@JUDGMENTTAG-ORDER
Jayant M. Patel, J@mdashThe present appeal has been preferred by the Revenue mainly on the following substantial question of law:
"Whether the Tribunal has erred in holding that dealer is entitled to interest under section 54(1)(aa) on refund arising from appellate order?"
The facts are that the assessment and demand was made of Rs. 1,66,286 by the assessing officer, which included interest and penalty. In appeal, the appellate authority found that there would not be any demand, but Rs. 5,26,577 by way of refund of tax would be available to the assessee and the appeal was allowed. As no interest was awarded by the appellate authority, the assessee preferred further appeal before the Tribunal and the Tribunal, for the reasons recorded in the order, found that the interest would be available to the assessee on the amount of refund, which has resulted pursuant to the order of the first appellate authority. Under these circumstances, the State has preferred the present appeal.
2. We have heard Mr. Dave, learned Additional Government Pleader for the Revenue and Mr. Mehta, learned counsel for the assessee, who has appeared upon advance copy.
3. As such, in our view, the question, which is raised by the Revenue in the present appeal, is already covered by the decision of this court in Tax Appeal No. 87 of 2015 and allied matters decided on February 9, 2015 (State of Gujarat v. Doshi Printing Press [2015] 82 VST 384 (Guj). We may record that in the said decision, this court observed, thus (page 390 in 82 VST):
"8. In our view, when there are two different views of the Tribunal, one for entitlement of interest on the appellate order and another for non-entitlement of interest on the appellate order for refund, we may instead of examining the aspect of consistency to be observed by the Tribunal, we may further examine the aspect as to whether the subsequent view taken by the Tribunal in case of Saurashtra Chemical Ltd. (Second Appeal No. 603 of 2007 decided on August 1, 2014) or the earlier view taken in case of Gayatri Tiles is appropriate or not?
9. The learned Additional Government Pleader contended that as per the provisions of section 54(1)(aa) of the Act, there is reference upon the assessment order and, therefore, it cannot be interpreted to mean that the refund on account of the appellate order is arising from the assessment order and he submitted that in view of the clear language of the statute, the Tribunal ought not to have departured from the earlier view taken by it in case of Gayatri Tiles. The learned Additional Government Pleader further contended that unless there is a specific provision providing for entitlement of interest on refund on account of the appellate order, no interest would be available since equity has no role to play in taxation matter. He submitted that there is no express provision made for entitlement to the interest to the assessee on account of refund due to appellate order passed by the appellate authority and, therefore, even otherwise also, the Tribunal has committed error in awarding interest on the refund of the amount of tax ordered by the appellate authority.
10. In our view, once an order is passed by the competent authority for assessment and the appeal is preferred before the appellate authority against such order of assessment, and the appellate authority modifies the order of assessment, the principles of doctrine of merger would squarely apply. Once the order of assessment merges with the order of the appellate authority in appeal, one may say that the assessment is finalized by the appellate authority in the appeal. Same would be the situation if such circumstances arise in the second appeal or in any further appeal, expressly provided by the statute and the order of assessment of assessing authority or the first appellate authority is modified. One may say that the consequence in law would be the assessment made by the first authority and further modified by the first appellate authority and further modified by the second appellate authority or the third appellate authority as the case may be but, the ultimate determination of assessment is made by the appellate authority in appeal. Under these circumstances, it cannot be said that while giving effect to section 54(1)(aa) of the Act, the effect would be available to the assessment made by the assessing authority only and not the further modification made by the first appellate authority or thereafter, the second appellate authority or even third appellate authority as the case may be. The interpretation canvassed by the Revenue of section 54(1)(aa) of the Act, if accepted, would run counter to the basic principles of doctrine of merger which is well accepted doctrine incorporated in the system of administration of justice.
11. Apart from the above, it may also result into discriminatory treatment to the extent that one, who succeeds in the assessment and is entitled to the refund, would get interest on refund but the one, who has carried the matter in appeal and becomes entitled to get the refund on account of order of the appellate authority, would not get interest.
