Delhi High Court
Nucleus Marketing & ... vs Commissioner Of Delhi Value Added ... on 12 July, 2016
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
22
+ W.P.(C) 7511/2015
NUCLEUS MARKETING & COMMUNICATION ..... Petitioner
Through: Mr. A.K. Babbar with Mr. Surinder
Kumar, Mr. Bhagat Tripathi, Ms. Amita
Babbar, Advocates.
versus
COMMISSIONER OF DELHI VALUE ADDED TAX,
DEPARTMENT OF TRADE & TAXES ..... Respondent
Through: Mr. Naushad Ahmed Khan, ASC
(Civil) with Ms. Astha Nigam, Advocate.
With
27
+ W.P.(C) 8104/2015
NUCLEUS IMPEX PVT. LTD ..... Petitioner
Through: Mr. A.K. Babbar with Mr. Surinder
Kumar, Mr. Bhagat Tripathi, Ms. Amita
Babbar, Advocates.
versus
COMMISSIONER OF DELHI VALUE ADDED TAX,
DEPARTMENT OF TRADE & TAXES & ANR ..... Respondents
Through: Mr. Naushad Ahmed Khan, ASC
(Civil) with Ms. Astha Nigam, Advocate.
And
28
+ W.P.(C) 8393/2015
NUCLEUS IMPEX PVT. LTD ..... Petitioner
Through: Mr. A.K. Babbar with Mr. Surinder
Kumar, Mr. Bhagat Tripathi, Ms. Amita
Babbar, Advocates.
W.P. (C) Nos. 7511, 8104, 8393/2015 Page 1 of 13
versus
COMMISSIONER OF DELHI VALUE ADDED TAX,
DEPARTMENT OF TRADE & TAXES & ANR ..... Respondents
Through: Mr. Naushad Ahmed Khan, ASC
(Civil) with Ms. Astha Nigam, Advocate.
CORAM:
JUSTICE S.MURALIDHAR
JUSTICE NAJMI WAZIRI
ORDER
% 12.07.2016
Dr. S. Muralidhar, J.:
1. Nucleus Impex Pvt. Ltd („NIPL‟) is the Petitioner in W.P.(C) Nos. 8104
& 8393/2015 and Nucleus Marketing & Communication („NMC‟) in
W.P.(C) 7511/2015. They are dealers duly registered under the Delhi
Value Added Tax Act, 2004 („DVAT Act‟) and Central Sales Tax Act,
1956 („CST‟).
2. The essential grievance of the Petitioners is against the failure by the
Respondent, Commissioner, Delhi Value Added Tax („DVAT‟) to grant
refund together with interest due to the Petitioners in accordance with
Section 38 of the DVAT Act. In the case of NMC the refund together with
interest was due for the months of November 2012 for the year 2012-13
and in the case of NIPL it was due for the 3rd and 4th quarter for 2012-13 as
well as 1st, 2nd, 3rd and 4th quarters of 2013-14.
3. The case of the Petitioners is that they have been filing returns as and
when due under the DVAT Act. For the month of November 2012, the
return was filed on 27th December 2012 claiming refund of Rs. 20,46,725.
It is submitted that in respect of the said claim, the due date for issuance of
refund in terms of Section 38 of the DVAT is 27th February 2013. As
regards the quarterly returns for the 3rd and 4th quarter relating to 2012-13,
returns were filed on 31st October 2013 (revised) and 26th April 2013
(original) respectively. The respective due dates for issuance of the refund
as claimed in these returns were 31st December 2013 and 26th June 2013
respectively.
4. As regards the returns for 2013-14 the revised returns for the 1st and 2nd
quarter were filed on 16th July 2014 claiming refund and for the 3 rd and 4th
quarter on 28th March 2015 (all revised returns) claiming refund. While the
due date for issuance of refund for the 1st and 2nd quarter for 2013-14 was
16th September 2014, the refund for 3rd and 4th quarter for 2013-14 was due
on 28th May 2015.
5. It is submitted that during the period in question, the dealers had less
output tax payable and more input tax credit („ITC‟) and such refund was
due as indicated in the return. Further, a reference is made to Circular No.
