Introduction Under fiscal laws like sales tax, there may be a situation that the party might have paid excess amount than what was due as per law. Therefore, there will be some amount refundable to the dealer. Under BST era, the assessment for each year was mandatory. Therefore, even if any claim of refund has remained to be made in returns, the dealer had an opportunity to claim the same in the course of assessment.
Under the MVAT Act, 2002, the situation has changed. As per policy of sales tax department, under the MVAT Act, 2002, assessment of each year is not compulsory and therefore the department can select assessment as per their own choice. Thus, the dealers may not get opportunity to put their refund claim, which they could have if assessment proceedings were taken up. The dealers are, therefore, required to pursue their refund claims with due care.
Relevant provisions
Under the MVAT Act, 2002, return filed by the dealer is considered as prime document. There are speaking provisions about granting refund as per returns. Section 51 of the MVAT Act, 2002 specifically provides the scheme for grant of refunds arising as per returns.
The important provisions of this section are that the dealer should show refund in the return. In respect of the said return, the dealer should file application in Form 501 and give the details as required in the said application. There is time limit for filing the above application. The normal time limit as on today is 18 months from the end of the relevant year in which refund arises.
If the dealer has filed an application as above, he is entitled to get the same processed and further entitled to refund as per the said proceeding.
Non filing of form 501
The issue is really arising in respect of those dealers, who have failed to file form 501 within the prescribed time. When such application is not filed, the department is of the opinion that the refund though shown in return is not required to be processed. In other words, department was of the opinion that in such cases, there is no responsibility of the department to process the return for granting refund.
Writ Petitions before the Bombay High Court
Dealers and consultants filed representations before the authorities to consider the refunds as per returns and process the same by initiating assessments etc. or by any other way. However, there was no positive response.
Therefore, several dealers started filing writ petitions in the Hon’ble Bombay High Court. Dealers raised several contentions for processing of returns. Important contentions were as under;
i) filing of application is procedural. It cannot be mandatory.
ii) return is the basic document and if the refund is shown in such return then there is already an implied application and it is required to be processed, if the return is within time prescribed for filing application in form 501.
iii) filing form 501 is one of the ways for getting refunds. There is no prohibition of granting refunds through other provisions including assessments, more so, when the dealers are ready to undergo the said process.
iv) If there is no speaking assessment then the return should be considered as self assessment and accordingly also refund should be granted.
v) Non grant of refund will amount to unjust enrichment.
The Hon’ble Bombay High Court, in cases of Jubilee Industries (W.P. No.121 of 2015) Tara Enterprises (W. P. No.122 of 2015), B. L. Trading Company (W.P.123 of 2015) dt.3.2.2015, directed the department to dispose of the applications, without going into merits.
However, in its Judgment in case of Silver Dot Convertors Pvt. Ltd. (W.P.1118 of 2015 DT.3.3.2015), the Hon’ble High Court considered the overall position and opined that the refunds shown in returns are required to be processed by the department and they cannot ignore them. The High Court has not dealt with the legal ground but based, its decisionon the accepted theory that a dealer should be finally assessed as to whether he liable to pay any dues or entitled to a refund, and directed department to process the returns showing refunds and pass the orders. The relevant portion of speaking order of the Hon’ble High Court is as under;
“5) We only desire that none of such applications as are noted by us and in the Petitions are kept pending by the department/ Respondents. If the returns are furnished and submitted, then, they deserve to be scrutinised. If they should be scrutinised expeditiously and early and equally the claims for refund in pursuance thereof, then, the only direction that we issue is that the Respondents process such cases and as expeditiously as possible.
6) Each of these matters were kept back in the morning session to enable Mr. Sharma to seek instructions from the concerned officials.
7) It is stated that pursuant to our oral direction, the Commissioner of Sales Tax is present in Court. He has instructed Mr. Sharma to state that all the returns and which are subject matter of the Petitions on today’s board and equally those pending with the department would be taken up for scrutiny and verification periodically and as far as the Petitioners are concerned, the returns would be processed and the requisite orders would be passed within a period of 4 weeks from the date of receipt of copy of this order. We accept these statements made by Mr. Sharma and in the presence of the Commissioner of Sales Tax as an undertaking given to this Court. We expect the Respondents to abide by the same and take requisite steps.
8) We clarify, in the event of any doubt, as orally expressed, that the direction to pass order and based on the undertaking given to the Court is confined to the Writ Petitions which are on today’s board and insofar as the other pending files are concerned, the same should be processed as expeditiously as possible and in any event within a period of 8 weeks from the date of receipt of copy of this order. The Writ Petitions are accordingly disposed of.”
Based on above, the Department has now started processing the returns in which refunds are shown. As per the Hon’ble High Court’s order, it appears that the responsibility is on the Department to process the returns, involving refund, on their own. However, on the safer side, it may be suggested that the dealer should write a letter to the department for processing his return.
In light of above, the Department has issued instructions by internal circular to process the refunds for the period from 2007-08 onwards. In respect of the years 2005-06 & 2006-07, the department feels that the returns cannot be processed as the time limit for assessments is over.
But, there could be a view that in respect of 2005-06 & 2006-07, as well the department should grant refunds by considering that there is a self assessment as per section 20 i.e. there is a statutory assessment and the refund is required to be granted accordingly.
Conclusion
The above judgment of the Hon’ble Bombay High Court has given great relief to the dealers. As a guardian of public, it is the duty of the Government to give fair treatment to the dealers. The basic structure of the taxation law is also that nobody should be made to suffer a liability, in excess of what is due as per law. Under above circumstances, it was necessary that the refunds shown in returns are dealt with by the department. Even if form 501 is not filed, there is no prohibition to initiate assessment and to see that due refund is granted. The above judgment has, therefore, restored the constitutional obligation of the Department. We hope that the said principle will remain applicable for all the time to come including in the GST era.
