VAT Penalty Refund Cannot Be Denied Over Filing Before Re-Designated Authority: Patna High Court

The Patna High Court on 21 August held that the State Tax Department cannot deny a dealer's refund of a penalty under the Bihar Value Added Tax Act, 2005 merely because the refund application was filed before the Joint Commissioner of State Tax instead of the re-designated Additional Commissioner of State Tax.

A Division Bench of Justices Anil Kumar Sinha and Vikash Kumar observed that such a technical objection cannot defeat a legitimate refund claim, and allowed a writ petition filed by S and H Manufacturing and Trading Pvt. Ltd., seeking refund of Rs. 1,69,017. It held:

"The technical objection taken by respondents refusing penalty amount on the ground of non-filing of application before Additional Commissioner of State Tax after re-designation cannot be accepted by this Court."

The petitioner, a tyre manufacturing company based in West Bengal, was transporting goods to Bihar in 2014 when the Commercial Tax Authorities intercepted its vehicle at Bhagalpur.

The authorities imposed a penalty under the Bihar Value Added Tax Act, which the company deposited. The Commercial Taxes Tribunal subsequently set aside both the penalty order and the appellate order confirming it.

After the Tribunal's decision was communicated to the tax authorities, the company applied for refund of the penalty amount along with interest. The State Tax Department refused to process the claim, contending that the company had filed the application before the wrong authority and that the prescribed Form A-VIII contained certain defects.

The Court rejected the Revenue's jurisdictional objection, noting that the Bihar GST regime had merely re-designated the Joint Commissioner of State Tax as the Additional Commissioner of State Tax. It held that the Joint Commissioner could have forwarded the application to the competent authority instead of rejecting the refund claim on a technical ground.

However, the Bench also rejected the company's contention that interest became automatically payable sixty days after the Tribunal's order. It held that a dealer must first submit a refund application in the prescribed Form A-VIII and clarified that the form applies to claims for refund of both excess tax and penalty.

Since the company had not rectified the defects identified in its earlier application, the judges directed it to file a fresh Form A-VIII before the Additional Commissioner of State Tax within ten days. They also directed the authority to release the refund within ten days of receiving the fresh application.

The Bench warned that if the authority fails to release the refund within the stipulated period, the concerned authority would have to pay interest at 6% per annum from his own pocket for the delay.

Accordingly, the High Court disposed of the case.

For Petitioner: Mr. Ajay Rastogi, Senior Advocate, with Mr. Rohan Verma, Advocate and Mr. Anubhaw K., Advocate.

For Respondent/State: Mr. Ravish Chandra, Advocate. Mr. Ajit Ranjan, Joint Commissioner, State Tax, was also present.