M/S Birla Corporation Limited vs State Of U.P. And 3 Others
2021 Latest Caselaw 11439 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

AFR
 
Court No. - 21
 

 
Case :- WRIT TAX No. - 749 of 2020
 

 
Petitioner :- M/S Birla Corporation Limited
 
Respondent :- State Of U.P. And 3 Others
 
Counsel for Petitioner :- Sujeet Kumar,Chhaya Gupta
 
Counsel for Respondent :- C.S.C.
 
With
 
Case :- WRIT TAX No. - 766 of 2020
 

 
Petitioner :- M/S Birla Corporation Ltd.
 
Respondent :- The State Of U.P. And 3 Others
 
Counsel for Petitioner :- Sujeet Kumar,Chhaya Gupta
 
Counsel for Respondent :- C.S.C.
 
With
 
Case :- WRIT TAX No. - 767 of 2020
 

 
Petitioner :- M/S Birla Corporation Ltd.
 
Respondent :- The State Of U.P. And 3 Others
 
Counsel for Petitioner :- Sujeet Kumar,Chhaya Gupta
 
Counsel for Respondent :- C.S.C.
 
And
 
Case :- WRIT TAX No. - 768 of 2020
 

 
Petitioner :- M/S Birla Corporation Ltd.
 
Respondent :- The State Of U.P. And 3 Others
 
Counsel for Petitioner :- Sujeet Kumar,Chhaya Gupta
 
Counsel for Respondent :- C.S.C.
 

 
Hon'ble Naheed Ara Moonis,J.

Hon'ble Saumitra Dayal Singh,J.

1. Heard Sri Santosh Kumar Bagaria, learned Senior Advocate, assisted by Sri Sujeet Kumar and Ms. Chhaya Gupta, learned counsel for the petitioner and Sri C.B. Tripathi, learned Special Counsel appearing for the revenue.

2. By means of these four writ petitions, the petitioner has sought payment of interest on the alleged delayed payment of refund due to it under section 40(2) of the U.P. Value Added Tax Act, 2008 (hereinafter referred to as the 'VAT Act') for A.Ys. 2004-05, 2005-06, 2006-07 and 2007-08. Individual writ petitions have been filed for each assessment year. Brief details of the writ petitions are as below:

Sl No.

Writ Tax No.

Assessment Year

Amount of Refund Granted

1.

749 of 2020

2004-05

1,24,73,696/-

2.

766 of 2020

2005-06

6,21,78,915/-

3.

767 of 2020

2006-07

6,02,23,413/-

4.

768 of 2020

2007-08

3,96,92,735/-

3. Though the aforesaid refund claimed were granted to the petitioner vide orders dated 29.06.2020, by further communications dated 07.07.2020 and 11.08.2020 issued by the Deputy Commissioner, Commercial Tax, Sector - 3, Prayagraj, the said authority had adjusted the amount of refund quantified at Rs. 17,45,68,741/- for A.Ys. 2004-05 (beginning 14.10.2004) to 2007-08 (ending 31.12.2007), claimed by the petitioner under the provisions of U.P. Trade Tax Act, 1948 (hereinafter referred to as the 'Erstwhile Act') against the outstanding demand of interest due on delayed payments of entry tax Rs. 18,10,01,347/- for A.Ys. 2003-04 and 2009-10 under the U.P. Tax on Entry of Goods into Local Areas Act, 2007 (hereinafter referred to as the 'Entry Tax Act').

4. The petitioner challenged the aforesaid adjustment of refund by means of Writ Tax No. 748 of 2020. It was heard and decided on 16.11.2021. That hearing proceeded on an admission made by the revenue that the claim for refund made by the petitioner [as was dealt with vide communications dated 29.06.2020, 07.07.2020 and 11.08.2020 by the Deputy Commissioner, Commercial Tax, Sector - 3, Prayagraj (impugned in that writ petition)], arose and was decided in accordance with the provisions of the VAT Act.

5. Though reference had been made to the provisions of the Erstwhile Act, no doubt was expressed by either party to the eligibility of refund claimed by and granted to the petitioner under the provisions of the VAT Act or to the applicability of that enactment. In view of such concession made by the State, the issue of applicability of the VAT Act to the refund claimed by the petitioner, was assumed to exist. Therefore, and as would be discussed later, on that issue the said decision would remain confined as a decision obtaining on the facts of that case.

