Adjusting Refund Amount against Amounts due under Default Notices issued Subsequent to Refund Period is not Justifiable under DVAT Act: SC [Read Judgement]
Adjusting Refund Amount against Amounts due under Default Notices issued Subsequent to Refund Period is not Justifiable under DVAT Act, rules SC
DVAT Act – Default Notices issued – Supreme court of india – Tax updates – Delhi Value Added Tax Act –
DVAT Act – Default Notices issued – Supreme court of india – Tax updates – Delhi Value Added Tax Act –
In a recent decision, the Supreme Court of India held that adjusting refund amount against amounts due under default notices issued subsequent to refund period is not justifiable under the Delhi Value Added Tax Act, 2004 (DVAT Act).
The issue for consideration before the Court was whether the timeline for refund under Section 38(3) of the Delhi Value Added Tax Act, 2004 must be mandatorily followed while recovering dues under the Act by adjusting them against the refund amount.
The Value Added Tax Officer passed an adjustment order dated 18.11.2022 to adjust the respondent’s claims for refund against dues under default notices dated 30.03.2020, 23.03.2021, 30.03.2021, and 26.03.2022. The respondent then filed a writ petition before the Delhi High Court for quashing the adjustment order and the default notices.
The High Court quashed the adjustment order and directed refund of Rs. 17,10,15,285/- for the 4th quarter of 2015-16 and Rs. 5,44,39,148/- for the 1st quarter of 2017-18, along with interest as per Section 42 till the date of realisation.
The ASG submitted that the timelines under Section 38(3) are only to ensure that interest is paid if the refund is delayed beyond the statutorily prescribed period. However, it was argued, that the timeline cannot be used to denude the power to adjust refund amounts against outstanding dues under Section 38(2). The refund can be adjusted as long as outstanding dues exist at the time when the refund is processed, even if it is beyond the stipulated timeline.
The counsel for the assessee has supported the reasoning of the High Court and has placed reliance on several judgments of the Delhi High Court that affirm this position of law.
A Two-Judge Bench comprising Justice Pamidighantam Sri Narasimha and Justice Prasanna Bhalachandra Varale observed that “By the time when the refund should have been processed as per the provisions of the Act, the dues under the default notices had not crystallised and the respondent was not liable to pay the same at the time. The appellant-department is therefore not justified in retaining the refund amount beyond the stipulated period and then adjusting the refund amount against the amounts due under default notices that were issued subsequent to the refund period.”
To Read the full text of the Order CLICK HERE
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