2 said issue of non-granting of interest on the refund due to the appellant, in the present appeal. 2. This appeal came up for preliminary hearing bef

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1 - In the Gujarat Value Added Tax Tribunal at Ahmedabad Before: Hon'ble Mr. Justice, KA.Puj, President Shri Y.P.Bhatt, Member Shri N.A.Acharya, Member SECOND APPEAL NO. 895 OF 2013 MIS. JUPITER ENGINEERS vis THE STATE OF GUJARAT APPELLANT... RESPONDENT Shri Apurva Mehta, Learned Advocate for the appellant Shri Y.A.Radhanpura, Learned Government Representative for the Respondent JUDGMENT Date:04/08/20 14 Per Mr. Justice, K.A.Puj. President :_ The appellant has filed this appeal against the order passed by the learned Deputy Commissioner of Commercial Tax, Appeal-2, Audit, Ahmedabad on whereby the appeal filed before him came to be partly allowed. As a result of the order passed by the learned Deputy Commissioner, the appellant was entitled to refund of Rs. 5,26,577/-. The learned Deputy Commissioner has however, not granted interest on such refund by considering the provision contained in Section 54(1)(aa) of the Gujarat Sales Tax Act, The appellant has therefore challenged the

2 2 said issue of non-granting of interest on the refund due to the appellant, in the present appeal. 2. This appeal came up for preliminary hearing before this Tribunal on and after hearing Mr.Apurva Mehta, the learned advocate appearing for the appellant and Mr. C.B.Patel, the learned government representative appearing for the respondent, this appe.1 was admitted and the office was directed to place this appeal for regular hearing along with Essar Group. 3. It is the case of the appellant that the appellant is a manufacturer of various industrial components having its unit at Rajkot. The appellant was duly registered as a dealer at the appropriate point of time under the provisions of the Gujarat Sale Tax Act, The appellant was assessed by the Commercial Tax Officer (3), Division-4, Rajkot for the fmancial year During the Course of assessment proceedings, the Commercial Tax Officer by an order dt disallowed certain claims of set off amounting of Rs. 5,97,934/- on the ground that the said claims were not in accordance with the Rules and as such, solely because of directions of pre-audit authorities. Consequently, the appellant could not receive refund of Rs. 5,26,5771-, which it was otherwise entitled to receive with interest In accordance with law. Being aggrieved and

3 3 dissatisfied by the aforesaid order of the learned Commercial Tax Officer, the appellant preferred first appeal before the learned Deputy Commissioner of Commercial Tax, Appea-7, Rajkot, who vide his order dt , has allowed the said appeal and granted refund of Rs. 5,26,577/- as a result of allowing the appellant's claim of set off. The learned Deputy Commissioner has, however, not granted interest on the said refund uls. 54(1)(aa) of the Act. 4. Mr. Mehta has submitted that the learned Deputy Commissioner has erred in not awarding interest on refund on general principles as the set off was denied and refund thereon was not granted in the assessment order by the assessing officer only at the behest and on the insistence of the audit party and no independent decision was taken by the assessing officer in this regard who had actually accepted the view canvassed by the appellant. He bas further submitted that the appellant is entitled to interest on refund uls. 54(1)(aa) of the Act and also on general principles. He has further submitted that be has filed detailed submissions and also made oral submissions. He has therefore submitted that considering the said submissions, claim of interest on refund made by the appellant should be allowed.

4 J j 4 5. Mr. Y.A.Radhanpura, the learned government representative appeanng for the respondent has relied on the orders passed by the authorities below and submined that as per the express provision contained in section 54(1)(aa) of the Act, since, the refund due to the appellant is not as a result of assessment order, the appellant is not entitled to any interest on such refund. He has further submined that this issue has already been decided by this Tribunal in favour of the department and hence no different view may be taken. He has further submined that the maner relating to this issue is pending before the Hon' ble Gujarat High Court. He has, therefore, submined that this appeal should be dismissed. 6. We have considered this controversial issue in great detail raised in the case of MIs. Saurashtra Chemicals Ltd. vis. State of Gujarat in second appeal no. 603 of 2007 decided on and as per the said decision, we hold that the appellant is entitled to claim interest u/s. 54(1)(aa) of the Act. We have observed in the said case as under. "19. In the opinion of this Tribunal, the assessment order passed U/S 41 includes original order passed by first assessing authority as well as modified assessment order in appeal. Under an appeal the jurisdiction of the original order appealed against is exercised and therefore the order passed in appeal is corrected/modified order under the provision under which the appealed order is passed. The order passed <.. "':