6. By means of the present petitions, the issue of interest on the refund claim alone has been raised. Therefore, it must be tested on its own merits. The facts involved in the present case insofar as they are common to the earlier M/S Birla Corporation Limited Vs. The State of U.P. And 3 Others, Writ Tax No. 748 of 2020, as have also been recorded in the order dated 16.11.2021, are quoted below:

"5. In brief, the petitioner set up a unit to manufacture cement using fly ash as a raw material. At the relevant time, on 18.06.1997, the Government of U.P. (in exercise of its power under section5 of the Erstwhile Act), had issued a rebate notification granting rebate on payment of tax under the Erstwhile Act, to eligible units, for a period of ten years. Admittedly, the petitioner was granted that benefit for the period 14.12.1998 to 13.12.2008. Mid-way into that scheme, the said rebate notification came to be rescinded on 14.10.2004, by the State Government. Consequently, for the period 14.10.2004 to 13.12.2008, no rebate was allowed to the petitioner under the Erstwhile Act. Consequently, tax payments were made.

6. The notification dated 14.10.2004 rescinding the rebate notification dated 18.06.1997 was challenged by the petitioner and others before this Court. First, writ petition M/s Jai Prakash Associates Ltd. vs. State of U.P. and Another 2010 UPTC 757, came to be decided by the judgment dated 29.03.2010. Paragraph 125 of the said decision reads as under:-

"125. The writ petition is allowed in part to the extent petitioner's entitlement for tax exemption for the period available under the original notification dated 27th February, 1998. Accordingly, a writ in the nature of mandamus is issued directing the opposite parties to provide tax exemption to the petitioner industry from the date of production for the period of entitlement under original notification dated 27th February, 1998."

7. On 16.04.2010, the petition filed by the present petitioner being Writ Petition (Misc. Bench) No. 6176 of 2004, M/s Birla Corporation Ltd. vs. State of U.P and others came to be decided by the order dated 16.04.2020 on the following terms:-

"Keeping in view the fact that the controversy has been set at rest, present writ petitions too are decided finally in terms of the judgment and order dated 29.3.2010, passed in writ petition No. 5861(M/B) of 2010.

No order as to costs."

8. The above judgments, were carried in appeal by the revenue, to the Supreme Court. Vide judgment dated 12.11.2019, in State of Uttar Pradesh and Another vs. Birla Corporation Ltd. (2019) SCC OnLine SC 1569, the Supreme Court dismissed the revenue's appeal with certain observations. Relevant to our issue, paragraph nos. 34 and 36 of the said decisions read as below:-

"34. A priori, the respondents and similarly placed persons would be entitled to rebate for the relevant period prescribed in the notification dated 27th February, 1998 which would continue to remain in vogue until the expiry of the specified period, namely, ten years. In the case of BCL up to 13 th December, 2008 and in the case of JPAL up to 17th September, 2014 respectively. The amount of rebate, however, would depend on the verification of their refund claim pending before the concerned authorities and would be subject to just exceptions including the principle of unjust enrichment. The respondents should be able to substantiate that the amount claimed by them has not been passed on to their consumers. Only then, they would be entitled for refund. The competent authority may verify the claim for refund of each of the respondent(s) in accordance with law and pass appropriate orders, including about the interest for the relevant period.

35. ................................

36. In view of the above, these appeals must fail. Hence, the same are dismissed with observations. There shall be no order as to costs. All pending applications are also disposed of."

(emphasis supplied)

9. As was noted in the order of the Supreme Court, upon the petitioner's writ petition being allowed by this Court, the petitioner had filed applications dated 20.11.2010 claiming refund Rs. 17,90,61,418/- being the total amount of rebate denied to the petitioner during pendency of its writ petition before this Court, for different Assessment Years, during the period 14.10.2004 to 31.12.2007. It may be noted, no refund was claimed for the period beyond 01.01.2008 when the VAT Act was enforced.

10. Separate orders were passed by the respondent no. 4 on the petitioner's applications claiming refund, all on 29.06.2020. Thus, instead of granting the refund of the amount claimed, the respondent-assessing authority of the petitioner only quantified the total amount of trade tax refundable at Rs. 17,45,68,741/- for A.Y.s 1998 (from 14.12.2008)-1999 to 2007-2008 (upto 31.12.2007). It is also undisputed, at that stage, the assessing authority of the petitioner found the petitioner had not passed on that liability (of disputed trade tax). Thus, neither the principle of unjust enrichment was found applicable nor any other ground was found existing to deprive the petitioner of the refund claimed. At the same time, the assessing authority found, no interest was payable to the petitioner on the delayed refund. Thereafter, on 07.07.2020, instead of paying out the refund, the assessment authority of the petitioner issued a further ex-parte communication to the petitioner informing adjustment of the entire amount of refund Rs. 17,45,68,741/- against the outstanding demand of dues of interest on Entry Tax Rs. 18,10,01,347/-, for the A.Ys. 2003-04 to 2009-10.

