M/S Mukesh Agencies vs. Commissioner Trade & Taxes & Anr.
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The Petitioner, M/s Mukesh Agencies, sought interest on refund amounts from the Respondent, Commissioner, Trade & Taxes & Ors. The dispute centered on the Respondent's failure to pay interest on refunds for various periods. The Petitioner challenged "zero demand orders" dated July 6, 2012, and July 10, 2012, and default assessment orders dated January 31, 2013, for the period April 2010 to March 2011. The Respondent acknowledged that these orders were unsustainable. The Respondent also stated that refund orders had been issued, and they would comply with a time-bound direction for interest payment.
Held
The Court held that the "zero demand orders" dated July 6, 2012, and July 10, 2012, and the default assessment orders dated January 31, 2013, were unsustainable in law. The Court reasoned that such orders unnecessarily multiply litigation and delay legitimate refunds. The Court emphasized that the Delhi Value Added Tax (DVAT) Act and Rules clearly mandate the calculation and payment of interest on refund amounts simultaneously with the grant of refund, and these orders must be speaking orders. Citing its decision in IJM Corporation Berhard v. Commissioner of Trade and Taxes, the Court reiterated that interest is payable from the date the refund was due or the overpaid amount was paid, whichever is later, with the due date being determined by Section 38(3) of the Act, not the date of filing the return. The Court directed the Respondents to pass reasoned orders on the grant of interest within four weeks and credit the interest amounts by September 15, 2019, failing which a compensation of Rs. 50,000/- would be payable to the Petitioner.
Key Issues
1. Whether the "zero demand orders" and default assessment orders dated January 31, 2013, are legally sustainable. (Question of law, concerning the validity of assessment orders). 2. Whether the Respondent is liable to pay interest on the refund amounts to the Petitioner, and if so, from what date and in what manner. (Question of mixed law and fact, concerning the interpretation and application of provisions related to refunds and interest). Petitioner's arguments: The Petitioner contended that the "zero demand orders" and default assessment orders were unsustainable and led to unnecessary litigation and delayed refunds. They argued that interest on refunds is statutorily mandated and should have been paid simultaneously with the refund. Respondent's arguments: The Respondent conceded that the "zero demand orders" and default assessment orders were unsustainable. They stated that refund orders had been issued and indicated willingness to comply with a time-bound direction for interest payment.
Sections Cited
Section 38, Section 42
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O R D E R %
2019
In the present case, the dispute is narrowed down to the issue of the Respondent failing to pay the Petitioner interest on the refund amount for all the periods for which the Petitioner is claiming such refund.
The Court is informed that the Respondents realize that the impugned „zero demand orders‟ dated 6th July 2012 and 10th July 2012, and the default assessment orders, all dated 31st January 2013 (where reason for such assessment is given as 'a') for the period from April, 2010 to March, 2010-2011, are unsustainable in law.
Even otherwise, this Court has, in a series of decisions including the recent decision dated 17th July 2019 in W.P(C) 9282/2017 M/s Mega Media Solutions v. Commissioner Trade & Taxes and Anr., held that W.P.(C) 9809/2018 such „zero demand orders‟ are unsustainable in law, as “they end up only multiplying litigation needlessly and delaying the grant of refunds to which the dealers are legitimately entitled.” As far as the default assessment orders dated 31st January 2013 are concerned, since the reason given in all such orders is uniformly 'a', these are orders which absolutely make no sense and deserve to be set aside. Accordingly, the „zero demand orders‟ and the default assessment orders as referred to hereinabove are hereby set aside.
Mr. Satyakam, learned Senior Standing Counsel for the Department informs the Court that the refund orders, as prayed for by the Petitioner, have already been issued. As regards the interest payable on the refund amounts, he says if a time bound direction is issued, it will be abided by the Respondents.
The Court would like to emphasize that the DVAT Act and Rules are absolutely clear that the amount of interest has to be calculated and indicated in the order granting the refund itself. There is no occasion whatsoever for the Respondent not to calculate and pay the Assessee the interest on the refund amount in accordance with law simultaneously with the grant of refund. Further, these orders, needless to state, have to be speaking orders.
The Court reiterates its decision inIJM Corporation Berhard v. Commissioner of Trade and Taxes 2018 (48) GSTR 102 (Del) wherein para 15 it was observed as under:
“15. When we harmoniously read sections 38 and 42 of the Act, which relate to processing: of claim for refund and payment of interest, it is crystal dear that the interest is to be W.P.(C) 9809/2018 paid from the date when the refund was due to be paid to the assessee or date when the overpaid amount was paid, whichever is later. The date when the refund was due would be with reference to the date mentioned in section 38, i.e., clause (a) to sub-section (3). This would mean that interest would be payable after the period specified in clause (a) to sub-section (3) to section 38 of the Act, i.e., the date on which the refund becomes payable. Two sections, namely, sections 38(3) and 42(1) do not refer to the date of filing of return. This obviously as per the Act is not starting point for payment of interest.”
It is accordingly directed that the Respondents will pass orders with reasons on the issue of grant of interest on the refund amounts not later than four weeks from today and the interest amounts so found due and payable to the Petitioner will be credited to the Petitioner's account not later than 15th September, 2019, failing which the Respondents will pay the Petitioner Rs.50,000/- as compensation. Needless to state, if the Petitioner is aggrieved by such order, it will be open to the Petitioner to seek appropriate remedies in accordance with law.
The writ petition is accordingly disposed of.
Copy of the order be given Dasti under the signatures of the Court Master.
S.MURALIDHAR, J.
TALWANT SINGH, J. JULY 25, 2019/mk
Reproduced from the public record of the Delhi High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.