The division bench of the Delhi High Court in a recent decision held that the claim for refund under section 38 cannot be delayed for the reason that the Department is initiated proceedings for fresh demand from the assessee.
The Bench comprising of Justices Muralidhar and Najmi waziri further opined that, section 38(3) of DVAT Act provides for a time-bound scheme for dealing with refund application and therefore, it cannot be affected by any further proceedings of the Department. If the Department sought for continuing with the proceeding, that must be after granting the assessee’s claim for refund.
The grievance of the Petitioner, in the instant case was that despite the lapse of over two months since the filing of the quarterly returns, the refunds were not issued in terms of Section 38(3)(a)(ii) of the DVAT Act. The Petitioner also points out that Circular No. 6 dated 15th June 2005 issued by the Commissioner, VAT requires refund claims to be processed and refund orders issued in Form DVAT-22 within a period of 15 days from the date of receipt of the return unless it has been picked up audit or where additional information sought that has not been furnished.
The Petitioner also maintained that as recently as on 20th July 2016, for the period 1st April 2012 to 31st March 2013, the Department of Trade ad Taxes (DT&T) has issued a notice to the Petitioner under Section 59(2) of the DVAT Act seeking certain documents/books to be produced.
On behalf of the petitioners, it was argued that Section 38 encapsulates a time-bound point scheme for dealing with applications for refund. Where the Commissioner under Section 38 (2) of the DVAT Act determines that any amount is due under the DVAT Act or the CST Act, then he shall first apply the refund towards recovery of such amounts before making any refund either under the DVAT Act or the CST Act.
The Court, in the light of a catena of decisions, enumerated certain principles created by the judiciary in connection with this issue. Firstly, the mandatory nature of the time limits under Section 38 of the Act for the processing and issuing of refunds have to be scrupulously adhered to by the Department. Secondly, where the Department seeks to invoke Section 59 of the DVAT Act to seek more information from the dealer after picking up the return in which the refund has been claimed for scrutiny, those steps are to be taken within the time frame envisaged under Section 38 of the DVAT Act. Lastly, even where the Department seeks to invoke Section 39 of the Act, that action again has to be taken within the time frame in Section 38(3) of the DVAT act.
It was further opined by the Court that the legislative intent behind the section 38(3) is to provide a time-bound composite scheme which requires the DT&T to take immediate action upon receiving a return in which a refund is claimed. On this basis the Court held that “In any event, even if the Department seeks to initiate the process for creating any fresh demand, that process cannot defeat the time period under Section 38(3)(a)(i) or (ii) for processing the refund claim.”
Read the full text of the Judgment below.