11. A similar communication giving full details of such adjustments made was issued to the petitioner on 11.08.2020. In such circumstances, the petitioner again wrote to its assessing authority on 31.08.2020 stating, no amount of tax was due against him either under the erstwhile Act or the VAT Act or the Central Sales Tax Act, 1956 (hereinafter referred to as the "Central Act"). It reiterated its demand for payment of refund due. In the present writ petition in paragraph 3, it has been specifically stated, there is no amount of tax outstanding or due against the petitioner under the provisions of the Erstwhile Act or the VAT Act or the Central Act. In reply thereto in paragraph 29 of the counter affidavit, only this much has been stated, on the date of the refund order dated 29.06.2020 being passed, interest on Entry Tax Rs. 18,10,01,347/- was outstanding against the petitioner for the A.Ys. 2003-04 to 2009-10."

7. Learned Senior Counsel appearing for the petitioner would submit, unlike section 29 of the Erstwhile Act, section 40 of the VAT Act clearly provides for payment of interest after expiry of thirty (30) days from the date of receipt of the order giving rise to refund. Referring to the order dated 16.04.2010 passed by a division bench of this Court in M/S Birla Corporation Ltd. Vs. State of U.P. & Anr., Misc. Bench No. 6176 of 2004, it has been submitted, the interest became due w.e.f. 16.04.2010. In appeal decision of the Supreme Court in State of U.P & Anr. Vs. Birla Corporation Ltd., 2019 SCC Online 1569, no fresh or independent direction was issued regarding refund. Even the stipulation of just exceptions on account of unjust enrichment, pre-existed. In that regard, reliance has been placed on a three-Judge bench decision of the Supreme Court in M/S Sahakari Khand Udyog Mandal Ltd. Vs. Commissioner of Central Excise & Customs, AIR 2005 SC 1897. Thus, referring to section 40(2) of the VAT Act, it has been submitted, the process of verification of facts as to the applicability or otherwise of the principle of unjust enrichment should have been made within thirty (30) days from the date 16.04.2010 and refund paid within that time. No fresh condition and no fresh limitation of time arose upon the order of the Supreme Court dated 20.11.2019 in State of U.P. & Anr. Vs. Birla Corporation Ltd. (supra). The interest liability was incurred by the State, by operation of law. The submissions advanced by the revenue that the refund claim did not arise, and no interest became due to the petitioner in absence of any order of refund, has been seriously disputed. The earlier decisions of this Court in M/S Indodan Milk Products Ltd. Vs. State of U.P. & Anr., 1983 UPTC 583, P.P.G. Asian Paints Pvt. Ltd. Vs. Deputy Commissioner, Commercial Tax & Ors., 2016 NTN 60 and, a Full Bench decision in Lucent Technologies (P) Ltd. Vs. Commissioner, Trade Tax, U.P., Lucknow, (2015) 82 VST 371 (ALL) (FB) as also decision of the Supreme Court in Commissioner of Sales Tax, U.P. Vs. Hind Lamps, Ltd., JT 2008 (8) SC 590 are claimed to be wholly distinguishable as those decisions arose in the context of section 29 of the Erstwhile Act. They have no application to the present facts as refund has been granted under section 40 of the VAT Act.

8. In this regard, reference has been made to a decision of the Supreme Court in Suhas H. Pophale Vs Oriental Insurance Company Limited and Its Estate Officer, (2014) 4 SCC 657. Further, in support of his submission, learned Senior Counsel for the petitioner has relied on another decision of the Supreme Court in National Engineering Industries Ltd. Vs Commissioner of Central Excise Jaipur, (2005) 13 SCC 418 to submit - the refund claim became due on 16.04.2010 upon the earlier writ petition filed by the present petitioner (Misc. Bench No. 6176 of 2004), being allowed. On that date, the Erstwhile Act did not exist. The only statutory law in force was section 40 of the VAT Act. Therefore, only that provision would govern the claim for interest. Under section 40 of the VAT Act the claim for interest may arise upon an order giving rise to refund passed by a Court and it is not dependent on any further or specific order to be passed by the assessing authority to grant such refund. Therefore, the interest liability accrued upon lapse of thirty days from the order dated 16.04.2010. Last, it has been submitted, the revenue having retained the money without any authority of law, it is liable to compensate the petitioner with interest for such an illegal act. Reliance has been placed on a decision of a Supreme Court in Union of India Vs. Tata Chemicals Ltd., (2014) 6 SCC 335.

