Gujarat High Court
Asian Paints Limited vs State Of Gujarat on 2 December, 2022
Bench: Mauna M. Bhatt
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 22228 of 2022
FOR APPROVAL AND SIGNATURE:
HONOURABLE MS. JUSTICE SONIA GOKANI
and
HONOURABLE MRS. JUSTICE MAUNA M. BHATT
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1 Whether Reporters of Local Papers may be allowed NO
to see the judgment ?
2 To be referred to the Reporter or not ? NO
3 Whether their Lordships wish to see the fair copy NO
of the judgment ?
4 Whether this case involves a substantial question NO
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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ASIAN PAINTS LIMITED
Versus
STATE OF GUJARAT
==========================================================
Appearance:
MR MONAAL J DAVAWALA(6514) for the Petitioner(s) No. 1
for the Respondent(s) No. 2,3
ADVANCE COPY SERVED TO MS POOJA ASHAR, ASST.GOVERNMENT
PLEADER/PP for the Respondent(s) No. 1
==========================================================
CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI
and
HONOURABLE MRS. JUSTICE MAUNA M. BHATT
Date : 02/12/2022
ORAL JUDGMENT
(PER : HONOURABLE MS. JUSTICE SONIA GOKANI)
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
1. The challenge here is to the order
dated 02.11.2017 passed by the respondent
NO.3 granting refund of only principal
amount of Rs.2,15,80,739/- (Rupees Two
Crore Fifteen Lakh Eighty Thousand Seven
Hundred Thirty-nine) without interest for
the period spanning 2005 till the date to
the petitioner under Section 54 of the
Gujarat Sales Tax Act, 1969 ('the GST Act'
hereinafter) alleging the same to be
illegal and contrary to law.
2. This Court issued the notice to the
respondent on 10.11.2022 by a following
order:
"1. By way of the present petition under Article 226 of the
Constitution of India, challenges the order passed by the
respondents granting refund of only principal amount without
interest, which according to the petitioner is contrary to law.
The prayer sought for, is as follows:
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
"7. The petitioner, therefore, prays that this Hon'ble
Court be pleased to issue a writ of mandamus or a writ
in the nature of mandamus or a writ of certiorari or a
writ in the nature of certiorari or any other appropriate
writ, direction or order and be pleased to :
(a) command the Respondent/s to pay interest to the
petitioner at 6% p.a. on Rs.76,00,879/- from 1.4.2005
on Rs.34,39,839/- from 6.9.2008 and Rs.1,05,40,021/-
from 13.7.2009 till the date of actual refund on the
total amount of Rs.2,15,80,739/-; and/or
(b) any other and further relief deemed just and proper
be granted in the interest of justice;
(c) to provide for the cost of this petition."
2. We have heard learned Senior Advocate Mr.S.P.Soparkar
assisted by Mr.Monaal Davawala, learned Advocate for the
petitioner, who has drawn the attention of this court to
decision rendered in the case of very petitioner in Special
Civil Application No.18379 of 2018 for the Assessment Year
1997-98, wherein the respondents have been directed to pay
the interest at the rate of 6% per annum till the date of
actual refund on the principal amount. It is also noted that in
Special Leave Petition (Diary) No.19516 of 2020, no stay has
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
been granted by the Hon'ble Supreme Court, however the
matter has been tagged with the other matters.
3. Notice for final disposal returnable on 01/12/2022. Learned
AGP Ms.Pooja Ashar waives service of notice for respondent
Nos.1 to 3. She drawn attention of the court to the fact that
in Special Leave to Appeal No.30627 to 30629 of 2019, the
court has granted the stay until further orders and the matter
has been tagged with Special Leave Petition No.16117 of 2016
and Special Leave Petition (Diary) No.19516 of 2020 has also
been tagged with the same on 22/01/2021."
3. Affidavit-in-reply is not filed on the
ground that the matter is already covered
by the decision of this very court. The
point which is required to be considered is
as to whether the respondent is required to
be directed to pay the interest from
01.04.2005 till the date of actual refund
on the total amount.
4. We have heard extensively the learned
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
senior advocate, Mr.Soparkar assisted by
the learned advocate, Mr.Moonal Davawala
and learned AGP, Ms.Pooja Ashar.
