M/S Sapco INDIA vs. State Th.Finance Deptt. And Anr.

Held

The Court held that the petitioner is entitled to simple interest at the rate of 18% per annum on the deposited amount of Rs. 1,40,000/-. The Court found that the respondents' contention that the petitioner failed to request the refund was untenable, citing the petitioner's repeated requests dating back to November 13, 2003. The Court noted that the Assessing Authority failed to pass a formal order regarding the refund despite reaccepting the petitioner's return. The Court also rejected the respondents' excuse of administrative delays and the need for approval as specious and untenable. The Court reasoned that the J&K GST Act, specifically Section 10-B, mandates payment of interest on refunds. The Court directed the respondents to calculate the interest at 18% per annum from the various dates of payment by the petitioner up to November 22, 2017, when the refund was paid, and to deposit the amount within four weeks. The Court expressly left undecided any issues related to the GST regime post-implementation of the GST Act.

Facts

The petitioner, M/s Sapco India, engaged in the sale of cement and iron goods, filed a writ petition seeking a refund of Rs. 1,40,000/- deposited with the Sales Tax Department, along with 18% interest. The deposit was made during the pendency of an appeal against a reassessment order for the accounting period 1993-94. Subsequently, the appellate authority remanded the case, and the Assessing Authority, by an order dated June 30, 2003, reaccepted the petitioner's return, indicating no tax was due. Despite this, the Assessing Authority failed to issue a refund. The petitioner made repeated requests for the refund and interest, including an affidavit in 2007. The department cited delays and the need for approval from the Commissioner Commercial Taxes. The High Court directed the refund, which was credited by November 22, 2017, but the interest remained outstanding, leading to the present petition.

Key Issues

1. Whether the petitioner is entitled to interest on the refund amount of Rs. 1,40,000/- deposited with the Sales Tax Department, and if so, at what rate and from when. Petitioner's arguments: The petitioner contended that the refund became due on June 30, 2003, when the Assessing Authority reaccepted their return. They argued that the respondents' failure to refund the amount, which was not payable, for an extended period, despite repeated requests, entitled them to interest. They relied on the provisions of the J&K GST Act, specifically Section 10-B, which provides for interest on refunds. They also invoked general principles of law regarding delay in payments by authorities. Respondents' arguments: The respondents argued that they could not be faulted for the delay in refunding the amount as the petitioner had failed to make the request for it. They also cited administrative delays and the need for approval from the Commissioner Commercial Taxes as reasons for the non-payment of interest.