The Punjab and Haryana High Court, in an important assessee-favor ruling, has held that the VAT department cannot withhold the refund of VAT merely due to mechanical reasons.
The petitioner, M/s Vijendra Stores was held entitled to Rs.2,10,58,992/- as excess tax refundable on application. The said refund was approved by Deputy Excise and Taxation Commissioner (ST) and held that since the petitioner has been issued a notice of revision of assessment order by Deputy Excise and Taxation Commissioner (ST), Yamuna Nagar and thus he is not entitled to a refund at this stage.
After analyzing the provisions of Section 21 of the Haryana VAT Act, 2003, the division bench comprising Justice Tejinder Singh Dhindsa and Mr. Justice Pankaj Jain observed that one would infer that it confers power on the Commissioner to pass an order withholding refund or allowing the refund on furnishing of security on the satisfaction of the conditions enumerated under Section 21(2).
“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. It goes without saying that any order passed to withhold the refund is prejudicial to the interest of assessee,” the bench observed.
Directing the authorities to release the refund, the Court held that “Since the provision itself provides that the Commissioner may pass an order withholding the refund or direct that refund be made on furnishing of security, the said power cannot be exercised mechanically. 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 a case for a refund or satisfy him by furnishing security. Thus, noting on file cannot be a substitute for an order required to be passed under the provisions of Section 21. Further impugned order Annexure P-10 is bereft of any reasoning. It is trite that mere reproduction of the words of statute cannot be construed as a substitute for the reasons that an authority exercising statutory power is required to record.”
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