9. Opposing the writ petition, Sri C.B. Tripathi, learned Special Counsel placed heavy reliance on the provision of section 29 of the Erstwhile Act and the earlier division bench decisions of this Court in M/S Indodan Milk Products Ltd. Vs. State of U.P. & Anr. (supra) and P.P.G. Asian Paints Pvt. Ltd. Vs. Deputy Commissioner, Commercial Tax & Ors. (supra). That view is asserted to have been affirmed by the Full Bench of this Court in Lucent Technology (P) Ltd. Vs. Commissioner, Trade Tax U.P. Lucknow (supra) that is consistent to the ratio of the decision of the Supreme Court in Commissioner of Sales Tax, U.P. Vs. Hind Lamps Ltd. (supra). Carrying his submission further, Sri Tripathi, would submit, in the present facts, no amount was found refundable either by this Court or the Supreme Court. Therefore, a specific order of refund was necessary to be passed before any amount may have been refunded to the petitioner. The order quantifying the refund was passed on 29.06.2020. Thereafter, that refund amount was adjusted against other demands of interest on entry tax, on 07.07.2020. Thus, it cannot be said that any refund remained pending beyond the statutory period of thirty days from the order of refund being passed. Consequently, no interest liability was incurred by the respondent-State authorities.

10. At the first instance, we record our utter dismay at the approach adopted by the revenue. The present writ petitions and Writ Tax no.748 of 2020 were listed together on 16.11.2021. All five petitions had arisen from common facts and orders. Subject to time availability, all petitions would have been heard and decided on the same day. Yet, the revenue chose to adopt different stance as to the applicable law, in the two sets of petitions that have come into existence only by pure chance. Writ Tax 748 of 2020 was heard and oral order was passed thereon on 16.11.2021. Thereafter, the present batch of petitions were heard. Hearing could not conclude due to paucity of time. Hence these four petitions are listed today. In such circumstances, there exists an inconsistent duality in the stand adopted by the revenue.

11. In any case, the earlier writ petition being Writ Tax No.748 of 2020 was confined to the issue whether the liability of interest on entry tax could be adjusted against any other refund of trade tax found due to the petitioner. On the other hand, here the issue is to the entitlement of interest on the refund of trade tax that became due upon the earlier order of this Court dated 16.04.2010. We have allowed the revenue to advance submissions that are at variance with the submissions advanced by it in the earlier writ (already decided by us vide order dated 16.11.2021), more out of helplessness, and not out of choice.

12. Having thus heard learned counsel for the parties and having perused the record, in the first place, we may take note of the certain statutory provisions. Under the Erstwhile Act, the provision of refund existed in the shape of section 29 of that Act. A slightly different provision existed in the shape of section 40 of the VAT Act. It would be useful to our discussion, to extract in tabular form the provisions of sections 29 of the Erstwhile Act and 40 of the VAT Act, as below :

Section 29. Refund

(1) The assessing authority shall, in the manner prescribed, refund to a dealer any amount of tax, fees or other dues paid in excess of the amount due from him under this Act:

Provided that the amount found to be refundable shall first be adjusted towards the tax or any other amount outstanding against the dealer under this Act or under the Central Sales Tax Act, 1956 (Act 74 of 1956), and only the balance, if any, shall be refunded.

(2) If the amount found to be refundable in accordance with sub-section (1) is not refunded as aforesaid within three months from the date of order of refund passed by the Assessing Authority or, as the case may be, from the date of receipt by him of the order of refund, if such order is passed by any other competent authority or Court, the dealer shall be entitled to simple interest on such amount at the rate of twelve percent per annum [For Uttaranchal: simple interest on such amount at the rate of twelve per cent per annum] from the date of such order or, as the case may be, the date of receipt of such order of refund passed by the Assessing Authority to the date of the refund:

Provided that for calculation of interest in respect of any period after the 26th day of May, 1975, the sub-section shall have effect as if for the words six months the words three months were substituted and for the words six percent the words twelve percent were substituted.

(3) Notwithstanding any judgment, decree or order of any Court or authority, no refund shall be allowed of any tax or fee due under this Act on the turnover of sales or purchases or both, as the case may be, admitted by the dealer in the returns filed by him or at any stage in any proceedings under this Act.

Explanation I:

The date of refund shall be deemed to be the date on which intimation regarding preparation of the refund voucher is sent to the dealer in the manner prescribed.

Explanation II:

The expression 'refund' includes any adjustment under the proviso to sub-section (1)

[See Rules 89 to 104]

(4) Notwithstanding anything contained in sub-sections (1), (2) and (3), where the tax has been paid by a dealer on purchase of certain goods and the value of goods manufactured out of such goods is inclusive of such tax and the State Government remits the tax liability on such purchases retrospectively, the dealer shall not be entitled to refund of tax paid on purchases of such goods unless he proves to the satisfaction of the Assessing Authority that he has not passed on the liability of such tax to any third party as a result of any sale or otherwise.

