M/S N.N. BROTHERS v. COMMISSIONER OF DVAT AND ANR

1. This hearing has been done through hybrid mode.

2. The present petition has been filed by the Petitioner under Article 226 of the Constitution of India, inter alia, seeking payment of interest on the refund amount of Rs.1,30,940/- which has not been allowed in favour of the Petitioner vide the impugned order dated 9th May, 2024 passed by the Office of the GST Officer (Ward-10, Zone- II), Department of Trade & Taxes.

3. The brief background as captured in the counter affidavit by the Department is that, for the years 2015-16 and 2016-17 certain demands were raised and on 27th August, 2021, a DVAT-25A notice was issued to the Petitioner for recovery of pending demand to the tune of Rs.31,96,110/-. Since the Petitioner had not replied to the same, the Department resorted to attachment proceedings of the bank account of the Petitioner on 23rd December, 2021. Thereafter, from the bank account, a sum of Rs.14,54,896/was credited to the Government. The demands against the Petitioner were reduced vide order dated 24th December, 2021. Thereafter, the Petitioner had filed a DVAT-21 application on 5th January, 2022 seeking refund of Rs.14,54,896/-. A sum of Rs.14,54,896/- was refunded to the Petitioner vide refund order dated 12th September, 2023. However, interest was not granted to the Petitioner. The Petitioner had thereafter, filed objections in Form DVAT-38 objection on 15th November, 2023 claiming interest on the refunded amount which was not granted to the Petitioner. The claim of the Petitioner was rejected by the Authority on the following grounds:

records was started and completed in a logical span of time without any deliberate delay. It is observed that time period taken for processing the application was due to mandatory procedural requirement involving due verification and therefore, Dealer is not entitled for any interest amount on the refund of Rs.14,54,896/-.

6. In view of the above discussion, I hereby reject the claim of interest on the refund amount of Rs.l[4],54,896/- sanctioned vide Refund Order dated 12.09.2022.”

4. A perusal of the above would show that the same has not been granted on the ground that the delay in settling the Government dues and depositing the same is attributable to the Petitioner. However, there can be no doubt that interest has to be paid on the refund amount. This is clear from a reading of Rule 57 read with Rule 34 of the Delhi Value Added Tax Rules, 2005 as also Section 42(1) of the Delhi Value Added Tax Act, 2004. The said provisions read as under:

period. (3) The Commissioner may, for reasons to be recorded in writing, issue notice to any person claiming refund to furnish security under subsection (5) of section 38 in Form DVAT 21A, of an amount not exceeding the amount of refund claimed, specifying therein the reasons for prescribing the security. (4) Where the refund is arising out of a judgment of a Court or an order of an authority under the Act, the person claiming the refund shall attach with Form DVAT-21 a certified copy of such judgment or order. (5) When the Commissioner is satisfied that a refund is admissible, he shall determine the amount of the refund due and record an order in Form DVAT-22 sanctioning the refund and recording the calculation used in determining the amount of refund ordered (including adjustment of any other amount due as provided in subsection (2) of section 38). [(5A) The order for withholding of refund/furnishing security under section 39 shall be issued in Form DVAT- 22A.] (6) Where a refund order is issued under sub-rule (5), the Commissioner shall, simultaneously, record and include in the order any amount of interest payable under sub-section (1) of section 42 for any period for which interest is payable. (7) The Commissioner shall forthwith serve on the person in the manner prescribed in rule 62, a cheque for the amount of tax, interest, penalty or other amount to be refunded along with the refund order in Form DVAT-22. [PROVIDED that the Commissioner may transfer the amount of refund through Electronic Clearance System (ECS) in the bank account of the dealer.] (8) No refund shall be allowed to a person who has not filed return and has not paid any amount due under the Act or an order under section 39 is passed withholding the said refund. (9) Before allowing the claim for refund to a dealer under section 38 of the Act, the Authority concerned shall satisfy himself that the conditions laid down in clause (g) of sub-section (2) of section 9 of the Act are fulfilled. XXXX

42. Interest Rule: (1) A person entitled to a refund under this Act, shall be entitled to receive, in addition to the refund, simple interest at the annual rate notified by the Government from time to time, computed on a daily basis from the later of – (a) the date that the refund was due to be paid to the person; or (b) the date that the overpaid amount was paid by the person, until the date on which the refund is given.

PROVIDED that 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 Sales Tax Act, 1956 (74 of 1956): PROVIDED FURTHER that if the amount of such refund is enhanced or reduced, as the case may be, such interest shall be enhanced or reduced accordingly. Explanation.- If the delay in granting the refund is attributable to the said person, whether wholly or in part, the period of the delay attributable to him shall be excluded from the period for which the interest is payable.

5. A Co-ordinate Bench of this Court in the decision in Ramky Infrastructure Limited v. Commissioner of Trade and Taxes, 2023:DHC:4999-DB, while interpreting Section 42(1) of the Delhi Value Added Tax Act, 2004, held that the taxpayer, upon vindicating its stand that the refund claim was correct and the subsequent assessments erroneous, would be entitled to the refund along with interest from the said date. The relevant portion of the said decision reads as under:

such cases, the taxpayer would have to once again make a claim by filing Form DVAT 21 and the refund would be payable, thereafter. According to the Revenue, interest would be required to be calculated from two months after filing of Form DVAT 21.

46. This aforesaid contention is unmerited. Once the taxpayer has succeeded in upsetting the assessments framed under Sections 32 or 33 of the DVAT Act, which results in vindicating its claim for refund either in part or as a whole, as claimed by furnishing a return, interest under Section 42(1)(a) of the DVAT Act would be payable from such date as the refund was due to be paid to the taxpayer. The expression, “the date that refund was due to be paid” must be construed as the date when such a refund ought to have been paid to the taxpayer. If the taxpayer succeeds in vindicating its stand that its claim for the refund was correct and that the subsequent assessments framed by the concerned authorities for the same tax period were erroneous or unjustified; it would follow that the taxpayer should have been refunded the amount claimed and that interest would be payable from the said date. In cases where the taxpayer partially succeeds and its claim for refund has been upheld, not to the extent of the entire amount but part thereof, the taxpayer would be entitled to interest only for the part of the said amount, which has been sustained, pursuant to the subsequent proceedings. However, it would be erroneous to proceed on the basis that the amount of refund, which has been sustained by the authorities or the Court in the subsequent proceedings, was not payable at the material time when the taxpayer had made a claim.