5. The brief facts which are needed to be
considered are as follow:
5.1 The petitioner is engaged in the
business of manufacturing and selling
paints, varnishes, thinners, chemicals,
etc. During the assessment for Financial
Year 2004-2005, the purchase tax was levied
by the respondent authorities on tax free
goods, fuel, packing material, etc. and the
higher taxes on the red oxide. The order of
assessment was passed by the Assessing
Authority on 31.07.2008 and demand raised
was of Rs.1,71,99,195/- (Rupees One Crore
Seventy-one Lakh Ninety-nine Thousand One
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
Hundred Ninety Five Only) for the Financial
Year 2004-2005 and the petitioner paid
Rs.34,39,839/- (Rupees Thirty Four Lakh
Thirty-nine Thousand Eight Hundred Thirty-
nine Only) on 06.09.2008 and
Rs.1,05,40,021/- (Rupees One Crore Five
Lakh Forty Thousand Twenty-one Only) on
13.07.2009. Thus, the entire demand had
been completed on 13.07.2009 and
thereafter, the petitioner filed an appeal
against the Assessment Order.
5.2 The order in appeal was passed on
13.10.2017 granting relief to the
petitioner for the refund for the sum of
Rs.2,15,80,739/- (Rupees Two Crore Fifteen
Lakh Eight Thousand Seven Hundred Thirty-
nine Only) for the Financial Year 2004-
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
2005, which was duly processed by the
respondent No.3 on 18.11.2017. However, no
interest on this refund of Rs.2,15,80,739/-
(Rupees Two Crore Fifteen Lakh Eighty
Thousand Seven Hundred Thirty-nine Only)
had been provided.
5.3 According to the petitioner, he is
entitled to the interest from the year 2005
on the refund for which he sent repeated
reminders to various authorities and
multiple communications starting from
23.10.2018 upto 13.04.2002 fell on deaf-
ears.
5.4 The petitioner, is therefore, before
this Court urging the Court that under
Section 54 of the Act the interest from the
year 2005 as required under the law is
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
required to be granted.
6. It would be apt to refer to Section 54
of the Act:
"54.Interest on Delayed Refunds:
(1)(aa) Where refund of any amount becomes due to the
dealer by virtue of an order of assessment under section 41,
for the specified year, he shall, subject to the provisions of
this section, be entitled to receive, in addition to the said
amount, simple interest at the rate of twenty four per cent
per annum, on the said amount from the date immediately
following the date of closure of the accounting year to which
the said amount relates to the date of order of assessment:
PROVIDED that where dealer has paid any amount after the
closure of the accounting year and such amount is required to
be refunded, no interest shall be payable for the period from
the date of closure of such accounting year to the date of
payment of such amount:
PROVIDED FURTHER that no interest shall be payable on the
amount of refund which does not exceed rupees one hundred.
Explanation : For the purposes of this clause, the expression
"specified year" means -
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
(i) the financial year commencing from the 1st April, 1993;
(ii) the calendar year commencing from the 1st January,
1993;
(iii) Samvat year 2049 commencing from the Kartak sud
akam, or
(iv) co-operative year commencing from 1st October, 1993, or
(v) any such year thereafter.
(a) where an amount required to be refunded by the
Commissioner to any person by virtue of an order of
assessment under section 41 is not so refunded to him with
in a period of thirty days of the date of order, or
(b) where an amount required to be refunded by the
Commissioner to any person by virtue of any other order
made under this Act is not so refunded to him within a
period of ninety days of the date of the order, the State
Government shall pay to such person simple interest at
twenty four per cent per annum on the said amount from the
date immediately following the expiry of the period specified
in clause (a) or, as the case may be, clause (b) to the date of
the refund:
PROVIDED that no interest shall be payable where an appeal
or revision application is ;led or where an application has
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
been made to the Tribunal to refer to the High Court any
question of law.
Explanation 1 : If the delay in granting the refund within the
period specified in clause (a) or (b) is attributable to the
dealer, whether wholly or in a part the period of the delay
attributable to him shall be excluded from the period for
which interest is payable.
Explanation 2 : In the case of an order relating to refund
passed in appeal or in revision, the period of ninety days
shall be calculated from the date of the receipt of such order
by Sales Tax Officer. (2) Where any question arises as to the
period to be excluded for the purposes of calculation of
interest under the provisions of this section, such question
shall be determined by the Commissioner whose decision shall
be final."
