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2024 DIGILAW 768 (GUJ)

R N Laboratories Pvt. Ltd. v. State Of Gujarat

2024-04-04

BHARGAV D.KARIA, NIRAL R.MEHTA

body2024
JUDGMENT : BHARGAV D. KARIA, J. 1. Heard learned advocate Mr. Uchit Sheth for the petitioner and learned Assistant Government Pleader Mr. Raj Tanna for the respondent-State. 2. Rule returnable forthwith. Learned AGP waives service of notice of rule on behalf of the respondent-State. 3. Having regard to the controversy narrated in narrow compass, with the consent of the learned advocates for the parties, the matter is taken up for final hearing. 4. By this petition under Article 226 of the Constitution of India, the petitioner has prayed for the following reliefs: “A. This Hon’ble Court may be pleased to issue a writ of mandamus or writ in the nature of mandamus or any other appropriate writ or order directing the Respondents to forthwith release the balance amount of interest of Rs. 8,81,322/- under section 38 of the VAT Act. A1. This Hon’ble Court may be pleased to issue writ of certiorari or writ in the nature of certiorari or any other appropriate writ or order quashing and setting aside the revised refund payment order (Annexed at Annexure H) and the original refund payment order (Annexed at Annexure E) may please be ordered to be restored as well as fully executed and implemented.” 5. Brief facts of the case are as under: 5.1 The petitioner-Company is engaged in the business of manufacturing of Chemicals was earlier registered under the Gujarat Value Added Tax Act, 2003 (for short ‘VAT’ Act’). 5.2 On coming into force of the Central/Gujarat Goods and Services Tax Act,2017 [‘GST Act’ for short], the petitioner carried forward the un-utilized input tax credit under section 140 of the GST Act as transitional tax credit in the electronic ledger to be maintained as per the provision of the GST Act. 5.3 On advice given by the auditor of the petitioner that there was no mechanism of claiming refund of excess input tax credit as the petitioner is SEZ Unit under the GST Act and such refund is required to be claimed under the VAT Act, the petitioner filed Form DRC-03 for reversal of the transitional tax credit under the GST Act and claimed the refund of the excess tax credit in the audit assessment under the VAT Act for the period from 01.04.2017 to 30.06.2017. 6. 6. However, the Assessing Officer rejected the refund claim of the petitioner on the ground that the petitioner is not entitled to such refund as the petitioner has already availed transitional tax credit under section 140 of the GST act and therefore, on voluntary reversal of such credit, the petitioner could not have been granted the refund under the provisions of the VAT Act. 7. The petitioner being aggrieved by the order passed by the Assessing Officer preferred appeal before the Commissioner, who, by order dated 22.05.2023, allowed the appeal granting refund on unutilized input tax credit in the electronic ledger which was reversed by the petitioner. 8. The petitioner on receipt of the order of the appeal, preferred an application before the Assessing Officer requesting for release of the refund along with interest to be calculated as per the provision of the 38 of the Act 9. On receipt of such application, the Assessing Officer passed the order of refund along with interest from 01.07.2017 till the date of the order passed by the Commissioner i.e. 22.05.2023 and passed the refund payment order on 31.07.2023 granting refund of Rs. 57,32,306/- after calculating the interest upon the refund of Rs. 42,34,894/- granted by the appellate authority. 10. However, to shock and surprise of the petitioner, the refund of only Rs. 42,48,50,984/- was granted and there was a shortfall of Rs. 8,81,322/- towards the interest amount. The petitioner has therefore, preferred this petition with the aforesaid prayers. 11. Learned advocate Mr. Sheth for the petitioner submitted that the respondent- authority could not have revised the refund payment order once the same is issued under the provisions of the VAT Act. It was submitted that the petitioner has never utilized the input tax credit which was transferred to electronic ledger and the appellate-authority has also passed the impugned order on the un- utilized input tax credit and therefore, as per the provision of section 38 of the VAT Act, the petitioner is entitled to refund from 01.04.2017 till the date of the order passed by the appellate authority. 12. 12. In support of his submissions, reliance was placed on the decision of this Court in case of RPG Life Sciences Ltd vs. Commissioner of Sales Tax reported in 2001 3 GLH 331 to submit that the respondent- Assessing Officer could not have revised the refund payment order by reducing the amount of interest suo motu. 13. Learned advocate Mr. Sheth has also placed reliance upon the decision of the Division Bench of this Court in case of State of Gujarat vs Doshi Printing Press reported in 2015 SCC online Guj. 2411 to submit that once the assessment order is merged with the appellate order, the interest is required to be paid from the date of the assessment order. 14. It was submitted that the respondent- authority could not have reduced the interest amount from the date of reversal of the credit and calculated the interest from 18.12.2020. 15. It was submitted that the petitioner has never been given an opportunity of hearing by the respondent-authority for revising the refund payment order and paying reduced amount of interest. 16. On the other hand, learned AGP Mr. Raj Tanna for the respondent-authority submitted that the petitioner has already transferred the input tax credit on 01.07.2017 to electronic credit ledger and therefore, such amount would vest with the GST department in the electronic ledger and therefore, respondent- VAT authority is not liable to pay the interest on the amount for the period from which such amount was in the electronic credit ledger and therefore, the respondent-authority has rightly calculated the interest from the date of reversal of such input tax credit by the petitioner on 18.12.2020 till the date of order passed by the appellate authority amounting to Rs. 6,16,090/-. Reliance was placed on the following averments of the affidavit-in-reply filed on behalf of the respondent- authority. “13. I say and submit that therefore, the respondent authorities have not at all reduced a single amount of refund which was allowed by the First appellate authority and as per the said order entire refund has already been granted to the petitioner. The answering respondent had