Monday 27 November 2017

HC : Interest on VAT refund computable from 'processing' of return, not 'filing' date

HC holds that interest u/s 42 of Delhi VAT Act on refund of VAT amount accrues after period specified for processing refunds/returns u/s 38(3)(a) and not from date of filing return; Observes that sub-clauses (i) and (ii) of Section 38(3)(a) mandate refund within 1 or 2 months depending upon tax period (i.e. monthly or quarterly) and Section 42(1) prescribes simple interest payable on such refund at a rate notified by Government; Harmonious reading of Sections 38 and 42 clearly indicates that interest is to be paid from the date when same is due to be paid to assessee or date when excess amount was paid, whichever is later, and date 'when refund is due' would be the date mentioned in Section 38 (i.e. when refund becomes payable); Remarks, since both Sections 38(3) and 42(1) do not refer to the date of filing of return, same obviously cannot be the starting point for interest payment, and “Obligation of the assessee to pay tax and date when tax is payable, and the duty and date on which refund is payable by the Revenue need not coincide and could be different as per the statute”; Further, elucidates that, said interpretation is not in conflict with Section 11 which deals with computation formula to calculate tax payable and empowers dealer to seek adjustment or refund in case of a negative net tax  : Delhi HC

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