6.1 Section 54 of the Act thus clearly
speaks of entitlement of dealer of an
amount which becomes due to the dealer by
virtue of the order of assessment under
Section 41, for the specified year. In
addition to the said amount, the simple
interest at the rate of nine percent per
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
annum, on the amount from the date
immediately following the date of closure
of the accounting year to which the said
amount relates.
6.2 The proviso to this states that if the
amount has been paid after the closure of
the accounting year and such amount is
required to be refunded, no interest shall
be payable for the period from the date of
closure of such accounting year to the date
of payment of the amount.
6.3 The second proviso also states that no
interest shall be payable on the amount of
refund which does not exceed rupees one
hundred.
6.4 This will apply to the refund which has
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
been granted beyond the period of 30 days
of the date of order. It also provides that
the amount which is to be refunded if has
not been refunded within a period of 90
days from the date of order. The rate of
interest to be paid is nine percent per
annum on the said amount from the date
immediately following the expiry of the
period specified in clause (a) or the
clause (b) as the case may be.
6.5 It also says that where an appeal or
revision is filed or where an application
has been made to the Tribunal to refer any
question of the law to the High Court
interest shall not be payable. If the delay
in granting the refund is attributable to
the dealer wholly or in a part, then that
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
period shall be excluded so far as the
interest is concerned.
7. Section 38 of the Gujarat Value Added
Tax Act, 2003 ('the GVAT Act' hereinafter)
also provided for the interest on the
refund, which speaks this wise.
"38. Interest on refund.
Where refund of any amount of tax becomes due to the
dealer by virtue of an order of assessment under section 34,
he shall subject to the provision of this section be entitled to
receive in addition to the amount of tax, simple interest at
the rate of six per cent per annum on the said amount of tax
from the date immediately following the date of the closure
of the accounting year to which the said amount of tax
relates till the date of payment of amount of such refund:
Provided that where the dealer has paid any amount of tax
after the closure of the accounting year and such amount is
required to be refunded, no interest shall be payable for the
period from the date of closure of such accounting year to
the date of payment of such amount.
(2) A registered dealer entitled to refund in pursuance of any
order other than referred to under sub-section (1) or in
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
pursuance of any order by any court, shall subject to rules,
be entitled to receive, in addition to the refund, simple
interest at the rate of six per cent per annum on the amount
of such refund from the date immediately following the date
of closer of the accounting year to which the said amount of
refund relates till the date of payment of amount of such
refund. 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
Act. If, as a result of any order passed under this Act, the
amount of such refund is enhanced or reduced, such interest
shall be enhanced or reduced accordingly:
(3) Where the realization of any amount remains stayed by
the order of any court or authority and such order is
subsequently vacated, interest shall be payable also for any
period during which such order remained in operation.
8. This Court in case of State of Gujarat
vs. Doshi Printing Press (Tax Appeal No.87
of 2015) was required to consider this very
aspect and it has held that once the order
is passed by the competent authority for
assessment and the appeal is preferred
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
before the Appellate Authority against such
order, the principles of doctrine of merger
would squarely apply and once the order of
assessment merges with the order of the
Appellate Authority in appeal, the
assessment is finalized by the Appellate
Authority in appeal. In the situation that
would arise, the argument would not be
available to the respondent that while
giving effect to Section 54(1)(aa) of the
GVAT Act, the effect would be given to the
assessment made by the Assessing Authority
and not to the further modification made
the First Appellate Authority or thereafter
by the Second Appellate Authority or even
the Third Appellate Authority, as the case
may be.
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
8.1 The Court has held that, it may also
result into discriminatory treatment to the
extent that the person, who succeeds in the
assessment if is otherwise found entitled
to the refund would get interest on the
refund but, the one carried the matter in
appeal and becomes entitled, would not get
the interest which can never be the case
and therefore, in taxing statute, the
principles of equity though may have a
little role to play, but, at the same time,
any statute in taxation matter should also
meet with the test of constitutional
provision.
8.2 This had been also followed in case of
State of Gujarat vs. Unjha Pharmacy,
reported in [2016] 341 ELT 211 (Guj.) as
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
well as in M/s.Syngenta Crop Protection
Pvt. Ltd. vs. State of Gujarat in (Special
Civil Application No.23287 of 2017).