Section 29-A - Procedure for disbursement of amount wrongly realised by dealer as tax

(1) Where any amount is realised from any person by any dealer, purporting to do so by way of realisation of tax on the sale or purchase of any goods, in contravention of the provisions of sub-section (2) of Section 8-A, such dealer shall deposit the entire amount so realised in such manner and within such period, as may be prescribed.

(2) Any amount deposited by any dealer under sub-section (1) shall, to the extent it is not due as tax, be held by the State Government in trust for the person from whom it was realised by the dealer, or for his legal representatives, and the deposit shall discharge such dealer of the liability in respect thereof to the extent of the deposit.

(3) Where any amount is deposited by any dealer under sub-section (1), such amount or any part thereof shall, on a claim being made in that behalf be refunded, in the manner prescribed, to the person from whom such dealer had actually realised such amount or part, or to his legal representatives; and to no other person:

Provided that no such claim shall be entertained after the expiry of three years from the date of the order of assessment or one year from the date of the final order on appeal, revision or reference, if any, in respect thereof, whichever is later.

Explanation. - The expression "final order on appeal, revision or reference," includes an order passed by the Supreme Court under Article 32, Article 132, Article 133, Article 136 or Article 137 or by the High Court under Article 226 or Article 227 of the Constitution.

[See Rules 105 to 110]

Section 29-B - Reimbursement in respect of declared goods

(1) Where any tax has been levied under this Act in respect of the sale or purchase of any goods referred to in Section 14 of the Central Sales Tax Act, 1956, and such goods are subsequently sold in the course of inter-State trade or commerce, and tax has been paid under the said Central Act in respect of the sale of such goods in the course of inter-State trade or commerce, the tax levied under this Act may, on an application being made in writing to the Assessing Authority within six months from the date on which the tax was so paid or the date of commencement of the Uttar Pradesh Sales Tax (Amendment) Act, 1973, whichever is later, be reimbursed to the person making such sale in the course of inter-State trade or commerce.

(2) where the Assessing Authority is satisfied that the application is maintainable under sub section (1), it shall in the manner prescribed reimburse to the applicant the amount of such tax and, in any other case, shall reject the application:

Provided that no such application shall be rejected wholly or in part except after the applicant has been given a reasonable opportunity of being heard:

Provided further that the amount found to be reimbursable shall first be applied towards the tax on any other amount outstanding against the applicant under this Act and only the balance, if any, shall be reimbursed.

[See Rules 77, 89, 104 and 105]

40. Refund and adjustment

(1) Subject to other provisions of this Act, the assessing authority shall in the manner prescribed, refund to the dealer an amount of tax, fee, or other dues paid in excess of the amount due from him under this Act.

Provided that amount found to be refundable shall first be adjusted towards tax or any other amount outstanding against the dealer under this Act or under The Central Sales Tax Act 1956 or under the erstwhile Act and only the balance if any shall be refunded.

Provided further that refund, of excess amount of input tax credit, shall, without prejudice to other conditions, be subject to conditions and restrictions of section 15.

(2) Where amount found refundable in accordance with the provisions under sub-section (1), is not refunded within thirty days from the date of order of refund passed by the assessing authority or where order giving rise to refund is passed by any other authority or court, from the date of receipt of such order by the assessing authority by due process, the dealer shall be entitled to simple interest on such amount at the rate of twelve percent per annum from the date of such order passed by the assessing authority or from the date of receipt of the order giving rise to refund passed by any other authority or Court, till the date refund is made.

Provided that where refund relating to excess amount of input tax credit due on the basis of returns filed by the dealer, is not allowed within the time prescribed under section 15, the dealer shall be entitled to simple interest on such amount at the rate of twelve percent per annum from the date on which refund becomes due and till the date refund is made.

(3) Notwithstanding any judgment, decree or order of any Court or authority, no refund shall be allowed of any tax or fee due under this Act on the turnover of sales or purchases or both, as the case may be, admitted by the dealer in the returns filed by him or at any stage in any proceedings under this Act, whichever is higher.

(4) Where a dealer has requested the assessing authority for withholding any amount refundable to him for adjustment towards his future liabilities either under this Act or under the Central Sales Tax Act, 1956, the dealer shall not be entitled for interest.

(5) Where any amount of tax has been deducted from any dealer under section 34 as tax payable by him for any assessment year, for the purpose of sub-section (3), amount deducted shall be deemed to be tax due under this Act and shall not be refunded to the dealer where the dealer -

(a) has neither submitted returns of turnover and tax for all tax periods nor has submitted annual return for the assessment year in which sales are made; and

(b) has been assessed exparte for the assessment year in which sales are made.