6 issued by the Commissioner, VAT on 15th June 2015 in terms of which
the Petitioners have the right to receive the refund within 15 days from the
date of filing of the return where the return is not picked up for audit. It is
stated that the said Circular issued under Section 67 (2) of the DVAT Act
is binding on the VATO and yet no refund has been made till date. It is
asserted that neither was the refund issued to the Petitioner within 15 days
nor was the case picked up for audit nor any security under Section 38 (5)
of the DVAT Act demanded. No notice was issued under Section 59 (2) of
the DVAT Act within 10 days from the date of filing return.
6. The main plank of the submission of Mr. A.K. Babbar, learned counsel
appearing for the Petitioner, is based on the decision of this Court in
Swarn Darshan Impex (P) Limited v. Commissioner, Value Added Tax
(2010) 31 VST 475 (Del) which was subsequently followed by this Court
in Dish TV India Limited v. Government of NCT of Delhi (2016) 92 VST
83 (Del)
7. Pursuant to the notices issued in these petitions, counter-affidavits have
been filed in W.P.(C) Nos. 8104 and 8393/2015 by the Respondent. In the
first place, it is urged that an alternative remedy is available to the
Petitioners under the DVAT Act since any return filed by the dealer is
deemed to be a notice of assessment under Section 31 (1) (b) of the DVAT
Act and if the Commissioner had failed to issue any assessment or order to
that effect then the person aggrieved by such failure can file an objection
before the Objection Hearing Authority („OHA‟) under Section 74 (2) of
the DVAT Act. If the dealer is still aggrieved by the decision of the OHA,
an appeal can be preferred before the Appellate Tribunal (AT) under
Section 76 (1) of the DVAT Act.
8. As regards the preliminary objection raised by the Respondent, the
Court finds that the matter pertains to the delay in processing and issuing
the refund due to the Petitioners. For the reasons discussed hereinafter it
would be seen that even in the matter of processing of the refund claim, the
Respondent has not adhered to the time limits set out in Section 38 of the
DVAT Act and in Circular No. 6 issued by the Commissioner, VAT under
Section 67 (2) of the DVAT Act. Relegating the Petitioner, in the
circumstances, to the alternative remedy of going before the OHA would
only further delay the refund and therefore, is not considered to be
efficacious. The preliminary objection is, accordingly, rejected.
9. It is submitted by the Respondent that a survey was undertaken by the
Enforcement Branch in the business premises of the Petitioners on 17th
October 2014 wherein not only some variation in cash and stock was found
but also it was admitted by the dealer that it was engaged in making
purchases "from suspicious dealers‟ thereby claiming false ITC and false
refunds. It is stated that the Petitioner voluntarily surrendered the ITC
claimed in respect of the transaction with M/s. Eagle Trade Mart.
10. As regards the failure to make refund, it is stated that in view of the
survey undertaken it became necessary to ask the Petitioner to place the
documents on record for the satisfaction of the Assessing Authority, before
assessing/processing of refund. Since the Petitioner had not filed any
requisite documents, the Respondent was constrained not to issue the
refund.
11. Interestingly the counter affidavit of the Respondent is silent on the
failure by the Respondent to process the refund application within the time
stipulated under Section 38 of the DVAT Act. It is also silent on the failure
to comply with the Circular No. 6 issued by the Commissioner, VAT
which is binding on the VATO.