8.3 Relevant findings and observations in
case of State of Gujarat vs. Unjha
Pharmacy (supra) are reproduced thus:
"The facts and the law referred to in paragraph (supra)
would clearly go to show that the appellant was undisputably
entitled to interest under Sections 214 and 244 of the Act as
held by the various High Courts and also of this Court. In the
instant case, the appellant's money had been unjustifiably
withheld by the Department for 17 years without any rhyme
or reason. The interest was paid only at the instance and the
intervention of this Court in Civil Appeal No. 1887 of 1992
dated 30.04.1997. Interest on delayed payment of refund was
not paid to the appellant on 27.03.1981 and 30.04.1986 due
to the erroneous view that had been taken by the officials of
the respondents. Interest on refund was granted to the
appellant after a substantial lapse of time and hence it should
be entitled to compensation for this period of delay. The
High Court has failed to appreciate that while charging
interest from the assesses, the Department first adjusts the
amount paid towards interest so that the principle amount of
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
tax payable remain outstanding and they are entitled to
charge interest till the entire outstanding is paid. But when it
comes to granting of interest on refund of taxes, the refunds
are first adjusted towards the taxes and then the balance
towards interest. Hence as per the stand that the Department
takes they are liable to pay interest only upto the date of
refund of tax while they take the benefit of assesses funds by
delaying the payment of interest on refunds without incurring
any further liability to pay interest. This stand taken by the
respondents is discriminatory in nature and thereby causing
great prejudice to the lakhs and lakhs of assesses. Very large
number of assesses are dversely affected inasmuch as the
Income Tax Department can now simply refuse to pay to the
assesses amounts of interest lawfully and admittedly due to
that as has happened in the instant case. It is a case of the
appellant as set out above in the instant case for the
assessment year 197879, it has been deprived of an amount
of Rs.40 lakhs for no fault of its own and exclusively because
of the admittedly unlawful actions of the Income Tax
Department for periods ranging up to 17 years without any
compensation whatsoever from the Department. Such actions
and consequences, in our opinion, seriously affected the
administration of justice and the rule of law.
COMPENSATION:
The word 'Compensation' has been defined in P. Ramanatha
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
Aiyar's Advanced Law Lexicon 3rd Edition 2005 page 918 as
follows: "An act which a Court orders to be done, or money
which a Court orders to be paid, by a person whose acts or
omissions have caused loss or injury to another in order that
thereby the person damnified may receive equal value for his
loss, or be made whole in respect of his injury; the
consideration or price of a privilege purchased; some thing
given or obtained as an equivalent; the rendering of an
equivalent in value or amount; an equivalent given for
property taken or for an injury done to another; the giving
back an equivalent in either money which is but the measure
of value, or in actual value otherwise conferred; a
recompense in value; a recompense given for a thing received
recompense for the whole injury suffered; remuneration or
satisfaction for injury or damage of every description;
remuneration for loss of time, necessary expenditures, and for
permanent disability if such be the result; remuneration for
the injury directly and proximately caused by a breach of
contract or duty; remuneration or wages given to an
employee or officer." There cannot be any doubt that the
award of interest on the refunded amount is as per the
statute provisions of law as it then stood and on the peculiar
facts and circumstances of each case. When a specific
provision has been made under the statute, such provision
has to govern the field. Therefore, the Court has to take all
relevant factors into consideration while awarding the rate of
interest on the compensation. (Emphasis supplied)
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
12. The aforesaid shows that in the above referred decision,
the Apex Court did maintain that the interest on the amount
of refund, if provided by the statute, such would govern the
field, but the Court has to take all relevant factors into
consideration while awarding rate of interest on
compensation.
13.In the latter decision of the Larger Bench of the Apex
Court in the case of Commissioner of Income Tax, Gujarat Vs.
Gujarat Fluoro Chemicals (supra) at paragraphs 5, 6, and 7, it
was observed and held as under:-
5. Since there was an inordinate delay on the part of
the Revenue in refunding the amount due to the
assessee this court had thought it fit that the assessee
should be properly and adequately compensated and,
therefore, in paragraph 51 of the judgement, the court
while compensating the assessee had directed the
Revenue to pay a compensation by way of interest for
two periods, namely; for the assessment years 197778,
197879, 198182, 198283 in a sum of Rs.40,84,906 and
interest at 9 per cent from March 31, 1986, to March
27, 1998, and in default, to pay the penal interest at
15 per cent, per annum for the aforesaid period.
