Retaining Balance Amount After Reduction of VAT Demand Violative of Constitution: Jharkhand HC rules in Favour of Castrol India [Read Order]

In a ruling in favour of Castrol India Ltd, the Jharkhand High Court ruled that the department retaining balance amount after reduction of tax demand under Value Added Tax Act ( VAT ) is violative of the constitution.

In this instance, the assessee/petitioner received a demand notice and assessment orders, which the assessee contested under section 79 of the Jharkhand VAT Act.  The assessee asked the Assessing Officer to issue a new assessment order, and the assessee's tax liability was lowered as a result. Following remand, a new assessment order was also issued, restating that the assessee must pay the tax amounts once more without crediting the amount that was submitted by the assessee at the time it filed an appeal.

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Despite multiple warnings from the assessee, the department did not return the money that was placed by the assessee at the time of submitting the appeal after the tax was subtracted and later requested. The assessee requests that the government and respondents return any excess tax money that was deposited throughout the appeal process.

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According to the bench, "retaining the balance after the assessing officer, post-remand, drastically reduced the demand would undoubtedly amount to unjust enrichment on the part of the respondents and would be violating Article 14 and Article 265 of the Constitution of India if the actual tax assessed from the petitioner is much less than the amount which the petitioner had deposited at the time of filing the appeal and seeking stay."

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The division bench, which is made up of Justice Deepak Roshan and Chief Justice M.S. Ramachandra Rao, stated that the appellate authority's demand that the assessment order be delayed prohibits the department from keeping the money that the assessee submitted.  Additionally, they maintained that the money did not need to be returned.

The bench ordered the department to return the assessee's submitted funds after deducting them from the tax that was ultimately assessed after the assessing authority remanded the case.  The bench granted the petition in light of the aforementioned.

To Read the full text of the Order CLICK HERE

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