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2020 DIGILAW 768 (TS)

M K Agencies v. Deputy Commercial Tax Officeri

2020-11-12

M.S.RAMACHANDRA RAO, T.AMARNATH GOUD

body2020
JUDGMENT 1. Heard counsel for petitioner and Sri M.Govind Reddy, Special Counsel for Commercial Taxes appearing for respondents. 2. This Writ Petition has been filed petitioner for a Writ of Mandamus to direct the 2nd respondent to refund a sum of Rs.8,60,697/- after reducing the CST liability of Rs.5,849/- along with applicable interest under Section 38(6) of the Telangana VAT Act, 2005. 3. Petitioner was engaged in the business of trading in skimmed milk power and ghee and was a registered dealer under the provisions of Telangana VAT Act, 2005 and CST Act, 1956, on the rolls of the 2nd respondent. Petitioner discontinued its business w.e.f. 30.06.2016 allegedly due to operational reasons and continuous losses. 4. Petitioner contends that as per Section 13 of the VAT Act, VAT paid by the petitioner is available as input tax credit to the petitioner, which is equivalent to cash or property of the petitioner and the petitioner was entitled to utilize such input tax credit as a mode of payment to discharge output tax liability on its sales under the VAT Act. 5. According to the petitioner, it was purchasing goods locally after paying applicable VAT and subsequently they were sold by the petitioner in the interstate sale transactions covered by 'C' forms to the registered dealers in the other States at concessional rate of 2% and as a result of this, there is a excess input tax credit on account of inverted tax structure of the business; and the petitioner has been claiming the same and utilizing the same to make payment of output VAT from time to time by adjusting the same while filing the monthly returns in Form VAT 200. 6. According to the petitioner, for the tax period up to March, 2016, petitioner had accumulated input tax credit to the extent of Rs.7,47,201/- which is reflected in VAT 200 return dt.09.04.2016 and in addition, petitioner also had an excess credit of Rs.1,19,345/- lying in the 'Balance 28 NCCF' adjustment for the month May, 2014, consequent upon State bifurcation and the petitioner was entitled to a total excess credit of input tax amount of Rs.8,66,545/-. 7. 7. It is also contended by the petitioner that for the period September, 2012 to September, 2015, the 1st respondent had passed an order in form VAT 312 dt.27.01.2016 stating that no discrepancies are noticed during the audit and has also stated that the assessment is completed on 'no variation' basis. 8. According to the petitioner, the 2nd respondent had also taken up CST assessment of the petitioner for the year 2015-16 and completed the same vide order dt.20.08.2019 and this has resulted in net tax liability of a sum of Rs.5,849/-. 9. Petitioner contends that it had made representations to respondents 2 and 3 on 05.09.2019 vide Ex.P6, along with requisite documents, which are necessary for complying with the refund procedures, requesting refund of the amount of Rs.8,66,546/- due to the petitioner after reducing the CST liability of Rs.5,849/-, and that the petitioner had followed it up by another representation also on 24.01.2020 to the 2nd respondent to grant refund since already 42 months have already elapsed since the closure of the business; and on account of the inaction of the respondents, petitioner was therefore constrained to file this Writ Petition. 10. Counter affidavit has been filed by the 2nd respondent contending that after coming into affect of the Goods and Services Tax Act, 2017, there was a rationalization of Circles and the jurisdiction as regards the petitioner had been transferred to 5th respondent as per G.O.Ms.No.145 dt.02.08.2018 and that the petitioner is now on the rolls of the 5th respondent. 11. The 2nd respondent did not deny that the assessment of the petitioner for the tax period from 01.09.2012 to 30.09.2015 had been completed on 27.01.2016 on 'no variation' basis. It is also not disputed that for the tax period 2015-2016 under the CST Act, 1956, the 3rd respondent had completed the assessment of the petitioner on 20.08.2019, pursuant to which tax of Rs.5,849/- was due from the petitioner. 12. However, it is contended that for the period October, 2015 to March, 2016, an authorization had been granted to the 5th respondent by the Deputy Commissioner (CT), Warangal Division on 20.10.2020, and that the 5th respondent is now proceeding to conduct a VAT audit for the said period. It is also contended that only after the same is completed, decision will be taken for grant of the VAT refund dues to the petitioner. 13. It is also contended that only after the same is completed, decision will be taken for grant of the VAT refund dues to the petitioner. 13. Counsel for the petitioner contends that as per sub-Rule (2) of Rule 35 of the TS VAT Rules, 2005, petitioner had made all compliances and had filed all returns due, and the respondents therefore have a duty to refund the tax dues to the petitioner, which are in excess of what was payable by the petitioner. 14. Counsel also referred to sub-Rule (3) of Rule 35, which permitted the respondents to adjust any amount to be refunded only against tax, penalty and interest "outstanding" under the Act. According to the counsel for petitioner, since the very VAT audit against the petitioner for the period October, 2015 to March, 2016 has not been done, it cannot be said that any tax penalty or interest is due by the petitioner for the said period, which could be adjusted against the refund, which is due to the petitioner. 15. We agree with the counsel for petitioner that only if there is a final demand of tax, penalty or interest found outstanding after assessment, the same is liable to be adjusted against the refund amount due to an assessee, but when such final assessment has not been done, and is in process, the respondents cannot take advantage of the same and deny refund to the petitioner of the amount, which the petitioner is entitled to be refunded. 16. Accordingly, the Writ Petition is allowed; the respondents are directed to refund a sum of Rs.8,60,697/-, after adjusting the CST liability of Rs.5,849/-, with interest @ 12% per annum from the date on which the refund is liable to be paid to the date on which the actual payment is made, within a period of four (04) weeks from the date of receipt of a copy of this order. No order as to costs. 17. Consequently, miscellaneous petitions pending if any, shall stand closed.