Research › Search › Judgment

Gujarat High Court · body

2016 DIGILAW 546 (GUJ)

Ganesh Sales Corporation v. State of Gujarat

2016-03-08

G.R.UDHWANI, HARSHA DEVANI

body2016
JUDGMENT : Harsha Devani, J. 1. Rule. Ms. Maithili Mehta, learned Assistant Government Pleader, waives service of notice of rule on behalf of the respondents. Having regard to the controversy involved in the present case, which lies in a very narrow compass and with the consent of the learned advocates for the respective parties, the matter was taken up for final hearing today. 2. By this petition under Article 226 of the Constitution of India, the petitioner has challenged the order dated 3.7.2015 passed by the Deputy Commissioner of Commercial Tax, Range-13, Nadiad (the third respondent herein) and also seeks a direction to him to disburse the refund along with the interest forthwith in terms of the provisional refund orders dated 18.2.2015 and 10.3.2015. 2.1 The petitioner is a proprietary concern of Shri Amit Trilokchand Goyal and is, inter-alia, engaged in trading of various products, including cigarettes. The petitioner is a dealer registered under the provisions of the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as the "GVAT Act") as well as under the Central Sales Tax Act, 1956. The petitioner purchased cigarettes of various brands from the State of Gujarat and availed input tax credit in terms of section 11(3) of the GVAT Act as the same were purchased for the purpose of re-sale in the State of Gujarat and in the course of inter-state trade and commerce. Since the petitioner was not in a position to utilise the entire amount of input tax credit availed on purchase of the goods, he filed a provisional refund claim for Rs. 1,69,68,477/- in terms of the provisions of rule 37 of the Gujarat Value Added Tax Rules, 2006 (hereinafter referred to as "the rules") on 17.11.1994 for the tax period 1.7.2014 to 30.9.2014. It is the case of the petitioner that he had submitted the requisite documents, viz., sales and purchase registers, purchase invoices, sales invoices, lorry receipts, check-post form (Form No. 402), list of C-forms received and photocopies of the profit and loss account and balance sheet, along with the affidavit of the petitioner to the effect that they would return the amount of refund if it was not found to be in terms of the provisions of the GVAT Act to substantiate the claim of provisional refund. 2.2 The third respondent granted an opportunity of personal hearing to the petitioner, whereupon the petitioner appeared through his advocate and stated that the provisional refund claim should be granted in terms of section 37 of the GVAT Act read with various circulars issued by the second respondent from time to time. After considering the documents submitted by the petitioner for sanctioning the provisional refund, the third respondent, by an order dated 18.2.2015, sanctioned the refund claim of Rs. 1,52,42,129/- (at 90% of the refund claim) in terms of the circulars dated 17.2.2007 and 1.7.2008. 2.3 Thereafter, the refund sanctioned vide order dated 18.2.2015 was withheld by the respondent on account of cancellation of registration of one of the dealers from whom the petitioner had purchased the said goods. It is the case of the petitioner that he had remained present before the third respondent and provided all the requisite documents to show that tax on the disputed transactions was duly paid and the registration of the dealer was in existence at the time when the goods were sold to the petitioner. The third respondent, after being satisfied with the documents submitted by the petitioner and after making an independent inquiry, vide order dated 10.3.2015, directed the Assistant Commissioner of Commercial Tax to sanction the provisional refund. Upon receipt of the order dated 10.3.2015, the petitioner approached the Assistant Commissioner of Commercial Tax with a request to disburse the refund in terms of the provisional refund orders dated 18.2.2015 and 10.3.2015 whereupon the petitioner was given to understand that the refund would be sanctioned immediately after completion of the financial year. However, since the refund was not disbursed even after the financial year 2014-15 was over, the petitioner vide letter dated 23.4.2015 requested the Assistant Commissioner of Commercial Tax to disburse the refund in terms of the above provisional refund orders. 2.4 In response to the above letter dated 23.4.2015, the Assistant Commissioner of Commercial Tax, by a letter dated 27.4.2015, informed the petitioner that the third respondent had directed him not to disburse the amount of refund till further orders. He had also stated that since he did not have jurisdiction over the sanction of refund and the Deputy Commissioner was only the proper officer to sanction and disburse the refund claim, the petitioner should approach the Deputy Commissioner of Commercial Tax for sanctioning the refund. He had also stated that since he did not have jurisdiction over the sanction of refund and the Deputy Commissioner was only the proper officer to sanction and disburse the refund claim, the petitioner should approach the Deputy Commissioner of Commercial Tax for sanctioning the refund. 2.5 Since the third respondent did not disburse the amount of provisional refund claim, the petitioner was continuously following up with the office of the third respondent. In the meanwhile, the third respondent issued a show cause notice dated 22.5.2015 to the petitioner calling upon him to submit various documents in support of the provisional refund claim and fixed the personal hearing on 8.6.2015. Pursuant to the show cause notice dated 22.5.2015, the petitioner, by a letter dated 8.6.2015, submitted various documents as sought for by the third respondent and also provided the information that was sought for by the Deputy Commissioner. Certain other additional documents were also submitted along with the letter dated 9.6.2015. 2.6 By the impugned order dated 3.7.2015, the third respondent, withheld the amount of refund sanctioned provisionally vide orders dated 18.2.2015 and 10.3.2015. Being aggrieved, the petitioner has filed the present petition seeking the reliefs noted hereinabove. 