.2013, has allowed the said appeal and granted refund of Rs.
5,26,577/- as a result of allowing the appellant's claim of set off. The
learned Deputy Commissioner has, however, not granted interest on the
said refund uls. 54(1)(aa) of the Act.
Mr. Mehta has submitted that the learned Deputy Commissioner
has erred in not awarding interest on refund on general principles as the
set off was denied and refund thereon was not granted in the assessment
order by the assessing officer only at the behest and on the insistence of
the audit party and no independent decision was taken by the assessing
officer in this regard who had actually accepted the view canvassed by the
appellant. He bas further submitted that the appellant is entitled to interest
on refund uls. 54(1)(aa) of the Act and also on general principles. He has
further submitted that be has filed detailed submissions and also made
oral submissions. He has therefore submitted that considering the said
submissions, claim of interest on refund made by the appellant should be
Mr. Y.A.Radhanpura, the learned government representative
appeanng for the respondent has relied on the orders passed by the
authorities below and submined that as per the express provIsion
contained in section 54(1)(aa) of the Act, since, the refund due to the
appellant is not as a result of assessment order, the appellant is not entitled
to any interest on such refund. He has further submined that this issue has
already been decided by this Tribunal in favour of the department and
hence no different view may be taken. He has further submined that the
maner relating to this issue is pending before the Hon' ble Gujarat High
Court. He has, therefore, submined that this appeal should be dismissed.
We have considered this controversial issue in great detail raised in
the case of MIs. Saurashtra Chemicals Ltd. vis. State of Gujarat in second
appeal no. 603 of 2007 decided on 1.8.2014 and as per the said decision,
we hold that the appellant is entitled to claim interest u/s. 54(1)(aa) of the
Act. We have observed in the said case as under.
"19. In the opinion of this Tribunal, the assessment order
passed U/S 41 includes original order passed by first assessing
authority as well as modified assessment order in appeal.
Under an appeal the jurisdiction of the original order
appealed against is exercised and therefore the order passed
in appeal is corrected/modified order under the provision
under which the appealed order is passed. The order passed
the appeal against original assessment order U/S 41 is
assessment order U/S 41 and the original order of assessment
merges in it. The intention of the legislature cannot be
presumed that the refund arises at the first stage of
assessment is only eligible for interest and orders of
assessment passed at subsequent stages resulted in to refund
are not entitled to interest.
Appeal proceedings are
continuing single proceedings of assessment. Therefore,
order passed in appeal is an order of assessment U/S 41. The
intention is of paying interest on refund arises in order of
assessment U/S 41 and the modified assessment order passed
in appeal is also covered under the clause (aa). The close
scrutiny of clause (aa) reveals that the dealer is eligible for
interest on refund arises in the assessment proceedings
carried out U/S 41 of the Act. It is further held that the appeal
is continuing proceedings of assessment and therefore the
provisions applicable to the original order of assessment are
also applicable to the modified order of assessment. The
restricted meaning of the word "an order of assessment U/S
41" will create discrimination between the situations of the
maners of similar facts, one gets refund in original stage of
assessment and another gets refund in appeal. The l:Iop 'ble
Supreme Coun held that the interpretation, which leads '
discrimination, must be avoided. The restricted interpretation
will give discretion to the first assessing authority to make
available the interest to the assessee. Similar situation will
take place in appeal, if the appeal is decided by remand to the
first assessing authority who passes the order of assessment
in form 39 following the direction and refund arises, the
dealer is entitled to interest. However, instead of remanding
the matter, the appellate authority decides the matter in
appeal and passes modified order of assessment the appellant
will be prevented from interest even though he gets refund.
The interpretation, which makes the provisions unworkable,
should be avoided. If the phrase "assessment order uls 41" is
not interpreted reasonably and the narrow and restricted
considerable chaos, confusion, uncertainty and conflict
would arise. The legislature never intends to deprive the
assessee from entitlement where refund does not arise
because of the erroneous original assessment order which
modified in appeal and resulted in to refund. The appellant
cannot be put to loss for the mistake of the first assessing
authority or for the reasons beyond control of the appellant.
The narrow and restricted meaning will defeat the purpose of
clause (aa) for which it is inserted. TI:e accepted principle in
interpreting a provision is that a construction, which
defeat its purpose, should be avoided. Even if more than one
construction is possible that which preserves its workabiliif.'and efficiency should be preferred to the one, which woulCI: . '
"It is, therefore, held that power to grant interest uls
of the Act is liable to be exercised by every
authority who has jurisdiction to deal with assessment in one
way or another, and at one time or another. It is not confmed
strictly to the assessing authority alone as a prescribed
authority. The appellate authority has also jurisdiction to
allow interest at the appellate stage. The appellate authority
is in continuation of the assessing authority and it can
exercise such powers conferred uls 54(1)(aa) of the Act. The
term order of assessment should not hold any restricted
meaning of assessment only. Provisions made uls 54(1)(aa)
of the Act are benevolent provisions and they are inserted by
the legislature with a view to compensate the financial loss to
be incurred to assessee. Only with a view to prevent the
future default and to make the assessee absolutely free about
his tax liability, the provision has been inserted. Passing of
appellate order is merely a rectification or correction in
original order. It is simply a merger as there cannot be more
than one operative order governing the same subject matter.
The strict interpretation of section 54(1)(aa) as was done
earlier by this Tribunal leads to manifest unjust result which
could never have been intended by the State Legislature and
therefore it is necessary to put a construction which modi~es
the meaning of the words used in section 54(I)(aa) of the Act
so as to grant interest even if refund becomes due to a dealer
as a result of order passed in appeal or revision."
"We are mindful of the fact that the department
,. .
heavily relied on the decision of this Tribunal in the c~~e of
MIs Gayatri Tiles vs State of Gujarat wherein this Tribunal
has given strict meaning to the words "by virrue of an order
of assessment U/S 41" and held that the said clause U/S 54 was
inserted by Gujarat II Act of 1993, so, when the refund has
arisen in appeal then the appellant is not entitled to interest as
seen from the wording of section 54 of the Act. With respect,
the said ratio laid down by this Tribunal does not seem to be
correct in view of the above discussion and also in view of
the fact that the provisions relating to interest on delayed
payment of refund have been consistently held as beneficial
and non-discriminatory. It is, therefore, held that the
appellant is entitled to the interest on delayed payment of
refund, irrespective of the fact
whether such interest ·is
payable by virrue of an order of assessment or even by virrue.
- .'
of an order passed in appeal or revision. It is, therefore, held
that in case of Mis Mahavir Expo Chern Ltd. vs. State of
Gujarat, this Tribunal vide its order dated 2214102 passed in
SA No. 335 & 336 of 2006 has adopted a very narrow
meaning of the word used in section 54(1)(aa) of the Act and
held that the entitlement of interest U/S 54 is from 114193 and
only on such refund amount which has arisen in the
'ass,essment order U/S 41 of the Act and not at the appellate.
stage. With respect, this is not correct proposition of law and
it cannot be considered as binding precedent."
Following the above decision, we allow this appeal and pass the
following order.
This appeal is allowed. The appellant is entitled to interest on
refund granted to the appellant as a result of the order passed by the
learned Deputy Commissioner at the applicable rate.
There shall be no order as to cost.
Pronounced in open court on this 4th day of August, 2014.
(Mr. Justice K.A.Puj)
(Shri Y.P.Bhatt)
Sd/(Shri N.A.Acharya)
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