12. It is pointed out by Mr. Babbar, learned counsel for the Petitioners that
the counter-affidavit filed on 16th December 2015 adverting to the survey
undertaken in the business premises of the Petitioners fails to mention that
even prior to the filing of the counter-affidavit, the OHA on 30th November
2015 allowed the objections filed on 12th May 2015 by NIPL to the 3rd
quarter of 2014-15. A copy of the order in Form DVAT 40 dated 30th
November 2015 passed by the OHA has been placed on record. It adverts
to the notice issued under Section 59 (2) of the DVAT Act to NIPL by the
AVATO following the survey conducted, seeking information and record
for not one but two assessment years. Later while framing assessment for
3rd quarter of 2014-15 the AVATO covered assessment for more than one
AY (2013-14 and 2014-15). This resulted in default assessment orders
dated 31st March 2015 being issued by the AVATO for the 3rd quarter of
2014-15 under Sections 32 and 33 of the DVAT Act to which the
objections were filed before the OHA. The OHA has referred to the fact
that the survey team had in the course of the survey collected two cheques
of Rs. 13,30,790 from the Petitioner towards tax and Rs. 2,66,158 towards
penalty without framing any assessment under the DVAT Act. The OHA
has in respect of the above actions concluded as under:
"As such, there appears to be tax collection prior to the
framing of assessment in the orders. There is documentary
evidence on record that proves collection of advance tax and
penalty is unlawful, and same was paid in protest under
coercion and duress. The facts of the case clearly indicate that
no assessment was framed prior to the collection/deposit of tax
and penalty sums above mentioned, hence not within the
framework of law. Objector is eligible to seek refund of above
stated advance tax and penalty paid as per the established
provisions of law after satisfying the Ward Officer showing
proof of payment of the same."
13. It is surprising that the Respondent has, while filing the counter-
affidavit on 16th December 2015, concealed the above fact of OHA having
found the survey undertaken to be illegal. The Court further notices that
the OHA has, in the same order, adversely commented on the fact that
although the notices of default assessments of tax, interest and penalty had
been issued by the AVATO for the relevant tax period of 3rd quarter of
2014, yet disallowance of ITC on the purchases made from M/s. Eagle
Trade Mart pertained to the earlier year 2013-14. It has been pointed out
that the case of disallowance of the ITC ought to have been taken into
consideration in a separate assessment order and not to be clubbed in the
assessments for the aforesaid 3rd quarter of 2014. The OHA has also
observed that the Petitioner had submitted evidence regarding the
functionality of the alleged cancelled dealer, M/s. Eagle Trade Mart,
through ward records and replies obtained under the RTI. Consequently,
the OHA had concluded that the claim of the surveying Enforcement
Officers that M/s. Eagle Trade Mart was a cancelled dealer, "appears to be
totally wrong, deceptive, incorrect and false, which is why, the Advance
Tax Collection/Deposit of Rs. 13,30,790 (tax) and Rs. 2,66,158 (penalty) is
most unlawful, obnoxious and contrary to the facts and circumstances of
the case. Therefore, on this count too, the impugned assessment orders
being null and void do not survive."
14. The OHA has held the Petitioner to be eligible for the refund of tax and
penalty paid for the tax period under which no assessment has been framed
till then. It is also to be noted that the above order of the OHA has attained
finality. Consequently, the main ground urged in the counter-affidavit for
not processing the refund application appears to be entirely without basis,
both factually and legally. In any event the fact remains that the survey
undertaken was not a justification for the Respondent to not process the
refund applications under Section 38 of the DVAT Act.
15. Section 38 of the DVAT Act reads as under:
"38. Refunds- (1) Subject to the other provisions of this section and
the rules, the Commissioner shall refund to a person the ·amount of
tax, penalty and interest, if any, paid by such person in excess of the
amount due from him.
(2) Before making any refund, the Commissioner shall first apply
such excess towards the recovery of any other amount due under this
Act, Or under the Central Sales Act, 1956 (74 of 1956).
(3) Subject to sub-section (4) and sub-section (5) of this section, any
amount remaining after the application referred to in sub-section (2)
of this section shall be at the election of the dealer, either-
(a) refunded to the person, -
(i) within one month after the date on which the return
was furnished or claim for the refund was made, if the
tax period for the person claiming refund is one month;
(ii) within two months after the date on which the
return was furnished or claim for the refund was made,
if the tax period for the person claiming refund is a
quarter; or
(b) carried forward to the next tax period as a tax credit in that
period.
(4) Where the Commissioner has issued a notice to the person under
Section 58 of this Act advising him that an audit, investigation or
inquiry into his business affairs will be undertaken or sought
additional information under Section 59 of this Act, the amount shall
be carried forward to the next period as a tax credit in that period.
(5) The Commissioner may, as a condition of the payment of a
refund, demand security from the person pursuant to the powers
conferred in section 25 of this Act within fifteen days from the date
on which the return was furnished or claim for the refund was made.