3. Mr. S.N. Soparkar, Senior Advocate, learned counsel for the petitioner invited the attention of the court to the provisions of the GVAT Act to submit that the respondent No. 3, having passed an order of provisional refund, there is no provision for review thereof. Under the circumstances, it is not permissible for the third respondent to review the order of provisional refund. It was pointed out that in relation to every dispatch, the corresponding Form No. 402 is on record and hence, there is no reason to disbelieve the genuineness of the transactions. It was pointed out that there is no suggestion either in the show cause notice or in the impugned order that grant of refund would adversely affect the revenue. It was pointed out that in relation to every dispatch, the corresponding Form No. 402 is on record and hence, there is no reason to disbelieve the genuineness of the transactions. It was pointed out that there is no suggestion either in the show cause notice or in the impugned order that grant of refund would adversely affect the revenue. Referring to the provisions of section 39 of the GVAT Act, it was submitted that the same can have no application in the facts of the present case inasmuch as there are two conditions precedent for exercise of powers under section 39 of the Act: firstly the order giving rise to refund should be subject matter of appeal or further proceedings or any other proceedings under the Act and secondly that the Commissioner should form an opinion that grant of refund is likely to adversely affect the revenue. It was submitted that in the facts of the present case neither is the order of refund subject matter of appeal or further proceedings nor is any other proceeding under the Act pending in relation thereto; nor is there is any suggestion, either in the show cause notice or in the impugned order, that grant of refund would adversely affect the revenue. It was submitted that, therefore, neither of the two conditions precedent are satisfied in the fact of the present case, under the circumstances, in the absence of recording of satisfaction as envisaged under section 39 of the GVAT Act, the impugned order is bad in law. According to the learned counsel, apart from the fact that it is not expressly stated in the impugned order that the grant of refund is likely to adversely affect the revenue, there is even no suggestion that any transaction contrary to law has taken place or that it is likely to adversely affect the revenue. 3.1 The learned counsel submitted that while the authorities have power to withhold refund under section 39 of the GVAT Act, there is no power to suspend. It was pointed out that the impugned order suspends the order of provisional refund without there being any power vested in the respondents to suspend such order. According to the learned counsel, further proceedings would be post an assessment order and hence also, section39 of the GVAT Act would have no application. It was pointed out that the impugned order suspends the order of provisional refund without there being any power vested in the respondents to suspend such order. According to the learned counsel, further proceedings would be post an assessment order and hence also, section39 of the GVAT Act would have no application. It was also contended that the availability of an alternative remedy under the statute is no remedy, as the entire exercise is without jurisdiction, inasmuch as, there is no power vested in the authorities to pass such interim directions which are totally without jurisdiction. It was submitted that assuming for the sake of argument that section 39 of the GVAT Act is applicable; even then, powers thereunder have to be exercised by a higher authority and not the same officer. 3.2 In support of his submissions, the learned counsel placed reliance upon the decision of this court in the case of Kanak Fabrics vs. Income Tax Officer, (2013) 359 ITR 447 (Guj.) wherein the court had, in the context of provisions of section147 of the Income Tax Act, observed that in the absence of any satisfaction having been recorded by the Assessing Officer that income has escaped assessment by reason of failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration, the assumption of jurisdiction under section 147 of the Act is invalid. It was submitted that the condition precedent for exercise of powers under section 39 of the GVAT Act is that the Commissioner must record satisfaction that if the refund is not withheld, it would adversely affect the revenue, in the absence of which even if any assessment is pending, it is irrelevant. It was pointed out that no such satisfaction has been recorded in the impugned order or even in the affidavit-in-reply, to submit that the whole proceedings are, therefore, without jurisdiction and consequently, the impugned order is bad in law. As regards the alleged irregularities, the attention of the court was invited to the show cause notice dated 22.5.2015, to point out that certain queries have been raised in response to which the petitioner has filed his reply dated 8.6.2015 giving full details in respect of such queries. As regards the alleged irregularities, the attention of the court was invited to the show cause notice dated 22.5.2015, to point out that certain queries have been raised in response to which the petitioner has filed his reply dated 8.6.2015 giving full details in respect of such queries. It was submitted that consequently the objections have been scaled down to the effect that the transporters do not own the vehicles. It was argued that after passing the order under section 39(1) of the GVAT Act, the respondents are now seeking reasons to support the order. It was, accordingly, urged that the impugned order whereby the order sanctioning provisional refund has been kept in suspension, being without authority of law, deserves to be set aside. 