In VAT APPEAL 31/2022 -DEL HC- Delhi High Court grants interest on refunded amount under Delhi Value Added Tax Act
Justice Rajiv Shakdher & Justice Tara Vitasta Ganju [29-03-2023]

Read Order: Commissioner of Trade and Taxes and Ors v. Corsan Corviam Construction S.A.-Sadbhav Engineering Ltd. JV and Ors

Chahat Varma

New Delhi, July 4, 2023: The Delhi High Court has ruled that the assessee, Corsan Corviam Construction S.A. Sadbhav Engineering Ltd. (JV), was entitled to interest on an already refunded amount. The court referred to Section 42(1) of the Delhi Value Added Tax Act, 2004, read with Section 39, and concluded that interest was payable to the assessee from the date when it accrued as per Section 38(3)(a)(ii) of the 2004 Act. The court determined that the assessee would receive interest at the rate of 6% per annum (simple interest) on the principal amount refunded.

The case involved a dispute regarding the assessee's claim for interest on an already refunded amount. The assessee was seeking interest from the date when two months elapsed after filing the return until the date of refund, based on the provisions of Section 38(3)(a)(ii) read with Section 42 of the 2004 Act. The revenue, however, argued that interest should be calculated from the date the claim for refund was made.

The division bench of Justice Rajiv Shakdher and Justice Tara Vitasta Ganju analysed Section 38(3)(a)(ii) of the 2004 Act and noted that the provision stipulated that the Commissioner was obligated to refund any excess tax, penalty, and interest, if any, paid by an assessee, which was more than the amount due from it. Furthermore, before ordering a refund, the Commissioner was empowered to apply the excess amount towards the recovery of any other amount, inter alia, due under the 2004 Act. Additionally, the assessee/dealer, on the other hand, were given the right to elect whether it would receive the refund or have it carried forward to the next tax period as a tax credit.

The bench emphasized that the 2004 Act established clear and strict timelines for the grant of refunds. In this case, since the revised return was filed on 10.07.2015, the refund under Section 38(3)(a)(ii) of the 2004 Act accrued in favor of the assessee on 10.09.2015. Any proceedings that took place after this, such as the issuance of a notice under Section 59(2) of the 2004 Act on 11.09.2015, the default assessment order dated 02.08.2017, and the adjustment order dated 25.08.2017, were deemed to be legally invalid.

The bench highlighted that even if the refund was initially withheld, the assessee would still be entitled to interest under Section 42(1) of the 2004 Act.

The bench also clarified that the claim for a refund made by the assessee was already embedded in its return and did not arise out of any order passed by the Court or an authority under the 2004 Act. Therefore, the assessee was not required to file a fresh claim for refund using DVAT 21, as contended by the revenue.