In CWP-7927-2020-PUNJ HC-Power to withhold refund u/s 21 of Haryana VAT Act not to be exercised mechanically; Assessee must be given opportunity to advance case for refund: P&H HC Justices Tejinder Singh Dhindsa & Panjak Jain [01-04-2022]

Read Order: Vijendra Stores v. State of Haryana and others

Monika Rahar

Chandigarh, April 11, 2022: While opining that any order passed to withhold the refund of an assessee is prejudicial to the interest of such assessee, the Punjab and Haryana High Court has held that since Section 21 of the Haryana VAT Act, 2003 (2003 Act) empowers the Commissioner to pass an order withholding the refund or to approve the refund on furnishing of security, the said power cannot be exercised mechanically.

The Bench of Justices Tejinder Singh Dhindsa and Panjak Jain held, “While exercising this power, the authority i.e. Commissioner has to act judicially and is required to give an opportunity to the assessee to make out case for refund or satisfy him by furnishing security. Thus, noting on file cannot be a substitute to an order required to be passed under the provisions of Section 21.”

Importantly, it came to the notice of the Court that the impugned order was devoid of reasons in arriving at the finding under scrutiny, resultantly, the Court held that the mere reproduction of the words of statute cannot be construed as substitute for the reasons that an authority exercising statutory power is required to record. 

By seeking the issuance of a writ in the nature of certiorari for quashing order of the second respondent withholding refund of Rs. 2,10,58,992/- payable to the petitioner on the basis of order passed by revisional authority in 2016. Further, the petitioner sought the issuance of a writ in the nature of mandamus for direction to the respondents to release the aforesaid refund. 

The petitioner, an assessee registered with Assessing Authority, Yamuna Nagar under the Act of 2003 filed its return for the assessment year 2013-14 as per the provisions of this Act. The returns so filed were taken up for scrutiny and assessment proceedings were initiated. 

In 2014, the petitioner was held entitled for Rs. 2,10,58,992/- as excess tax refundable on application and the said refund was approved by Deputy Excise and Taxation Commissioner (ST), Jagadhri in 2015. On the failure of the authorities in refunding the amount, the petitioner approached the High Court before which the respondents stated that the petitioner was issued notice of revision of assessment order by Deputy Excise and Taxation Commissioner (ST), Yamuna Nagar and thus he was not entitled for refund at this stage. 

Initiation of revisional proceedings was again challenged by the petitioner by way of a Writ, during the pendency of which the revisional order was passed. The assessment order was revised and a demand of Rs.1,45,66,070/- was raised. 

This revision order was challenged before the High Court due to the non-fuctioning of the Haryana Tax Tribunal. Here, the petitioner was relegated to the alternative remedy of appeal. In appeal, the revisional order was quashed which the assessment order was maintained, holding the petitioner entitled to refund of Rs.2,10,58,992/-. 

Based on the Tribunal Order passed in 2019, petitioner applied for refund. After respondent authority failed to respond, the petitioner again approached the High Court seeking writ of mandamus directing the respondents to pay the refund. After notice of motion was issued on the aforesaid writ petition, the impugned order was passed. 

While assailing the impugned order, the counsel for the petitioner submitted that the order passed under Section 21 of 2003 Act, was illegal as the same does not satisfy the conditions required to be fulfilled for exercising power under the said provision and thus the counsel vouched for setting aside the same. 

Per contra, the State counsel argued that since the order of Haryana Tax Tribunal, Chandigarh was prejudicial to the interest of revenue and the department was in the process of filing review/appeal, thus the taxing authority rightly recommended to withhold the refund to the Commissioner, who was competent authority as per provision of Section 21 of 2003 Act. It was submitted that no fault could be found with the impugned order as the competent authority withheld the refund in the interest of the State revenue as per provisions of law.

It was stated before the Court that the DETC, Jagadhri recommended to the Excise and Taxation Commissioner, Haryana to withhold refund, and the approval for such withholding was accorded by the competent authority in 2019 but inadvertently the order could not be conveyed to the relevant authority within the stipulated period of 90 days and thus, the Counsel submitted that the delay cannot be taken as a ground to challenge the impugned order. She further added that that the Tribunal ignored material facts in allowing the appeal filed by the petitioner, thus the authorities filed review application against the order of the Haryana Tax Tribunal, however, since the Tribunal was not functional, the same could not be listed.

After considering the facts and the rival submissions, the Court concluded at the very beginning that the facts of the matter were undisputed, and that the Court was approached to see whether the impugned order was in conformity with the provisions of the 2003 Act (Sections 20 and 21).

Section 20(5) of 2003 Act mandates that any amount refundable to any person as a result of an order passed by any Court, appellate authority or revising authority, shall be refunded to him on an application made in the prescribed manner, while Section 21 prescribes the power to withhold refund to which an assessee claims himself to be entitled under Section 20. 

In the present case, the Court noted that the reference to the Commissioner for withholding the refund was made on August 28, 2019 and as on this date, order of the Tribunal giving rise to a refund was not subject matter of any further proceedings. The order giving approval to withhold the refund by Commissioner, was held to be inconsequential. 

From the analysis of Section 21, the Court inferred that this Section confers power on Commissioner to pass an order withholding refund or allowing the refund on furnishing of security on satisfaction of the conditions enumerated under Section 21(2).

Further, while adding that power of withhold under Section 21 is equivalent to power of stay in money decree, the Court opined, 

“Legislature was conscious of the fact that the power conferred to withhold refund in Section 21 is akin to exercising power to stay the money decree and thus, an option was given that the refund can be directed to be made on furnishing of security as the objective is to affect the recovery only.”

Since the provision of Section 21 empowers Commissioner to pass an order withholding the refund or directing the refund to be made on furnishing security, the Court held, while saying that this power cannot be exercised mechanically, that while exercising this power, the authority i.e. Commissioner has to act judicially and is required to give an opportunity to the assessee to make out case for refund or satisfy him by furnishing security. 

Thus, it was held that noting on file cannot be a substitute to an order required to be passed under the provisions of Section 21. 

Accordingly, finding the impugned order bereft of any reasoning, the Court held that it is trite that mere reproduction of the words of statute cannot be construed as substitute for the reasons that an authority exercising statutory power is required to record. 

Therefore, the impugned order withholding the refund was held by the Court to be unsustainable being in teeth of provision of 2003 Act. The authorities were directed to issue refunds to the petitioner as per law in a time bound manner.