4. Opposing the petition, Ms. Maithili Mehta, learned Assistant Government Pleader, reiterated the contents of the affidavit-in-reply filed on behalf of the respondents. It was submitted that pursuant to the provisional refund order dated 18.2.2015 and 10.3.2015, a show cause notice was issued on 22.5.2015 calling upon the petitioner to show cause as to why the refund should not be withheld. Such show cause notice was issued in exercise of powers conferred under section 39(1) of the GVAT Act. It was submitted that pursuant thereto, after affording an opportunity of hearing to the petitioner, the impugned order withholding the refund has been passed and a copy thereof has been duly served upon the petitioner. Thus, prior to passing the impugned order, due procedure in accordance with law has been followed. It was submitted that the impugned order is an appealable order against which appeal lies to the Joint Commissioner under section 73 of the GVAT Act. Therefore, when there is an efficacious alternative remedy provided under the statute, this petition under Article 226 of the Constitution of India ought not to be entertained as otherwise, the remedy of appeal would become redundant. It was urged that the petitioner has committed serious irregularities in the conduct of his business insofar as compliance with the provisions of the GVAT Act is concerned and that in all likelihood huge recoveries will be required to be made from the petitioner and that the petitioner has no immovable properties in the State of Gujarat and hence it will be difficult to recover the amount sanctioned by way of provisional refund. It was, accordingly, urged that the petition being devoid of any merits deserves to be dismissed. 5. In the above backdrop, the rival contentions are required to be examined. Before adverting to the merits of the case, it may be germane to refer to the relevant provisions of the GVAT Act. Section 39 of the GVAT Act makes provision for power to withhold refund in certain cases. Sub-section (1) thereof provides that where an order giving rise to a refund is the subject matter of (i) appeal, or (ii) further proceeding, or (iii) where any other proceeding under the Act is pending, and the Commissioner is of the opinion that grant of such refund is likely to adversely affect the revenue, he may, after giving the dealer an opportunity of being heard, withhold the refund till such time as he may determine. 6. Thus, for the purpose of invoking section 39 of the Act, the condition precedents that are required to be satisfied are: firstly that there should be an order which gives rise to a refund; and secondly, that such order should be subject matter of (i) appeal, or (ii) further proceeding, or (iii) any other proceeding under the Act should be pending. It is only if both these conditions precedent are satisfied then resort can be made to the provisions of section 39 of the GVAT Act. Testing the facts of the present case in the light of the above statutory provision, the first condition precedent, viz., an order giving rise to a refund is satisfied, inasmuch as, the order of provisional refund does give rise to a refund. Insofar as the second condition precedent is concerned, the learned Assistant Government Pleader, even with the assistance of the concerned officer who was present before the court, was not in a position to point out that any of the three eventualities specified in the section are satisfied. Thus, it is an admitted position that the order of provisional refund is not subject matter of appeal, nor is there any further proceeding in connection therewith, nor is any other proceeding under the Act pending. Therefore, none of the three contingencies constituting the second condition precedent for invoking section 39 of the GVAT Act is satisfied in the present case. Therefore, none of the three contingencies constituting the second condition precedent for invoking section 39 of the GVAT Act is satisfied in the present case. Clearly, therefore, the impugned order has been passed without the conditions precedent for exercise of such power being satisfied and therefore, lacks jurisdiction. Under the circumstances, the contention that the petitioner should be relegated to avail of the remedy of appeal under section 73 of the GVAT Act does not merit acceptance, inasmuch as, it is by now well settled that when an order is without jurisdiction, it is permissible for the aggrieved party to invoke the extraordinary jurisdiction of this court under Article 226 of the Constitution of India. 7. Apart from the fact that the basic requirements for invoking powers under section 39of the GVAT Act are not satisfied, even otherwise the impugned order suffers from various illegalities and is not sustainable. 8. As noticed hereinabove, the provisions of section 39 of the GVAT can be invoked provided the circumstances referred to hereinabove exist. If such circumstances exist, the Commissioner is empowered to withhold the refund provided he is of the opinion that such refund is likely to adversely affect the revenue. Thus, before withholding the refund, the Commissioner is required to form an opinion that the grant of refund is likely to adversely affect the revenue. The fact regarding formation of such opinion, therefore, should be reflected in the order passed under section 39 of the GVAT Act withholding the refund. In this regard, a perusal of the impugned order clearly shows that there is not even a whisper therein as regards any opinion as envisaged in the section being formed. Consequently, in the absence of formation of any opinion that the refund is likely to adversely affect the revenue, the question of withholding the refund would not arise. Thus, none of the requirements for resorting to the power conferred by section 39 of the GVAT Act are satisfied in the present case. The impugned order, therefore, suffers from lack of jurisdiction and hence, cannot be sustained. 9. In the result, the petition succeeds and is, accordingly, allowed. The impugned order dated 3.7.2015 passed by the third respondent (Annexure-K to the petition) is hereby quashed and set aside. The impugned order, therefore, suffers from lack of jurisdiction and hence, cannot be sustained. 9. In the result, the petition succeeds and is, accordingly, allowed. The impugned order dated 3.7.2015 passed by the third respondent (Annexure-K to the petition) is hereby quashed and set aside. The respondents are directed to forthwith disburse the refund along with interest to the petitioner in terms of the provisional refund orders dated 18.2.2015 and 10.3.2015. Rule is made absolute accordingly with no order as to costs.