Department Cannot Deny Interest On Delayed VAT Refund After Blaming Assessee: Delhi High Court

The Delhi High Court has held that the tax department can't deny statutory interest on delayed Value Added Tax (VAT) refund by shifting the blame onto the taxpayer (assessee).

A division bench of Justices Nitin Wasudeo Sambre and Ajay Digpaul was dealing with a writ petition filed by an assessee seeking interest on VAT refund that had remained unpaid for 15 years despite the refund claim having attained finality through appeal proceedings.

The Department had opposed the claim, contending that the delay was attributable to the assessee on account of procedural issues, including alleged non-compliance and lack of follow-up.

Rejecting the Department's stand, the High Court noted that under the Delhi Value Added Tax Act, 2004, particularly Sections 38 and 42, once a refund becomes due and is not granted within the prescribed period, interest follows as a matter of course.

“Since it is not in dispute that, the petitioner in view of the statutory mandate under Section 38(3)(a)(ii) of DVAT Act, 2004 is entitled for refund post 60 days from the date of submission of the return, and since in the present case the return was filed on 26th April 2009, it is held that the petitioner shall be entitled for the interest pursuant to the statutory mandate,” it said.

Further, on perusing the record, the Court noted that the Department's order refusing to grant the refund was not uploaded on the portal. So it couldn't be inferred that Petitioner had knowledge about the order being passed against him.

When the said order did come to his knowledge, the Petitioner preferred a writ petition before the High Court. The matter then proceeded before the appellate authority as per statutory regime, which remanded the matter back to assessing authority.

“In the wake of aforesaid, it cannot be inferred that there was any attempt on the part of the petitioner to approach at delayed stage either before this Court in writ petition in the earlier round of litigation…” the Court said.

It added,

“As such the contentions raised by the counsel for the respondent that there was intentional delay or that the petitioner by his own conduct has created a situation thereby delaying the proceedings in the matter of lodging claim for refund of the VAT, cannot be established or inferred.”

As such, the Court directed the Department to grant 6% interest on the delayed VAT refund in accordance with law.

For Petitioner: Advocates Mukesh Gupta and Keshav Rai

For Respondent: Advocates Abhinav Sharma and Mr. Shubham