(6) Where in respect of sale of any goods, any amount of tax has been realized by a registered dealer from -

(a) any official or personnel of-

(i) any foreign diplomatic mission or consulate in India; or

(ii) the United Nations or any other similar International body, entitled to privileges under any convention to which India is a party or any other law for the time being in force; or

(b) any consular or diplomatic agent of any mission, the United Nations or any other body referred to in sub-clause (i) or sub-clause (ii) of clause (a), and where such official, personnel, consulate or agent has purchased goods for himself or for the purpose of such mission, United Nations, or any other body, then if such official, personnel, agent, United Nations or body, after producing tax invoice referred to in sub-section(1) of section 22 or the sale invoice referred to in sub-section (3) of the said section, as may be applicable, in the prescribed manner, claims refund of the amount of tax realised from him, the Commissioner or the officer authorised by him in this behalf, shall refund such amount to such official, personnel, consular or agent of such mission, United Nations or body, as the case may be.

(7) Refund, under any provisions of this Act, may be given by refund voucher or cheque:

Provided that where a dealer submits e-tax return, refund of any amount found refundable to him may be allowed through e-cheque.

Explanation- For the purposes of this Act, prescribed date shall be deemed to be the date of refund.

(8) The amount refundable under the erstwhile Act may be adjusted against the amount of tax or penalty or any other dues under this Act."

40-A. Withholding of refund in certain cases (1) Notwithstanding anything to the contrary contained in any other provision of this Act or in any judgment, decree or order of any Court, Tribunal or other authority, where after giving reasonable opportunity of being heard to the dealer or the person concerned, the Commissioner is satisfied on the report of the assessing authority that,-

(a) the dealer has submitted false return of the turnover or has concealed particulars of his turnover or has deliberately furnished inaccurate particulars of such turnover or has prevented the assessing authority or any other competent authority from making inspection and examination of books, accounts or documents maintained or goods shown to be held in stock by such dealer or obstructed any competent authority in performing his functions under this Act; or

(b) any purchase in respect of which input tax credit in any return has been claimed, is not verifiable; or

(c) the dealer has obtained tax invoices without making actual purchase of goods; or

(d) the dealer has failed to furnish any security demanded from him under any provision of this Act or the Central Sales Tax Act, 1956; or

(e) the circumstances exist involving fraud, and where the Commissioner is of the opinion that if refund is allowed, it may not be possible to realize any amount of tax or penalty likely to be levied, he may permit the assessing authority to pass an order for withholding, as a security, such amount of refund as would be sufficient to cover the amount of tax or penalty or both, as the case may be, likely to be levied, for a period as may be determined by the Commissioner.

(2) Where the assessing authority finds that the circumstances mentioned in sub-section (1) exist and sufficient material is available on the record, it shall send a report to the Commissioner along with the material for seeking the permission to withhold the amount of refund.

(3) The assessing authority shall complete the proceeding for assessment or penalty or both, pending before him within such period as may be determined by the Commissioner.

Provided that if the Commissioner is satisfied that the circumstances exist which would prevent the assessing authority to complete the assessment or penalty proceeding within the determined period, he may extend the period not exceeding 90 days.

(4) After the completion of the proceeding withheld amount shall be adjusted against demand created due to assessment or penalty proceeding and the balance if any shall be refunded along with interest at the rate of twelve percent per annum from the date on which refund has become due, in the manner provided under this Act and the rules made there under.

Explanation: For the purposes of this section refund includes the refund of input tax credit."

13. The Erstwhile Act was repealed by the VAT Act w.e.f. 01.01.2008. section 81 of the VAT Act reads as under :-

"81. Repeal and saving . - (1) The Uttar Pradesh Trade Tax Act, 1948 (U.P. Act No. XV of 1948) (hereinafter in this section referred to as the repealed enactment) is hereby repealed.

(2) Notwithstanding such repeal, -

(a) any notification, rule, regulation, order or notice issued, or any appointment or declaration made, or confiscation made, or any penalty or fine imposed, any forfeiture, cancellation or any other thing done or any action taken under the repealed enactment, and in force immediately before such commencement shall, so far as it is not inconsistent with the provisions of this Act, be deemed to have been issued, made granted, done or taken under the corresponding provisions of this Act.

(b) any right, privilege, obligation or liability acquired, accrued or incurred under the repealed Act, shall not be affected and (manufacturing units) enjoying facility of moratorium for payment of tax under section 8 (2-A) of the said Act shall be entitled to claim moratorium for payment of tax in accordance with provisions of section 42.

