Default Assessment Order was passed Only to defeat VAT Refund Claim: Delhi HC orders to disburse Refund with Interest [Read Judgment]

A two-judge bench of the Delhi High Court has quashed the default assessment orders issued by the VAT authorities which was found to be passed only to defeat the VAT refund claim. The bench also ordered the authorities to disburse the refund amount along with interest under Section 42 of the DVAT Act.

The petitioner was engaged in the trading of shoe accessories and is registered under the Delhi Value Added Tax (DVAT) Act under which, they paid tax on purchases made within the state which is adjusted against the tax payable on sales. Later, they claimed a refund on account of the fact that its output tax liability is less than the input tax paid.

However, the department rejected the claim and passed default assessment orders dated 14.11.2018 were passed in respect of five quarters, resulting in a demand of Rs. 17,66,883/-

The counsel appeared for the petitioner submitted that the refund was required to be made within a period of two months from the date of filing of the returns under Section 38(3)(ii) of the DVAT Act. According to him, the assessment in the present case had already been made on 12.01.2017 and statutory forms had also been filed. It was claimed that the default assessment orders do not reveal any mismatch between the selling dealer and the petitioner, or any finding that the petitioner has concealed material particulars which could justify the invocation of the extended period under Section 34 of the DVAT Act.

The bench comprising Justice S Muralidhar and Justice Prateek Jalan noted that the default assessment order has been generated only to defeat the refund claim of the petitioner, which, in any event, ought to have been paid well before the impugned orders were made.

“The impugned default assessment orders expressly state that there is no mismatch between the selling and purchasing dealers. Yet demand is sought to be raised in respect of alleged mismatch,” the bench said.

Allowing the petition in the light of judicial decisions, the bench held that “the impugned default assessment orders dated 14.11.2018 and the refund adjustment order dated 15.11.2018 cannot be sustained, and the same are hereby set aside. Consequently, the petitioner is entitled to refund of the amount of ₹17,59,874/- claimed by it. The said amount, along with interest payable under Section 42 of the DVAT Act, shall be disbursed by the DVAT authorities within four weeks from today.”