6. In our considered view, the aforesaid judgment has
been misquoted and misinterpreted by the assessees and
also by the Revenue. They are of the view that in
Sandvik case (supra) this Court had directed the
Revenue to pay interest on the statutory interest in case
of delay in the payment. In other words, the
interpretation placed is that the Revenue is obliged to
pay an interest on interest in the event of its failure to
refund the interest payable within the statutory period.
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
7. As we have already noticed, in Sandvik case (supra)
this Court was considering the issue whether an
assessee who is made to wait for refund of interest for
decades be compensated for the great prejudice caused
to it due to the delay in its payment after the lapse of
statutory period. In the facts of that case, this Court
had come to the conclusion that there was an
inordinate delay on the part of the Revenue in
refunding certain amount which included the statutory
interest and therefore, directed the Revenue to pay
compensation for the same not an interest on interest.
14.The aforesaid shows that in the latter decision of the
Larger Bench, it was held that the decision in the case of
Sandvik Asia Limited Vs. Commissioner of Income Tax &
Others (supra) cannot be read to mean that Revenue is
obliged to pay interest on interest in the event of its failure
to refund the interest payable within the statutory period.
The Apex Court further held that in the peculiar facts and
circumstances of the case of Sandvik Asia Limited Vs.
Commissioner of Income Tax & Others (supra) the Court had
come to the conclusion that there was inordinate delay on
the part of the Government to refund certain amount, which
includes statutory interest and, therefore, directed the
Revenue to pay compensation for the same, but not interest
on interest.
15.In our view, as per the above referred observations of the
Apex Court in the case of Commissioner of Income Tax,
Gujarat Vs. Gujarat Fluoro Chemicals (supra), obligation on
the part of the Government to pay compensation for
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nonpayment of the statutory interest by way of interest on
interest was not approved. Further, in the above referred
decision of the Larger Bench of the Apex Court at paragraph
7, it was observed that the interest provided under the
statute, which may be claimed by the Assessee from the
Revenue would be available and interest on such statutory
interest would not be available.
16.From the conjoint reading of the decision of the Apex
Court in the case of Sandvik Asia Limited Vs. Commissioner
of Income Tax & Others (supra) and the latter decision of the
Larger Bench in the case of Commissioner of Income Tax,
Gujarat Vs. Gujarat Fluoro Chemicals (supra) it appears that
the liability to pay interest on interest by the Revenue is not
approved and to that extent the contention of the Revenue
can be maintained. But the further contention of the Revenue
that no interest whatsoever would be payable if the refund of
the amount of tax or refund of the amount deposited towards
tax is to be made, no interest whatsoever would be available
by way of compensatory measure.
17.In our view, the general principles for awarding
compensation to the Assessee for the delay in receiving
monies properly due to it is not disapproved by the Larger
Bench of the Apex Court in the case of Commissioner of
Income Tax, Gujarat Vs. Gujarat Fluoro Chemicals (supra).
"14. In our view, the above-referred observation made
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by this Court in the above-referred decision in case of
Gujarat Fluoro Chemicals (supra) is a complete answer
to the contention of the learned A.G.P. that the interest
can be awarded even if not expressly barred by the
statute or that the taxing statute is silent about the
same."
6. Therefore, since the issue is covered by the decision of this
Court dated 9.2.2015 rendered in Tax Appeal No.87 of 2015
and allied matters, we see no reason to deviate from the
same. In the present tax appeals, no question of law arises
and hence, both the tax appeals are dismissed."
8.4 Relevant findings and observations in
M/s.Syngenta Crop Protection Pvt. Ltd. vs.
