Shiv Dal Udyog vs. State Of Punjab And Ors

Held

The Court held that the petitioner is entitled to the interest due on the delayed refund of tax under the Punjab Value Added Tax Act, 2005. The Financial Commissioner, Taxation, Punjab, had assured the Court that the process for refunding excess amounts paid by assessees, including any interest payable, is being streamlined and is expected to be cleared within four months. In the specific case of M/s Shiv Dal Udyog, the tax amount had already been refunded, but the interest payable was still outstanding. The Court directed that the amount of interest due to the petitioner be paid within four weeks. The reasoning was based on the assurance given by the Financial Commissioner regarding the expedited processing of all pending refunds and interest payments. The ratio decidendi is that when a tax amount has been refunded after a delay, the statutory interest due on that delayed refund must be paid promptly as per the relevant provisions of the Act. The writ petition was disposed of with the operative direction for the payment of interest within the specified timeframe.

Facts

The petitioner, M/s Shiv Dal Udyog, filed a writ petition before the Punjab and Haryana High Court seeking a direction for the release of refund of tax due to them. The Court had previously directed the Financial Commissioner, Taxation, Punjab, to appear in person to address the issue of pending refunds. The Financial Commissioner submitted that the refund process under the Goods and Services Tax (GST) regime is being streamlined. He stated that approximately ₹750 crores are to be refunded to assessees under the Punjab Value Added Tax Act, 2005 (VAT Act), and this process is expected to be completed within four months. Interest payable on refunds would also be paid. In the present case, the tax amount had been refunded, but the interest payable under the VAT Act was still due.

Key Issues

1. Whether the petitioner is entitled to receive interest on the delayed refund of tax paid under the Punjab Value Added Tax Act, 2005, as per the provisions of the said Act? Petitioner's Argument: The petitioner, through their counsel, argued that they are entitled to the refund of tax and consequently, to the interest payable on such delayed refund as stipulated by the VAT Act. The fact that the tax amount itself has been refunded implies an acknowledgment of the petitioner's entitlement to the original amount, and the delay in releasing the interest warrants judicial intervention. Respondents' Argument: The Financial Commissioner, Taxation, Punjab, submitted that the process for refunds, including interest payments, is being streamlined under the new GST regime. He assured the Court that all pending refunds under the VAT Act are being processed and are expected to be cleared within four months, including any interest payable. Instructions have been issued to expedite the disposal of refund applications and to monitor their progress, with a promise of disciplinary action for non-compliance. The respondents did not dispute the petitioner's entitlement to interest but focused on the ongoing process of clearing all such dues.