M/S Karamhans Food PVT.LTD. vs. State Th.Secy.Finance Deptt. And Ors.

Held

The High Court held that the impugned order dated 22.08.2017 was not in complete accord with the obligations cast upon the respondents under Section 55 of the Jammu & Kashmir Value Added Tax Act, 2005, concerning the determination of the refund amount and the applicable rate of interest. The Court found the principle adopted by the Commissioner, that interest should be calculated from the date of approval for refund rather than from the date prescribed in sub-sections (3) and (4) of Section 55, to be erroneous. The Court reasoned that Section 55(3) mandates refund within 120 days from the date of sales, and Section 55(4) provides for interest if this period is exceeded. The date of sale, accompanied by the deposit of tax, is the crucial factor for initiating the refund period. The Court also noted that the rate of interest applied by the respondents was stated to be 18%, while Section 55(4) envisages 18% and 24% depending on the delay. Consequently, the Court set aside the impugned order and directed the Commissioner to re-work the amount payable to the petitioner strictly in terms of Section 55(3) and 55(4), considering the date of sales as the relevant date for calculating interest. The Court ordered this to be done within six weeks.

Facts

The petitioner, M/s Karamhans Food Private Limited, a dealer in walnuts, sought a writ petition challenging an order dated 22.08.2017 by the Commissioner, Commercial Taxes Department. The petitioner argued that the order failed to grant relief regarding payment of interest at 24% per annum in its entirety. The petitioner had made zero-rated sales of walnuts, and an amount of Rs. 57,34,346.21 was refunded under Section 55 of the Jammu & Kashmir Value Added Tax Act, 2005, on 22.03.2016. The petitioner claimed entitlement to interest on the delayed refund, as per Section 55(4) of the Act. The impugned order, passed pursuant to a previous High Court direction, awarded interest but calculated it from the date of approval for refund (30.10.2014) rather than the date of sale.

Key Issues

1. Whether the interest on the delayed refund of input tax credit for zero-rated sales should be calculated from the date of sale or from the date of approval for refund, as per Section 55(3) and 55(4) of the Jammu & Kashmir Value Added Tax Act, 2005? 2. Whether the rate of interest applied by the Commissioner, Commercial Taxes Department, was in accordance with Section 55(4) of the Act? Petitioner's Contention: The petitioner argued that the basis for calculating interest from the date of approval for refund (30.10.2014) was legally misconceived and erroneous. They contended that interest should be calculated from the date of sale, as stipulated by Section 55(3) and 55(4). Revenue's Contention: The respondents argued that the entitlement to interest was contingent on the determination of the petitioner's eligibility for refund. They stated that the petitioner was held entitled to refund only after appeal proceedings concluded on 12.05.2014, and approval was granted on 30.10.2014. Therefore, interest should be payable from the date of approval, not earlier. The respondents also stated that the rate of interest applied was 18% per annum.