merely corrected the calculation of interest on the said refund and even that interest component is already paid to the petitioner. The answering respondent had merely corrected the calculation of interest on the said refund and even that interest component is already paid to the petitioner. As it can be evident from the facts of the case that, when the petitioner reversed the ITC through DRC 03 on 18.12.2020 itself then the interest only accrued after 18.12.2020. Therefore, the calculation of interest amounting to Rs. 14,97,412/- was incorrect as it calculated interest from 01.07.2017 to 22.05.2023 and the correct calculation of interest was Rs. 6,16,090/- from 18.12.2020 to 22.05.2023 and the said is already paid to the petitioner. Therefore, no grievance of the petitioner survives and the petitioner cannot insist upon the payment of such amount of which is not entitled to. 14. I also say and submit that the petitioner cannot even take a ground that irrespective of any calculation error he is entitled for the interest which was calculated by first RPO. The calculation of interest has to be done at the end of assessing officer and it may happen that he may make a bonafide mistake in calculating the interest component and in the present case the same was immediately rectified as and when it was pointed out by the higher authorities. I also say and submit that it is also not the case of the petitioner that refund amount has been decreased by the answering respondent, the petitioner has been given full refund as per the order of First Appellate Authority and even interest in accordance with the law has been paid to the petitioner. 17. Having heard learned advocates for the respective parties and considering the facts of the case it appears that main challenge of the petitioner is with regard to short payment of interest by the respondent-authority. In other words, denial of interest from 01.04.2017 to 18.12.2020, the period during which the amount of input tax credit was lying in the electronic credit ledger of the petitioner. 18. The provision of section 38 of the VAT Act for payment of interest reads as under: 38. In other words, denial of interest from 01.04.2017 to 18.12.2020, the period during which the amount of input tax credit was lying in the electronic credit ledger of the petitioner. 18. The provision of section 38 of the VAT Act for payment of interest reads as under: 38. Interest on refund.(1) Where refund of any amount of tax becomes due to the dealer by virtue of an order of assessment under section 34, he shall subject to the provision of this section be entitled to receive in addition to the amount of tax, simple interest at the rate of six percent per annum on the said amount of tax from the date immediately following the date of the closure of the accounting year to which the said amount of tax relates [till the date of payment of amount of such refund] Provided that where the dealer has paid any amount of tax after the closure of the accounting year and such amount is required to be refunded, no interest shall be payable for the period from the date of closure of such accounting year to the date of payment of such amount. (2) A registered dealer entitled to refund in pursuance of any order other than referred to under sub-section (1) or in pursuance of any order by any court, shall subject to rules, be entitled to receive, in addition to the refund, simple interest at the rate of six per cent [per annum on the amount of such refund from the date immediately following the date of closer of the accounting year to which the said amount of refund relates] till the date of payment of amount of such refund. The interest shall be calculated on the amount of refund due after deducting therefrom any tax, interest, penalty or any other dues under this Act or under the Central Act. If, as a result of any order passed under this Act, the amount of such refund is enhanced or reduced, such interest shall be enhanced or reduced accordingly : [***] (2) Where the realization of any amount remains stayed by the order of any court or authority and such order is subsequently vacated, interest shall be payable also for any period during which such order remained in operation.” 19. On perusal of the above provision of sub- section (2) of section 38 of the Act, it is clear that the registered dealer is entitled to refund from the date immediately following the date of closure of the accounting year to which the said the amount of refund relates till the date of payment of the amount of such refund. In the facts of the case, appellant order would be the relevant date or the end date however, the date from which the interest starts running is the date of immediately following the accounting year which is 01.04.2017 under the facts of the case. 20. Merely because the petitioner has transferred the amount to the electronic credit ledger coupled with the fact that such amount remained unutilized till it was reversed by the petitioner by filling Form DRC-03, the transfer of amount to the electronic credit ledger was only a memorandum entry on 01.07.2017 which was reversed on 18.12.2020. For all effect and purpose, the amount was never utilized by the petitioner and the Commissioner has also rightly not granted refund of the amount input tax credit which is utilized by the petitioner. 21. It is pertinent to note that the petitioner made claim of refund for the amount of Rs. 42,35,215/- after considering already utilized amount of Rs. 3,45,133/- and there was shortfall of Rs. 22,500/ and therefore, the Commissioner, while granting refund, has taken into consideration this aspect and granted refund of only Rs. 42,34,894/- to the petitioner. Therefore, respondent-authority is required to calculate the interest on the amount as per the order passed by the appellate-authority from 01.07.2017 till the date of order i.e 22.05.2023. 22. Therefore, refund payment order dated 31.07.2023 is for issuance of the refund is correct amounting to Rs. 57,32,306/-. 23. It is pertinent to note that respondent could not have revised the refund order on its own without reference to the revisional proceedings under section 75 of the VAT Act. 24. In such circumstances, the self revision made by the respondent-authority of the refund payment order is also not in accordance with the provisions of VAT Act. 25. In such circumstances the respondent authorities are directed to refund balance amount of Rs.8,81,322/- within a period of four weeks from the date of receipt of copy of this order. Rule is made absolute to the aforesaid extent. No order as to costs.