Furnishing of CST Forms is not mandatory for processing refund, says Delhi HC [Read Judgment]

Finance Act - Delhi High Court - taxscan

Delhi High Court directs DVAT Authorities to dispose Refund Claims within 4 weeks,

In a recent ruling, the division bench of the Delhi High Court held that furnishing of statutory forms under the CST Act is not a mandatory requirement in the processing of refund claims.

The bench comprising of Justice Ravindra Bhatt and Justice Najmi Waziri further directed the DVAT authorities to process all the pending refund claims of the petitioners in respect of the documents by calling specific details within reasonable time and dispose of the refund claims along with applicable interest as prescribed under the law within four weeks.

The Court was hearing a bunch of petitions wherein the petitioners sought for directions that their refund claims, pending for long periods, should be processed and monies disbursed in a time-bound manner. In all these cases, the Revenue contended that the refund claims can be processed only after the verification of necessary documents, including Central Sales Tax (CST) documents.

The Revenue further contended that after introduction of Section 38 (7) (d) – to the DVAT Act, in 2012, the assessee/dealers’ refund claims cannot be said to be complete in case any amounts are due and owing under the CST regime.

The bench noted that as per section 38(7)(c) and (d) the dealer is under an obligation to furnish “the declaration or certificate forms” required by the CST Act. “Undoubtedly – again seen in an isolated manner, this obligation is an effectuation of Sections 8 and 11(2) (CST Act) and Rule 12 that prescribe preconditions for grant of concessional or NIL CST levies. The question is – are Sections 38(7)(c) and (d) “game changers” which disrupt or suspend the time-frame under Section 38(3)? This court’s considered view is in the negative, and that there is no change, in the time-periods.”

Allowing the petitions, the bench noted that nowhere in the above sections it is stated that the original paper declarations in CST Forms C, E1, E2, F, H, I etc. are to be furnished.Further, the bench emphasized that the DVAT authorities should examine the claims of the petitioners in terms of the local law, i.e, the DVAT Act and the Rules.

Diving deeply into the facts of the case, and the in the light of various notifications and circulars issued by the DVAT Department, it was observed that even though the amendment to Section 38(7) was made in June 2012, within three weeks, a statutory notification followed by circulars was issued advising all dealers to furnish requisite details online and to not file the original copies of the declarations. “The language of Section 38(7)(d) nowhere specifies that actual physical or hard copy of the original certificate is required. Moreover, the necessary form, i.e. Form-9 elicits exhaustive details in respect of CST and concessional duties with regard to receipt and pendency of declarations in Form E1, E2, F, H etc. Each of these relate to specific quarters for all the previous four years and are to be furnished by the dealers. Such being the case, the Revenue’s contention that the mandate of Sections 11(2) of the DVAT Act and Rule 12 of the CST Rules, overriding all other concerns and suspending as it were, the obligation to frame the assessments and process refunds within the timeframe prescribed.

“In view of the above discussion, it is held that in all these cases, the ratio in Prime Papers & Packers (supra) is good law and does not call for a review. Furthermore, the declaration in SwarnDarshanImpex (supra) and Prime Papers & Packers (supra) would mean that for the period beyond what is stipulated under Section 38(3), the Revenue would be under an obligation to pay interest till the point of time the refund claim is adjudicated and allowed. If, for any reason, during the processing of the refund claim (but after the two month period), the assessee is called upon to furnish particulars relating to any inter-state transactions for the purposes of verification of any of the central forms, that time would stand excluded. It is however, clarified that only such time as is consumed by the dealer beyond the period given in the notice (say 15 days or so) in regard to details of specific transactions would be excluded.”

Based on the above findings, the bench issued the following directions.

  • If the period of two months is to expire on 31.03.2017, in a given case, and the officer seeks explanation on 15.03.2017, which is answered on 15.04.2017, the time after 31.03.2017 would not qualify for interest.

  • If the period expires on 31.03.2017 and the query or verification is sought through notice on 01.05.2017, which is replied within 15 days (before 14.05.2017), the entire interest after 31.03.2017 is payable. If the query is answered on 30.06.2017, the time taken, i.e. between 01.05.2017 to 30.06.2017 shall be excluded for payment of interest. At the same time, if documents are offered for scrutiny but are in fact not examined, the interest would be payable from the date the documents are offered, not when they are examined. To eliminate abuse on both sides, whenever information is sought it must be specific and relate to particular periods, and particular documents; the assessee should, in turn, provide an index of all documents supplied, with particulars and date of submission. The DVAT Department should facilitate the uploading of scanned documents/forms by the dealers, in addition to physical verification.

  • Once verification of documents is completed, and it is found that they are in order, while calculating interest on refund, the exclusion (of payment of interest) would be only for the period and the amounts relatable to such forms. In other words, interest for other amounts cannot be withheld.

Read the full text of the Judgment below.