Delhi High Court: Assessee Not Required to File Fresh Claim when Refund Claim is Embedded in Return

Delhi High Court: Assessee Not Required to File Fresh Claim when Refund Claim is Embedded in Return

The Delhi High Court by its coram comprising of Justices Rajiv Shakdher and Tara Vitasta Ganju while adjudicating an appeal preferred by the revenue observed that since the claim for a refund made by the assessee was embedded in its return, it did not arise out of an order passed by the Court or an authority constituted under the Delhi Value Added Tax Act, 2004 (hereafter referred to as the ‘2004 Act’) the assessee was not required to file a fresh claim under DVAT 21.

In the present case the assessee filed its revised return on 10 July, 2015 for the fourth quarter of the Financial Year (FY) 2014-15 (hereafter referred to as the ‘relevant tax period’).

It was submitted that the assessee’s tax period arose evert quarter, in terms of Section 38(3)(a)(ii), in the ordinary course, it was entitled to the refund within two months after the date on which the return was furnished, which, as indicated above, was filed on 10 July, 2015. Therefore, the two-month period would end on 10 September, 2015. The assessee was refunded Rs. 1,25,60,785 for the relevant tax period on 14 August, 2020, in Form DVAT-22. The notified rate of interest, we were informed, is 6% (simple) per annum.

The assessee was issued a notice under Section 59(2) of the 2004 Act, calling upon it to submit the relevant records on 11 September, 2015, i.e., after the expiry of two months from the date of furnishing the return, as prescribed under Section 38(3)(a)(ii) of the 2004 Act. The assessee, while filing its revised return on 10 June, 2015, had claimed a larger amount as the refund, i.e., Rs. 2,56,57,120 in terms of Section 38 of the 2004 Act.

A notice of default assessment of tax and interest was issued under Section 32 raising a demand amounting to Rs. 1,25,60,785. The Commissioner of Trade and Taxes granted the assessee a partial refund out of the amount claimed in the return, after adjusting the amount set forth in the notice of default assessment. The assessee was issued a refund order restricted to Rs 1,30,96,335.

Since the order dated 25 August, 2017 did not direct payment of interest on Rs. 1,30,96,335, the assessee was constrained to approach the High Court.

The issue that came for consideration before the Court was, whether the assessee's right to interest fructifies immediately, upon the expiry of the period prescribed under Section 38(3)(a)(ii) of the 2004 Act.

The Court on pursuing the relevant Section observed, “subject to other provisions of the very same Section and the Rules, the Commissioner is obliged to refund the tax, penalty, and interest, if any, paid by an assessee, which is more than the amount due from it. Furthermore, before ordering a refund, the Commissioner is empowered to apply the excess amount towards the recovery of any other amount, inter alia, due under the 2004 Act.”

The Court pointed out that the assessee/dealer is given the right to elect whether it would receive the refund or have it carried forward to the next tax period as a tax credit. Further, in those cases where the assessee/dealer elects to recover the refund, interest accrues in favor of the assessee/dealer depending on the tax period for which the refund is claimed.

The bench clarified that Section 38(5) vests discretion in the Commissioner to grant the refund against security, pursuant to powers conferred on him under Section 25 within 45 days from the date on which the return is furnished or a claim for refund is made.

The Court was of the view that, for assesses/dealers, where the tax period for claiming the refund is one month, interest would accrue from the date one-month elapses after the date of filing of the return or the date when the claim for refund is lodged. Where, however, the assessee/dealer's tax period for claiming the refund is a quarter, interest accrues two months after the return is filed or a claim for refund is made.

Sub-section (4) of Section 38 makes it amply clear that if a notice is issued under Section 58 or additional information is sought under Section 59 of the 2004 Act, the refund will be carried forward to the next tax period as a tax credit, stated the bench.

The Court noted that in the instant matter, claim for the refund was made in the revised return. Sub-rule (4) of Rule 34 would have no application as this provision alludes to lodgment of a claim for refund in form DVAT-21, where a refund arises out of a judgement of a court or an order of the authority constituted under the 2004 Act, stated the bench.

“Even if the refund is withheld, the assessee would be entitled to interest under Section 42(1) of the 2004 Act when as a result of the appeal or any other proceedings, the assessee becomes entitled to a refund; an aspect which is plainly evident on a bare perusal of Section 39 of the 2004 Act,” the bench discerned.

Accordingly, the Court ordered in favor of assessee and held that the assessee was entitled to interest at the rate of 6% (simple) per annum for the period spanning between 11 September, 2015 and 14 August, 2020 and that the Interest was ordered to be quantified on the principal amount refunded to the assessee i.e., Rs.1,25,60,785.