(6) The Commissioner shall grant refund within fifteen days from
the date the dealer furnishes the security to his satisfaction under
sub-section (5).
(7) For calculating the period prescribed in clause (a) of subsection
(3), the time taken to-
(a) furnish the security under sub-section (5) to the
satisfaction of the Commissioner; or
(b) furnish the additional information sought u:nder section
59; or
(c) furnish returns under section 26 and section 27, shall be
excluded.
(8) Notwithstanding anything contained in this section, where-
(a) a registered dealer has sold goods to an unregistered
person; and
(b) the price charged for the goods includes an . amount of tax
payable under this Act;
(c) the dealer is seeking the refund of this amount or to apply
this amount under clause (b) of sub-section (3) of this section;
no amount shall be refunded to the dealer or may be applied
by the dealer under clause (b) of subsection (3) of this
Section unless the Commissioner is satisfied that the dealer
has refunded the amount to the purchaser.
(9) Where-
(a) a registered dealer has sold goods to another registered
dealer; and
(b) The price charged for the goods expressly· includes an
amount of tax payable under this Act, the amount may be
refunded to the seller or may be applied by the seller under
clause (b) of sub-section (3) of this section and the
Commissioner may reassess the buyer to deny the amount of
the corresponding tax credit claimed by such buyer, whether
or not the seller refunds the amount to the buyer.
(10) Where a registered dealer sells goods and the price charged for
the goods is expressed not to include an amount of tax payable under
this Act the amount may be refunded to the seller or may be applied
by the seller under clause (b) of sub-section (3) of this section
without the seller being required to refund an amount to the
purchaser.
(11) Notwithstanding anything contained to the contrary in
subsection (3) of this section, no refund shall be allowed to a
dealer who has not filed any return due under this Act."
16. It is seen that in the first place there are strict time limits laid down
under Section 38 (3) read with Section 38 (7) of the DVAT Act. For taking
any action under Section 38 (8) or 38 (9) or 38 (11) the dealer would have
a notice in the first place by the Commissioner. Such notice would have to
be only issued in such a manner that the time limit prescribed under
Section 38 (3) of the DVAT is not exceeded. Where notice is already
issued under Section 58, or additional information sought under Section 59
of the Act, it is only in the circumstances under Section 38 (4) of the
DVAT Act, the refund amount sought shall be carried forward to the next
tax period as a tax credit in that period. In other words there are several
options available to the Commissioner, VAT or his delegates in response
to the application for refund. All these options have to be exercised in such
a manner that the time limit under Section 38 (3) is adhered to. Obviously,
the proceeding under Section 38 cannot result in reopening of concluded
assessment. The statutory rejection for that course of action is entirely
different. In other words, having missed the bus on the question of the
reopening of a concluded assessment for whatever reason, the
Commissioner cannot indirectly at the time of processing the application
for refund seek to reopen a concluded assessment.
17. As rightly pointed out by learned counsel for the Petitioner, the law
explained by this Court in Swarn Darshan Impex (P) Limited v.
Commissioner, Value Added Tax (supra) appears to squarely apply in the
facts and circumstances of the present case. In the said decision, the Court
analyzed Section 38 (3) as under:
"5. A plain reading of Section 38, which deals with refunds, makes it
clear that by virtue of sub-section (3) thereof, in the case where a
person is assessed quarterly, the refund is to be made to the dealer
within two months after the date on which the return is furnished or
the claim for the refund is made. Of course, it is the dealer's option
to elect as to whether the refund is to be made in cash or the said
amount is to be carried forward to the next tax period as a tax credit
in that period. In the present case, the petitioner has elected for the
grant of refunds in cash and has not elected for carrying forward the
refund amount to the next tax period. The provisions of Section
38(3) uses the expression "shall" and, therefore, it is clear that the
refund has to be made within two months from the date of the
return."