State of Gujarat are as follow:
"xxx
Section 54 of the Gujarat Sales Tax Act pertains to
interest of delayed refund. Relevant portion of which
reads as under :-
"54. Interest on delayed refund :
[1] Where refund of any amount becomes due to the
Dealer by virtue of an order of assessment under
Section 41, for the specified year, he shall, subject to
the provisions of this Section, be entitled to receive, in
addition to the said amount, simple interest at the rate
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
of nine per cent, per annum on, the said amount from
the date of immediately following the date of closure of
the accounting year to which the said amount relates to
the date of order of assessment-Provided that where
dealer has paid any amount after the closure of the
accounting year and such amount is required to be
refunded, no interest shall be payable for the period
from the date of closure of such accounting year to the
date of payment of such amount :
Provided further that no interest shall be payable
on the amount of refund which does not exceed rupees
one hundred :
[Explanation : "For the purposes of this clause, the
expression "specified year" means -
(i) the financial year commencing from the 1st April
1993; (ii) the calender year commencing from the 1st
January 1993; (iii) Samvat year 2049 commencing from
the Kartak Sud Ekam; or (iv) Cooperative year
commencing from 1st October 1993, or (v) any such
year thereafter]. [(a) where an amount required to be
refunded by the Commissioner to any person by virtue
of an order of assessment under Section 41 is not so
refunded to him within a period of thirty five days of
the date of order, or (b) Where an amount required to
be refunded by the Commissioner to any person by
virtue of any other order made under this Act is not so
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
refunded to him within a period of ninety days of the
date of the order, the State Government shall pay to
such person simple interest at nine percent per annum
on the said amount from the date immediately
following the expiry of the period specified in clause (a)
or, as the case may be, clause (b) to the date of the
refund."
Under these provisions, thus, where refund of any
amount becomes due by virtue of an order of
assessment, the Dealer would be entitled to receive
simple interest @ 9% per annum on such amount, from
the date immediately following the date of closure of
the accounting year concerning the order of assessment.
However, if the amount is deposited after the closure of
the accounting year, interest will not be payable for the
period from the date of closure of the accounting year
to the date of payment of such amount. As per clause
(a) of sub-section [1], where amount of refund; by
virtue of an order of assessment is not refunded within
thirty five days of the order, liability to pay interest @
9% per annum would continue till the actual payment.
Clause (b) of sub-section [1] provides that where an
amount is required to be refunded by the Commissioner
by virtue of any other order made under the Act and is
not refunded within ninety days of the order, the
liability to pay simple interest @ 9% per annum would
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
arise.
According to learned AGP, case of the petitioner
would fall under Clause (b) since the refund claim
arises out of an order of appellate authority and not an
order of assessment. However, such a question was
examined by the Division Bench of this Court in the
case of State of Gujarat v. Doshi Printing Press, [2015]
82 VST 384 [Gujarat] wherein, the Court held and
observed as under :
"9. In our view, once an order is passed by the
competent authority for assessment and the appeal is
preferred before the Appellate Authority against such
order of assessment, and the Appellate Authority
modifies the order of assessment, the principles of
doctrine of merger would squarely apply. Once the
order of assessment merges with the order of the
Appellate Authority in appeal, one may say that the
assessment is finalized by the Appellate Authority in the
appeal. Same would be the situation if such
circumstances arise in the Second Appeal or in any
further appeal, expressly provided by the statute and
the order of assessment of assessing authority or the
first Appellate Authority is modified. One may say that
the consequence in law would be the assessment made
by the first authority and further modified by the first
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
Appellate Authority and further modified by the second
Appellate Authority or the third Appellate Authority as
the case may be but, the ultimate determination of
assessment is made by the Appellate Authority in
appeal. Under these circumstances, it cannot be said
that while giving effect to Section 54(1)(aa) of the Act,
the effect would be available to the assessment made
by the assessing authority only and not the further
modification made by the first Appellate Authority or
thereafter, the second Appellate Authority or even third
Appellate Authority as the case may be. The
interpretation canvassed by the Revenue of Section
54(1) (aa) of the Act, if accepted, would run counter to
the basic principles of doctrine of merger which is well
accepted doctrine incorporated in the system of
administration of justice.
10. Apart from the above, it may also result into
discriminatory treatment to the extent that one, who
succeeds in the assessment and is entitled to the refund,
would get interest on refund but the one, who has
carried the matter in appeal and becomes entitle to get
the refund on account of order of the Appellate
Authority, would not get interest.
11. It is true that in taxing statute, principles of equity
may have little role to play but at the same time, any
statute in taxation matter should also meet with the test
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
of constitutional provision."
This judgment in case of Doshi Printing Press
[Supra] was followed by Division Bench of this Court in
the case of State of Gujarat v. Unjha Pharmacy,
reported in 2016 [341] ELT 211 (Guj).
