In a major decision, the Delhi High Court provided relief to Ashok Leyland Ltd, asserting that the denial of a ₹3.5 crore VAT refund based on the claim that the deposit was voluntary was unjustified.
The case arose when Ashok Leyland, a prominent manufacturer of motor vehicles, sought a refund for a substantial amount deposited in March 2013. This payment was made to meet revenue targets set by tax authorities but was later deemed excessive. Despite repeated requests for a refund, the tax department failed to process the application, leading the company to approach the Delhi High Court.
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The petitioner claimed that the amount deposited should be refunded as it was not properly accounted for in subsequent tax assessments. The revenue representative on the other hand, argued that, coercion and illegality impugned against the voluntary deposit of the amount of Rs. 3,50,00,000/- in apprehension of future demands that may be raised against the petitioner is an afterthought, for the petitioner admittedly never wrote any letter or made any representation before the respondent claiming that the said voluntary deposit was under any alleged coercion or alleged instructions by the respondent’s Officers and rather the petitioner’s letter dated 28.03.2013 asking the respondent to adjust the said amount towards pending/future liabilities or demands against the petitioner.
The court found that the initial rejection of the refund was largely based on the claim that the deposit was voluntary and that there had been a delay in claiming it.
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Justice Ravinder Dudeja and Justice Yashwant Varma, presiding over the case, highlighted several key points. The court ruled that whether the deposit was made under coercion or voluntarily was irrelevant to the claim for a refund.
The amount had been with the tax authorities since 2013, and no enforceable tax demand was outstanding. Additionally, the court noted that the delay in processing the refund was attributable to the tax department’s inefficiencies rather than any fault of Ashok Leyland.
Consequently, the claim for refund was not barred by limitations as argued by the tax authorities.
The court ordered the tax department to not only refund the principal amount but also to pay statutory interest on the delayed refund, in line with Section 42 of the DVAT Act, which stipulates interest on refunds due to delayed processing.
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Ashok Leyland Ltd is expected to receive the ₹3.5 crore refund along with accrued interest within four weeks of the decision.
The case sets a precedent for similar instances where taxpayers may face unjust delays or denials in refund claims, even when the tax has been paid voluntarily but erroneously.
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