12. It is true that in taxing statute, principles of equity may have little role to play but at the same time, any statute in taxation matter should also meet with the test of constitutional provision.
13. In addition to the above, the principles of compensatory measure may apply if the taxing statute is silent about the said aspect. The Legislature may control quantification of interest or the entitlement of interest on refund subject to meeting with the test of constitutional provision. But, when the Legislature is silent about entitlement of interest on refund of the tax amount already paid by the citizen, the interest can be considered by way of a compensatory measure. The reference may be made to the decision of the apex court in case of
11. In the case of
"Whether on general principles the assessee ought to have been compensated for the inordinate delay in receiving monies properly due to it?
The learned counsel for the appellant says that it cannot be denied that it has been deprived of the use of its monies for periods ranging from 12 to 17 years. It also cannot be denied that such deprivation is solely due to the actions of the Revenue which have been held by this court to be contrary to the provisions of the Act, on general principles it ought to be compensated for such deprivation.
In the impugned order, the Bombay High Court has held that no compensation is required to be paid since ''. . . there was a serious dispute between the parties, which was ultimately ordered to be paid pursuant to the order passed by this court on April 30, 1997. Undisputedly, the amount pursuant thereto was paid on March 27, 1998...'' The court further held that since the amount was paid once the controversy was resolved there was no wrongful retention of monies. No authority can ever accept an obligation to make payment and simply refuse to pay. In each and every case an authority must at least claim to act in accordance with law and hence claim it has no obligation to pay for some reason or another. When the claims of the authority are found to be unsustainable or erroneous by the courts it follows that the authority has acted wrongfully in the sense of not in accordance with law and compensation to the party deprived must follow. If the decision of the High Court is upheld it would mean that there can never be any wrongful retention by an authority until this court holds that their stand is not in accordance with law. Therefore, on this issue as well, the impugned judgment cannot be sustained and ought to be reversed.
In the present context, it is pertinent to refer to the circular on trade notice issued by the Central Excise Department on the subject of refund of deposits made in terms of section 35F of the Central Excise Act, 1944 and section 129E of the Customs Act, 1962. The circular is reproduced hereunder:
''Refund/return of deposits made under section 35F of CEA, 1944 and section 129E of Customs Act, 1962--Clarifications.
The issue relating to refund of pre-deposit made during the pendency of appeal was discussed in the Board Meeting. It was decided that since the practice in the Department had all along been to consider such deposits as other than duty, such deposits should be returned in the event the appellant succeeds in appeal or the matter is remanded for fresh adjudication.
2. It would be pertinent to mention that the Revenue had recently filed a special leave petition against the Mumbai High Court''s order in the matter of NELCO LTD., challenging the grant of interest on delayed refund of pre-deposit as to whether:
(i) the High Court is right in granting interest to the depositor since the law contained in section 35F of the Act does in no way provide for any type of compensation in the event of an appellant finally succeeding in the appeal, and,
(ii) the refunds so claimed are covered under the provisions of section 11B of the Act and are governed by the parameters applicable to the claim of refund of duty as the amount is deposited under section 35F of the Central Excise Act, 1944.
The honourable Supreme Court vide its order dated November 26, 2001, dismissed the appeal. Even though the apex court did not spell out the reasons for dismissal, it can well be construed in the light of its earlier judgment in the case of Suvidhe Ltd. and Mahavir Aluminium that the law relating to refund of pre-deposit has become final.
