Karnataka HC upholds Interest Allowed on Refund of Excessively Paid Sales Tax [Read Order]

In a recent case, the Karnataka High Court upheld the interest allowed on refund of excessively paid sales tax. The Court rejected the petition as there was no merit in any of the contentions raised by the petitioner.  

M/s Mary Carpentry Works, the petitioner engaged in the manufacture and sale of wooden goods and frames in Dandeli, is a registered dealer under the then Karnataka Sales Tax Act, 1957 and Central Sales Tax Act, 1956.  The case relates to the assessment year 1980-81. On 13.01.1983, an assessment order was passed. 

The petitioner filed an appeal before the first appellate authority contending that he had paid excess tax of Rs.72,000/.  It is stated that the litigation went on for more than 15 years. 

The appellate authority allowed the appeal.  After that, the petitioner filed a petition before assessing authority under Section 20(1) of the Sales Tax Act claiming interest from the payment date till refund.  The same was rejected and the petitioner filed the first appeal under Section 20(5) of the Act before the Commissioner.  The appellate authority by order rejected the appeal. 

The Tribunal under the impugned order confirmed the order passed by the assessing authority as well as the first appellate authority and held that the petitioner would be entitled to interest from the date of the refund order in terms of Section 13A of the Act. 

Sri Narayan G. Rasalkar, counsel for the petitioner submitted that the orders of the appellate authority as well as the Tribunal are wholly erroneous and have failed to appreciate that whenever an illegally collected tax is ordered to be refunded, the assessee would be entitled to interest from the date of collection of such illegal tax. 

The petitioner would be entitled to interest from the date of collecting excess tax.  Further submitted that the petitioner had prayed before the Tribunal to read down Section 13A of the Act and to grant interest from the date of collection of excess tax. 

Sri Gangadhar J.M Additional Advocate General would support the order passed by the Tribunal as well as the authorities.  Further, it was submitted that the Act would provide for payment of interest under section 13A of the Act.  When the Act itself makes provision for payment of interest, the authorities are bound to pay interest in terms of the said provision. 

A division bench of Justice S G Pandit and Justice G Basavaraja observed that no question of law would arise for consideration in terms of Section 23(1) of the Act.  Under Section 23(1) of the Act, it is open for the petitioner to prefer petition to the High Court against the order of the Tribunal on the ground that the Tribunal has either failed to decide or decided erroneously any question of law. 

In terms of Section 13A of the Act, the petitioner would be entitled for interest from 24.03.2012, the date of the order passed by the first appellate authority allowing his appeal.  Section 13A of the Act provides for payment of interest. The Tribunal where the petitioner had prayed to read down Section 13A of the Act, has rightly answered stating that it is outside the purview of the jurisdiction of the Tribunal and it was also outside the scope of the appeal.

The Court rejected the petition as there was no merit in any of the contentions raised by the petitioner.  

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