Refund Claim Embedded In Return, No Need To File Fresh Claim: Delhi High Court Directs Dept. To Pay 6% Interest

The Delhi High Court has held that since the claim for a refund made by the assessee was embedded in its return and the assessee was not required to file a fresh claim.

The division bench of Justice Rajiv Shakdher and Justice Tara Vitasta Ganju has directed the Department to pay interest within 4 weeks.

The assessee filed its revised return on 10.07.2015 for the fourth quarter of the Financial Year 2014-15. Since the assessee's tax period arises every quarter, in terms of Section 38(3)(a)(ii), in the ordinary course, it would be entitled to a refund within two months after the date on which the return was furnished. Therefore, the two-month period would end on 10.09.2015.

The assessee was refunded Rs. 1,25,60,785 for the tax period on 14.08.2020, in Form DVAT-22.

The assessee was issued a notice under Section 59(2) of the Delhi Value Added Tax Act, 2004, calling upon it to submit the relevant records on 11.09.2015, i.e., after the expiry of two months from the date of furnishing the return.

The assessee did not elect for having the amount claimed as a refund in the return to be carried forward to the next tax period as a tax credit; which was an option available under Section 38(3)(b) of the Delhi Value Added Tax Act, 2004.

The assessee, while filing its revised return on 10.07.2015, had claimed a larger amount as the refund, i.e., Rs. 2,56,57,120 in terms of Section 38.

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 25.08.2017 did not direct payment of interest on Rs. 1,30,96,335, the assessee was constrained to approach the High Court.

The court noted that subject to other provisions of the very same Section and the Rules, the Commissioner is obligated to refund the tax, penalty and interest, if any, paid by an assessee, which is more than the amount due from it. Before ordering a refund, the Commissioner is empowered to apply the excess amount towards the recovery of any other amount. The assessee/dealer, on the other hand, 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.

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 held that the provisions of Section 42(1) if read with Section 39, make it clear that interest, in any event, was payable to the evaluator, from the date when it accrued to the assessee in terms of section 38(3)(a)(ii).

Case Title: Commissioner Of Trade And Taxes Versus Corsan Corviam Construction S.A.-Sadbhav Engineering Ltd. Jv

Citation: 2023 LiveLaw (Del) 281

Date: 29.03.2023

Counsel For Petitioner: Rajeev Aggarwal

Counsel For Respondent: Rajesh Jain

Click Here To Read The Order