5 5 In the appeal against original assessment order U/S 41 is assessment order U/S 41 and the original order of assessment merges in it. The intention of the legislature cannot be presumed that the refund arises at the first stage of assessment is only eligible for interest and orders of assessment passed at subsequent stages resulted in to refund are not entitled to interest. Appeal proceedings are continuing single proceedings of assessment. Therefore, order passed in appeal is an order of assessment U/S 41. The intention is of paying interest on refund arises in order of assessment U/S 41 and the modified assessment order passed in appeal is also covered under the clause (aa). The close scrutiny of clause (aa) reveals that the dealer is eligible for interest on refund arises in the assessment proceedings carried out U/S 41 of the Act. It is further held that the appeal is continuing proceedings of assessment and therefore the provisions applicable to the original order of assessment are also applicable to the modified order of assessment. The restricted meaning of the word "an order of assessment U/S 41" will create discrimination between the situations of the maners of similar facts, one gets refund in original stage of assessment and another gets refund in appeal. The l:iop 'ble Supreme Coun held that the interpretation, which leads ' discrimination, must be avoided. The restricted interpretation will give discretion to the first assessing authority to make available the interest to the assessee. Similar situation will take place in appeal, if the appeal is decided by remand to the

6 6 first assessing authority who passes the order of assessment in form 39 following the direction and refund arises, the dealer is entitled to interest. However, instead of remanding the matter, the appellate authority decides the matter in appeal and passes modified order of assessment the appellant will be prevented from interest even though he gets refund. The interpretation, which makes the provisions unworkable, should be avoided. If the phrase "assessment order uls 41" is not interpreted reasonably and the narrow and restricted rnearung as "original assessment order" 15 given, considerable chaos, confusion, uncertainty and conflict would arise. The legislature never intends to deprive the assessee from entitlement where refund does not arise because of the erroneous original assessment order which modified in appeal and resulted in to refund. The appellant cannot be put to loss for the mistake of the first assessing authority or for the reasons beyond control of the appellant. The narrow and restricted meaning will defeat the purpose of clause (aa) for which it is inserted. TI:e accepted principle in interpreting a provision is that a construction, which ~ould defeat its purpose, should be avoided. Even if more than one construction is possible that which preserves its workabiliif.' and efficiency should be preferred to the one, which woulci:. ' "It is, therefore, held that power to grant interest uls of the Act is liable to be exercised by every

7 7 / authority who has jurisdiction to deal with assessment in one way or another, and at one time or another. It is not confmed strictly to the assessing authority alone as a prescribed authority. The appellate authority has also jurisdiction to allow interest at the appellate stage. The appellate authority is in continuation of the assessing authority and it can exercise such powers conferred uls 54(1)(aa) of the Act. The term order of assessment should not hold any restricted meaning of assessment only. Provisions made uls 54(1)(aa) of the Act are benevolent provisions and they are inserted by the legislature with a view to compensate the financial loss to be incurred to assessee. Only with a view to prevent the future default and to make the assessee absolutely free about his tax liability, the provision has been inserted. Passing of appellate order is merely a rectification or correction in original order. It is simply a merger as there cannot be more than one operative order governing the same subject matter. The strict interpretation of section 54(1)(aa) as was done earlier by this Tribunal leads to manifest unjust result which could never have been intended by the State Legislature and therefore it is necessary to put a construction which modi~es the meaning of the words used in section 54(I)(aa) of the Act so as to grant interest even if refund becomes due to a dealer as a result of order passed in appeal or revision." i \ 24. "We are mindful of the fact that the department,. has. ~. heavily relied on the decision of this Tribunal in the c~~e of -..' '.,.;

8 8 MIs Gayatri Tiles vs State of Gujarat wherein this Tribunal has given strict meaning to the words "by virrue of an order of assessment U/S 41" and held that the said clause U/S 54 was inserted by Gujarat II Act of 1993, so, when the refund has arisen in appeal then the appellant is not entitled to interest as seen from the wording of section 54 of the Act. With respect, the said ratio laid down by this Tribunal does not seem to be correct in view of the above discussion and also in view of the fact that the provisions relating to interest on delayed payment of refund have been consistently held as beneficial and non-discriminatory. It is, therefore, held that the appellant is entitled to the interest on delayed payment of refund, irrespective of the fact whether such interest is payable by virrue of an order of assessment or even by virrue. -.' of an order passed in appeal or revision. It is, therefore, held that in case of Mis Mahavir Expo Chern Ltd. vs. State of Gujarat, this Tribunal vide its order dated passed in SA No. 335 & 336 of 2006 has adopted a very narrow meaning of the word used in section 54(1)(aa) of the Act and held that the entitlement of interest U/S 54 is from and only on such refund amount which has arisen in the 'ass,essment order U/S 41 of the Act and not at the appellate. stage. With respect, this is not correct proposition of law and it cannot be considered as binding precedent." 7. Following the above decision, we allow this appeal and pass the following order.

9 9 ORDER 8. This appeal is allowed. The appellant is entitled to interest on refund granted to the appellant as a result of the order passed by the learned Deputy Commissioner at the applicable rate. There shall be no order as to cost. Pronounced in open court on this 4th day of August, Sd/ (Mr. Justice K.A.Puj) President Sd/ (Shri Y.P.Bhatt) Member Sd/- (Shri N.A.Acharya) Member TRUE 'Opy ~. r.ujaw VALUE ADD ED lax TAIBUttAL.. \1l1 ' I~d3 La::l.., :'.if,' ',.I.,.'-.; 1", '/, ',.- J,.!.',