(3) Any officer, authorised by the Commissioner under the repealed enactment, to exercise powers under section 10-B and sub-section(6) of section 13-A thereof, shall be deemed to have been authorised by the Commissioner to exercise such powers under section 56 and sub-section(7) of section 48 respectively.

(4) Any order made or direction issued by the State Government or by the Commissioner under the repealed Act, for carrying out purposes thereof, to the extent the same are not inconsistent with the provisions of this Act, shall be deemed to have been issued under the provisions of this Act.

(5) Any security or additional security, furnished under the provisions of the repealed Act, shall be deemed valid for the purposes under this Act only upon furnishing an undertaking from the surety to this effect in the prescribed form and manner within thirty days from the date of the commencement of this Act.

Provided that, in appropriate cases, the assessing authority may extend the time for furnishing undertaking from sureties.

(6) The mention of particular matters in this section shall not be held to prejudice or affect general application of section 6 of the Uttar Pradesh General Clauses Act, 1904, with regard to the effect of repeals."

14. Pertinent to our discussion, section 6 of the UP General Clauses Act, 1904 reads as under :-

"6. Effect of repeal. - Where any [Uttar Pradesh] Act repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not -

(a) revive anything not in force or existing at the time at which the repeal takes effect; or

(b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or

(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or

(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or

(e) affect any remedy or any investigation or legal proceeding commenced before the repealing Act shall have come into operation in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid;

and any such remedy may be enforced and any such investigation or legal proceeding may be continued and concluded, and any such penalty, forfeiture or punishment imposed as if the repealing Act had not been passed.

15. Section 81(2)(d) of the VAT Act preserves any right, privilege, obligation or liability acquired, accrued, or incurred under the repealed Act. On the date of repeal of the Erstwhile Act, the statutory law on rebate claimed by the petitioner under Erstwhile Act did not exist, by virtue of the repeal made. The challenge raised by the petitioner to the notification dated 14.10.2004 issued by the State Government in exercise of its powers under section 5 of the Erstwhile Act was pending consideration in Misc. Bench No. 6176 of 2004. That writ petition came to be decided on 16.04.2010.

16. Since, on the date of repeal, the earlier rebate notification dated 27.02.1998 stood withdrawn and only a challenge thereto was pending before this Court (under Article 226 of the Constitution of India), it may never be said that any right or privilege as to rebate had been acquired or had accrued in favour of the petitioner as may have been protected or saved under section 81(2)(b) of the VAT Act.

17. By way of effect caused by the repeal of the Erstwhile Act and by virtue of section 6(e) of the UP General Clauses Act, 1904, any remedy or legal proceeding if it had been commenced before the repeal (with respect to any right, privilege etc.) would remain intact. However, the proceeding here being a constitutional remedy availed by the petitioner, the same may even otherwise have survived the repeal. In any case, that remedy remained wholly untouched and/or unblemished by the repeal of the Erstwhile Act. It was availed by the petitioner by filing the earlier Writ Petition no. Misc. Bench No. 6176 of 2004. It was allowed on 16.04.2010. Plainly, the petitioner became entitled to claim refund under the Erstwhile Act, subject to normal/just exceptions, including a negative satisfaction as to unjust enrichment.

18. It may be noted, the principle of unjust enrichment may have dis-entitled a refund claim irrespective of its absence - as a statutory principle incorporated in that enactment itself. It being a judicially evolved principle, unjust enrichment would find its applicability to all cases of indirect taxation - wherever an assessee/claimant was found to have passed on the disputed tax liability to another, while resisting its imposition qua the State.

19. At the same time, there is no direct provision under the VAT Act or the UP General Clauses Act, 1904 as may be read to dis-entitle the petitioner to claim interest on refund under the Erstwhile Act. More importantly, there is no positive provision of law under the VAT Act either by virtue of language used in Sections 40 or 81 of that Act as may have allowed the petitioner to claim interest on refund of trade tax under the provisions of the VAT Act.

20. Reliance placed by learned Senior Counsel for the petitioner on the decision of the Supreme Court in National Engineering Industries Vs. Commissioner of Central Excise, Jaipur (supra) is wholly misplaced. In that case, the refund had been claimed for the tax period 1976-1977 to 1978-79. The quantum dispute was decided in favour of National Engineering Industries by the CEGAT. The claim for refund filed pursuant thereto was taken up for consideration in year 1993. By that time section 11B of the Central Excise Act, 1994 stood amended. By that amendment the principle of unjust enrichment stood statutorily incorporated in section 11B of the Central Excise Act, 1944. Applying that principle, the refund claim was rejected. In that context, with respect to the refund claim made under the same enactment, the Supreme Court held- the law prevalent at the time of refund had to be applied.