18. The Court in Swarn Darshan Impex (P) Limited v. Commissioner,
Value Added Tax (supra) next considered whether Section 38 of the
DVAT Act was directory or mandatory. While distinguishing the decision
in Commissioner of Sales Tax v. Behl Construction (2009) 21 VST 261
(Del), the Court observed as under:
"10. Such a situation does not arise in the present case inasmuch as
the provisions of Section 38 do not contemplate a situation where the
Commissioner does not grant a refund within the stipulated period.
The decision in Behl Construction (supra) was in the context· of the
provisions of Section 7 4 and those circumstances do not arise in the
present case. As pointed out above, what this court has to determine
is: what is the legislative intent behind the provisions of Section 38? It
is this intent which shall determine whether the stipulations as to time
are merely directory or they are mandatory as suggested by the use of
the word "shall". On going through all the sub-sections of Section 38
of the said Act, the legislative intent that is clearly discernible is that
refunds must be granted to a person entitled within the specific time
period stipulated in sub-section (3) thereof. This intention is further
fortified by a look at the provisions of sub-section (7) of Section 38
which stipulates that for calculating the period prescribed in clause
(a) of sub-section (3), the time taken to furnish the security under
sub-section (5) to the satisfaction of the Commissioner or to furnish
the additional information sought under Section 59 or to furnish
returns under Sections 26 and 27, "shall be excluded". This
provision as to exclusion of time taken in doing the aforesaid acts,
is in itself an indication that the legislature was dead serious about
the stipulation as to time for making refunds under Section 38 (3)
of the said Act. For, if the legislative intent were not so, what was
the need or necessity for providing for exclusion of time? Thus, not
only do the provisions of Section 38 employ the word "shall",
which is usual in mandatory provisions, the legislative intendment
discernible from the said provisions also points towards the
mandatory nature of the said provisions. Clearly, subject to the
exclusion of time provided under sub-section (7) or Section 3 8, in
a case falling under Section 38(3)(a)(ii), the refund has to be made
within two months from the date of the return."
19. The Court in Swarn Darshan Impex (P) Limited v. Commissioner,
Value Added Tax (supra) also rejected the argument that the issuance of
notice to the dealer under Section 59 of the DVAT Act could delay the
grant of refund. The Court observed as under:
"13. In any event, even if we assume that the said notice was
issued by the respondents and that it had been received by the
petitioner, it would not change the position in law. Sub-section (4)
of Section 3 8 has to be read with the provisions of sub-section (3)
of Section 38. By virtue of the latter provision, the refund had to
be paid to the petitioner within two months from the date of the
return furnished by him. No such notice under Section 59
requiring additional information had been issued during that
period. Consequently, the subsequent purported issuance of notice
under Section 59 cannot be taken as a ground for not paying the
refund to the petitioner. In this connection, the provisions of sub-
section (7) of Section 38 also needs to be examined. The said
provision stipulates that for calculating the period prescribed in
Section 38(3)(a), the time taken to, inter alia, furnish additional
information sought under Section 59 shall be excluded. It is
obvious that exclusion can only be when the period of limitation
itself has not run out. The consequence of this discussion is that
the notice under Section 59 in connection with refund has to be
issued within the period of two months stipulated in Section
38(3)(a)(ii). As a result, the submission of the learned counsel for
the respondents that because of issuance of notice under Section
59 of the said Act, albeit beyond the prescribed time, the refund
was not payable, is not tenable."
20. The Court is of the view that in view of the law explained in the above
decision, the failure by the Respondent to process the refund claimed by
the Petitioners for all the above tax periods appear to be wholly unjustified.
It is no longer open to the Respondent to raise an objection to the grant of
refund claimed together with interest.
21. In view of the matter, a direction is issued to the Respondent to process
the claim refund made by the Petitioners for the aforementioned periods as
set out in the three writ petitions and issue appropriate orders granting
refund together with interest in terms of Section 38 of the DVAT Act
within a period of eight weeks from today and in any event not later than
September 10, 2016. If there is any failure by the Respondent to comply
with the directions, the Petitioners shall seek appropriate relief in
accordance with law.
22. The petitions are allowed in the above terms with no orders as to costs.
23. Order be given dasti.
S.MURALIDHAR, J
NAJMI WAZIRI, J
JULY 12, 2016
Rm