3. In order to attain uniformity and to regulate such refunds it is clarified that refund applications under section 11B(1) of the Central Excise Act, 1944 or under section 27(1) of the Customs Act, 1962 need not be insisted upon. A simple letter from the person who has made such deposit, requesting the return of the amount, along with an attested Xerox copy of the order in appeal or CEGAT order consequent to which the deposit made becomes returnable and an attested Xerox copy of the challan in form TR6 evidencing the payment of the amount of such deposit, addressed to the concerned Assistant/Deputy Commissioner of Central Excise or Customs, as the case may be, will suffice for the purpose. All pending refund applications already made under the relevant provisions of the indirect tax enactments for return of such deposits and which are pending with the authorities will also be treated as simple letters asking for return of the deposits, and will be processed as such. Similarly, bank guarantees executed in lieu of cash deposits shall also be returned.
4. The above instructions may be brought to the notice of the field formations with a request to comply with the directions and settle all the claims without any further delay. Any deviation and resultant liability to interest on delayed refunds shall be viewed strictly.
5. All the trade associations may be requested to bring the contents of this circular to the knowledge of their members and the trade in general.
6. Kindly acknowledge receipt.
(Source : M.F.(D.R.)F. No. 275/37/2KCX. 8A, dated January 2, 2002)"
A close scrutiny of the contents of the Circular dated January 2, 2002, would disclose as to the modalities for return of pre-deposits. It again reiterated that in terms of the Supreme Court order such pre-deposit must be returned within three months from the date of the order passed by the Tribunal, court or other fiscal authority unless there is a stay of the order of the fiscal authority, Tribunal, court by a superior court. The Department has very clearly stated in the above circular that the delay beyond the period of three months in such cases will be viewed adversely and appropriate disciplinary action will be initiated against the concerned defaulting officers. A direction was also issued to all concerned to note that defaulter will entail a interest liability if such liability accrue by reason of any orders of the Tribunal/court such orders will have to be complied with and it may be recoverable from the concerned officers. All the Commissioners were advised implementation of these instructions and ensure their implementation through a suitable monitoring mechanism. It is also specifically mentioned that the Commissioners under respective jurisdiction should be advised that similar matters pending in the High Courts must be withdrawn and compliance reported and that the Board has also decided to implement the orders passed by the Tribunal already passed for payment of interest and the interest payable shall be paid forthwith.
The facts and the law referred to in paragraph (supra) would clearly go to show that the appellant was undisputably entitled to interest under sections 214 and 244 of the Act as held by the various High Courts and also this court. In the instant case, the appellant''s money had been unjustifiably withheld by the Department for 17 years without any rhyme or reason. The interest was paid only at the instance and the intervention of this court in Civil Appeal No. 1887 of 1992 dated April 30, 1997. Interest on delayed payment of refund was not paid to the appellant on March 27, 1981 and April 30, 1986 due to the erroneous view that had been taken by the officials of the respondents. Interest on refund was granted to the appellant after a substantial lapse of time and hence it should be entitled to compensation for this period of delay. The High Court has failed to appreciate that while charging interest from the assessees, the Department first adjusts the amount paid towards interest so that the principle amount of tax payable remain outstanding and they are entitled to charge interest till the entire outstanding is paid. But when it comes to granting of interest on refund of taxes, the refunds are first adjusted towards the taxes and then the balance towards interest. Hence as per the stand that the Department takes they are liable to pay interest only up to the date of refund of tax while they take the benefit of assessees'' funds by delaying the payment of interest on refunds without incurring any further liability to pay interest. This stand taken by the respondents is discriminatory in nature and thereby causing great prejudice to lakhs and lakhs of assessees. Very large number of assessees are adversely affected inasmuch as the Income-tax Department can now simply refuse to pay to the assessees amounts of interest lawfully and admittedly due to them as has happened in the instant case. It is a case of the appellant as set out above in the instant case for the assessment year 1978-79, it has been deprived of an amount of Rs. 40 lakhs for no fault of its own and exclusively because of the admittedly unlawful actions of the Income-tax Department for periods ranging up to 17 years without any compensation whatsoever from the Department. Such actions and consequences, in our opinion, seriously affect the administration of justice and the rule of law.