We are conscious that the Division Bench in case
of Doshi Printing Press [Supra] has also in the latter
portion of the decision discussed the compensatory
nature of interest to be paid and the Department is in
appeal before the Supreme Court. However, as far as
first portion of the judgment; reproduced hereinabove,
we have no hesitation in respectful concurrence. When
the statutory appellate authority allows the appeal of an
assessee, it only corrects the order of assessment. In
other words, he gives legal shape to the contours of the
matter, which in any case the Assessing Officer should
have adopted. In terms of Section 54 [1] of the Gujarat
Sales Tax Act, therefore, in such a situation, it cannot
be stated that the refund claim of the assessee arises
out of an order other than an order of assessment. The
appellate authority while allowing the appeal merely
corrects the assessment. It is such corrected assessment
which would prevail. The refund claim of the assessee,
therefore, cannot be stated to have arisen other than
from the order of assessment.
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
Somewhat similar provisions have been made in
the Gujarat Value Added Tax Act concerning interest
under Section 38. The said Section reads as under :
"38. Interest on refund
(1) Whether refund of any amount of tax becomes due
to the dealer by virtue of an order of assessment under
Section 34, he shall subject to the provision of this
section be entitled to receive in addition to the amount
of tax, simple interest at the rate of six percent per
annum on the said amount of tax from the date
immediately following the date of the closure of the
accounting year to which the said amount of tax relates
[till the date of payment of amount of such refund]
Provided that where the dealer has paid any amount of
tax after the closure of the accounting year and such
amount is required to be refunded, no interest shall be
payable for the period from the date of closure of such
accounting year to the date of payment of such
amount.
(2) A registered dealer to refund in pursuance of any
order other than referred to under sub-section (1) or in
pursuance of any order by any court, shall subject to
rules, be entitled to receive, in addition to the refund,
simple interest at the rate of six percent [per annum on
the amount of such refund from the date immediately
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
following the date of closer of the accounting year to
which the said amount of refund relates till the date of
payment of amount of such a refund. The interest shall
be calculated on the amount of refund due after
deducting there from any tax, interest, penalty or any
other dues under this Act, or under the Central Act. If,
as a result of any order passed under this Act, the
amount of such refund is enhanced or reduced, such
interest shall be enhanced or reduced accordingly.
[xxx]
(2) Where the realization of any amount remains stayed
by the order of any court or authority and such order
is subsequently vacated, interest shall be payable also
for any period during which such order remained in
operation."
In this section also, thus, there is a mandate for
granting interest @ 6% per annum from the date of
closure of the accounting year, or from the date of
payment of the amount by the Dealer till the date of
payment of amount of refund, if such refund becomes
due and payable by virtue of an order of assessment.
This section therefore also recognizes the right of a
dealer to receive refund with interest at the prescribed
rate from the date of payment or from the date of
closure of accounting year; whichever is later, till the
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
actual refund is made."
8.5 In petitioner's own case also, this
Court in Asian Paints Limited vs. State of
Gujarat in Special Civil Application
Nos.18379 and 18764 of 2018 has held thus:
"...
8. In the backdrop of the rival contentions, it is not in
dispute that the controversy involved in the present case is
no longer res integra, inasmuch as the same stands decided
by the above referred decision of this court in the case of M/
s Syngenta Crop Protection Pvt. Ltd. v. State of Gujarat
(supra). In the said case this court, relied upon an earlier
decision of this court in the case of State of Gujarat v. Doshi
Printing Press (supra) wherein the court turned down the
contention that while giving effect to section 54(1)(aa) of the
Act, the effect would be available to the assessment made by
the assessing authority only and not the further modification
made by the first appellate authority or thereafter, the second
appellate authority or even third appellate authority, as the
case may be. The court held that the interpretation canvassed
by the revenue of section 54(1) (aa) of the Act, if accepted,
would run counter to the basic principles of the doctrine of
merger which is a well accepted doctrine incorporated in the
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
system of administration of justice. Relying upon the above
decision, the court held that when the statutory appellate
authority allows the appeal of an assessee, it only corrects
the order of assessment. In other words, he gives legal shape
to the contours of the matter, which in any case the
Assessing Officer should have adopted. Therefore, in terms of
section 54(1) of the Gujarat Sales Tax Act, in such a
situation, it cannot be stated that the refund claim of the
assessee arises out of an order other than an order of
assessment. The appellate authority while allowing the appeal
merely corrected the assessment. It is such corrected
assessment which would prevail. The refund claim of the
assessee, therefore, cannot be stated to have arisen from an
order other than the order of assessment. The court further
held that the amounts were recovered from the petitioners
only in the month of February 2010, that is, long after the
VAT Act was brought in force and that the petitioner cannot
seek interest on the refund at the rate prescribed under the
repealed Gujarat Sales Tax Act merely because the amount
involved was in relation to a period when the Gujarat Sales
Tax Act was in force. To that extent, the petitioner's
contention was negatived.