21. The aforesaid ratio is wholly inapplicable to the present facts. Present is not a case of amendment of section 29 of the Erstwhile Act but of repeal and replacement of the Erstwhile Act itself by a completely new enactment namely - VAT Act. Section 40(1) of the VAT Act only provides for refund of any amount paid by an assessee "in excess of the amount due from him under this Act". Since the disputed amount of trade tax had not been paid by the present petitioner by virtue of any notification and/or provision or proceeding under the VAT Act and, in fact, that deposit was made and the dispute arising therefrom, pre-dated the enforcement of the VAT Act section 40(1) of the VAT Act has absolutely no application to the present facts.

22. Since section 40(1) of the VAT Act is found to be wholly inapplicable viz-a-viz the claim for refund of trade tax for the A.Ys. 2004-04 to 2007-08, the language of section 40(2) of the VAT Act is of no help to the petitioner. That provision of law providing for interest on delayed payment of refund would apply to only those cases that fall under the purview of section 40(1) of the VAT Act, and to no other. That is the plain effect of sub-section (2) of section 40 of the VAT Act.

23. As noted above, neither section 81 of the VAT Act nor section 6 of the U.P. General Clauses Act, 1904, offer any assistance to the petitioner. They do not make applicable the provisions of the subsequent Act (VAT Act) to proceedings or dispute that may have arisen under the earlier Act (Erstwhile Act). They also do not contain any statutory principle that may allow the petitioner to claim interest in accordance with the provisions of the VAT Act.

24. Thus, we find, though the petitioner became entitled to the claim refund upon its earlier writ petition - Misc. Bench No. 6176 of 2004 being allowed, at the same time, it cannot rely on any statutory provision of the VAT Act to claim interest from the date of that order. Only two courses were available to the petitioner on 16.04.2010 to either pursue his claim of refund under section 29 of the Erstwhile Act or to have pressed before this Court to provide for payment of interest on the refund as the Erstwhile Act stood repealed on that date. Neither before this Court nor before the Supreme Court, the petitioner made a prayer for payment of interest on the refund of trade tax claimed by it.

25. Examined in that light, the direction of the Supreme Court to the revenue authorities to consider the refund claims made by the petitioner on the touchstone of just exceptions such as unjust enrichment, may not lead us anywhere. That observation was made in the interest of revenue. The principle - interest is a natural accretion on capital, is a general principle we find difficult to invoke in the present facts, in the face of the statutory provisions of section 29 of the Erstwhile Act and the earlier decision of this Court dated 16.04.2010 and the decision of the Supreme Court dated 12.11.2019.

26. It may have been open to the petitioner to claim other-than-statutory interest in the first leg of litigation when it had challenged the notification dated 14.10.2004 whereby the earlier rebate notification dated 27.02.1998 issued under section 5 of the Erstwhile Act had been withdrawn. The petitioner having failed to make that prayer then, it is too late in the day to allow that prayer. The same may remain barred on the principle of constructive res judicata.

27. In any case, we also find it difficult to grant such a prayer in face of the clear language of section 29 of the Erstwhile Act that has been conclusively interpreted in favour of the revenue in a series of decisions in M/S Indodan Milk Products Ltd. Vs. State of U.P. & Anr. (supra); P.P.G. Asian Paints Pvt. Ltd. Vs. Deputy Commissioner, Commercial Tax & Ors. (supra); Lucent Technology (P) Ltd. Vs. Commissioner, Trade Tax U.P. Lucknow (Full Bench) (supra) and; the Supreme Court decision in Commissioner of Sales Tax, U.P. Vs. Hind Lamps Ltd. (supra).

28. In the present case, the order of refund was passed on 29.6.2020 whereas the refund was adjusted against the demand of entry tax on 07.07.2020 i.e. within the statutory period of thirty (30) days. The merits of that decision apart (considered in our earlier decision dated 16.11.2021 in Writ Tax No. 748 of 2021), for both reasons noted above, the petitioner is found not entitled to interest on the amount of refund of trade tax Rs. 17,90,61,418/-, up to the date 07.07.2020.

29. As to the interest for the subsequent period, we have already provided for that payment at the rate equal to the statutory rate of interest. Such direction (though obtained on an unreconciled concession made by the revenue in that case), may remain referable to the inherent powers of this Court in exercise of jurisdiction under Article 226 of the Constitution of India where, in exercise of equity jurisdiction, interest awarded may be quantified with reference to a statutory provision.

30. Accordingly, all the writ petitions are dismissed.

31. No order as to costs.

Order Date :- 7.12.2021

Abhilash/Shubham/Prakhar