Compensation:
The word ''compensation'' has been defined in P. Ramanatha Aiyar''s Advanced Law Lexicon, Third Edition 2005 page 918 as follows:
''An act which a court orders to be done, or money which a court orders to be paid, by a person whose acts or omissions have caused loss or injury to another in order that thereby the person damnified may receive equal value for his loss, or be made whole in respect of his injury; the consideration or price of a privilege purchased; some thing given or obtained as an equivalent; the rendering of an equivalent in value or amount; an equivalent given for property taken or for an injury done to another; the giving back an equivalent in either money which is but the measure of value, or in actual value otherwise conferred; a recompense in value; a recompense given for a thing received; recompense for the whole injury suffered; remuneration or satisfaction for injury or damage of every description; remuneration for loss of time, necessary expenditures, and for permanent disability if such be the result; remuneration for the injury directly and proximately caused by a breach of contract or duty; remuneration or wages given to an employee or officer.''
There cannot be any doubt that the award of interest on the refunded amount is as per the statute provisions of law as it then stood and on the peculiar facts and circumstances of each case. When a specific provision has been made under the statute, such provision has to govern the field. Therefore, the court has to take all relevant factors into consideration while awarding the rate of interest on the compensation."
(emphasis1 supplied)
12. The aforesaid shows that in the above referred decision, the apex court did maintain that the interest on the amount of refund, if provided by the statute, such would govern the field, but the court has to take all relevant factors into consideration while awarding rate of interest on compensation.
13. In the latter decision of the Larger Bench of the apex court in the case of
"5. Since there was an inordinate delay on the part of the Revenue in refunding the amount due to the assessee this court had thought it fit that the assessee should be properly and adequately compensated and, therefore, in paragraph 51 of the judgment, the court while compensating the assessee had directed the Revenue to pay a compensation by way of interest for two periods, namely; for the assessment years 1977-78, 1978-79, 1981-82, 1982-83 in a sum of Rs. 40,84,906 and interest at nine per cent from March 31, 1986, to March 27, 1998, and in default, to pay the penal interest at 15 per cent per annum for the aforesaid period.
6. In our considered view, the aforesaid judgment has been misquoted and misinterpreted by the assessees and also by the Revenue. They are of the view that in
7. As we have already noticed, in
14. The aforesaid shows that in the latter decision of the Larger Bench, it was held that the decision in the case of
15. In our view, as per the above referred observations of the apex court in the case of
16. From the conjoint reading of the decision of the apex court in the case of
17. In our view, the general principles for awarding compensation to the assessee for the delay in receiving monies properly due to it is not disapproved by the Larger Bench of the apex court in the case of
14. In our view, the above referred observation made by this court in the above referred decision in case of
15. In view of the aforesaid observations and discussion, we find that the question raised could no more be considered as substantial question of law since such aspect is already covered by the principles of doctrine of merger well settled in the system of administration of justice and also in the above referred decision of the apex court as well as of this court.
16. When the Tribunal has taken the view in case of Saurashtra Chemical Ltd. (Second Appeal No. 603 of 2007 decided on August 1, 2014) in consonance with the above referred view taken by us and thereafter, if the Tribunal has made departure from its earlier view taken in Gayatri Tiles, we do not find that the later view, which is supported by our view as well as the above referred decision of the apex court and of this court, should be deprecated or further examined which is on the mere principles of consistency to be maintained by the Tribunal and we find that no useful purpose would be served in further examination thereto.
17. Under the circumstances, we find that no substantial question of law would arise for consideration in the present tax appeals, as sought to be canvassed.
18. Under the circumstances, we do not find any case for interference to the impugned orders passed by the Tribunal. Hence, all the appeals are meritless and, therefore, dismissed."
4. Under these circumstances, as the question is already covered by the decision of this court, it cannot be said that any substantial question of law would arise for consideration. No interference would be called for to the order passed by the Tribunal. Hence, the present appeal is meritless. Therefore, dismissed.
1Here italicised