9. It is thus clear that the petitioner
would be entitled to the interest at the
rate of 6% from the date from April 2005
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
till the date of actual refund on the
amount of Rs.2,15,80,739/-(Rupees Two Crore
Fifteen Lakh Eighty Thousand Seven Hundred
Thirty-nine Only). The petitioner had filed
the appeal before the Gujarat Value Added
Tax Tribunal on 11.12.2017 and the judgment
was passed in case of M/s. Sygenta Crop
Protection Pvt. Ltd. vs. State of Gujarat
(supra) on 19.04.2018 and the petitioner's
case was decided on 07.02.2019.
10. The only aspect that requires to be
considered is that the similar such issue
had been challenged before the Apex Court
by way of Special Leave to Appeal Nos.30627
and 30629 of 2019 by the State of Gujarat
in case of Voltas Limited where the Court
has by way of an interim order in respect
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
of the stay had granted stay until further
order and directed this Special Leave
Petition to be tagged with Special Leave
Petition No.16117 of 2016.
11. We are also given to understand that
before the Apex Court challenge is made to
the decision rendered in case of the State
of Gujarat vs. Saurashtra Chemicals by way
of SLP No.16117 of 2016 arising from
Special Civil Application No.19478 of 2016
(decided on 09.05.2016) where no stay has
been granted and condonation of delay in
filing the Special Leave Petition is also
pending. There are couple of such matters
which are pending for admission for a long
time. In case of Asian Paints Limited vs.
State of Gujarat (supra) also for admission
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
and interim relief the matter is pending at
the stage of condonation of delay.
12. The request on the part of learned AGP,
Ms.Pooja Ashar was not to follow the
earlier decision.
13. Learned senior advocate, Mr.Soparkar
appearing with learned advocate,
Mr.Davavala has pressed into service the
order of the First Court in case of Asian
Paints Limited vs. J.P.Gupta, State of
Gujarat (Misc. Civil Application No.776 of
2020 in Special Civil Application No.1876
of 2018) where the Court has in contempt
jurisdiction on dated 28.03.2022 has
directed the amount to be refunded.
"Learned counsel appearing for the complainant submit that
order alleged to have been violated has since been complied.
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
Placing his submission on record, contempt proceedings
stands closed. Notice is discharged."
14. It is thus clear that the First Court
directed the amount to be deposited when
the challenge before the Apex Court had
already been made. The State has accepted
this order without a murmur. It is also to
note that the case which has been followed
for the purpose of seeking the refund, no
stay has been granted by the Apex Court and
couple of matters are still at a diary
stage.
15. In that view of the matter, the request
on the part of the petitioner for the
interest on the amount of delayed refund
deserves to be allowed, following the
decision in case of M/s Syngenta Crop
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
Protection Pvt. Ltd. v. State of Gujarat
(supra). The petitioner thus would be
entitled to the interest on the delayed
refund at the rate of 6% per annum. It is
thus made clear in all the decisions which
have been referred to hereinabove that when
the doctrine of merger is borne in mind and
when the statutory authority allows the
appeal of an assessee, he gives legal shape
to the contours of the matter which
assessing authority should have adopted and
therefore, the refund claim of the assessee
would essentially arise from the order of
assessment.
16. Resultantly, this petition is allowed.
The respondent No.3 is directed to pay
interest to the petitioner at the rate of
6% per annum from 13.07.2009 till the date
C/SCA/22228/2022 JUDGMENT DATED: 02/12/2022
of actual refund on the principal amount of
Rs.2,15,80,739/-, and not later than twelve
weeks from the date of receipt of a copy of
this judgment.
17. Over and above the regular mode of
service, direct service through e-mode on
official email address is also permitted.
(SONIA GOKANI, J)
(MAUNA M. BHATT,J)
M.M.MIRZA
