Sanchayita Lahkar

The High Court of Andhra Pradesh Division Bench of Justice Ravi Nath Tilhari and Justice Subhendu Samanta allowed a VAT dealer’s plea for interest on a delayed tax refund, holding that issuing a refund order within the 90-day statutory window is not enough if the amount is not actually paid within that period. The dispute arose after the dealer sought interest on a refund that was sanctioned but disbursed beyond 90 days, while the tax authorities denied liability citing processing delays and pandemic-related extensions. Setting aside the rejection, the Bench directed the authorities to pay interest for the period beyond 90 days up to the date of actual refund, in terms of the APVAT framework.

The writ petition was filed by M/s. JBD Educationals Pvt. Ltd., a VAT dealer, seeking payment of interest on a belated refund of ₹1,27,34,194. The refund related to the tax period from April 2013 to March 2016 and was approved by the Joint Commissioner (CT), Audit and Refunds, by order dated 19.06.2020. The refund amount, however, was actually credited to the petitioner on 31.03.2022, beyond the statutory period of ninety days. The petitioner thereafter applied for interest under Section 38 of the Andhra Pradesh Value Added Tax Act, 2005 read with Rule 35(8)(a) and (c) of the APVAT Rules, 2005.

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The Assistant Commissioner rejected the claim for interest by endorsement dated 23.06.2023, stating that there was no departmental delay and that the delay was attributable to issues in the Comprehensive Financial Management System, as well as exclusion of limitation due to COVID-19 orders of the Supreme Court. Aggrieved by the rejection of interest, the petitioner approached the High Court seeking quashing of the endorsement and a direction for payment of statutory interest.

The Court examined Section 38 of the APVAT Act and Rule 35(8) of the APVAT Rules and noted that the statute mandates refund within ninety days and payment of interest thereafter until the date of “actual refund”. The Court observed that “the liability for payment of interest is from the date, after the expiry of 90 days, till the date of actual refund.”

It was recorded that even according to the respondents’ own dates, the refund was not completed within the statutory period. The Court stated that “mere passing of the order within the period of 90 days would not be sufficient to avoid liability for payment of interest.” Emphasis was placed on the statutory expression “actual refund”, which the Court interpreted in its plain meaning as real and factual payment to the dealer.

Referring to principles of interpretation in taxing statutes, the Court stated that “the words used in a statute are primarily to be given their plain meaning” and that courts cannot read into the provision anything not expressly provided. The Court also recorded that “the statute does not permit any reason as an excuse, for non-payment, within the statutory period.”

On the issue of COVID-19 limitation extensions, the Court observed that such extensions “would not be available to an authority acting under any statute” and therefore could not be relied upon to deny statutory interest. The contention that the department had no control over treasury or CFMS delays was rejected, with the Court stating that once time is prescribed by statute, failure to act within that time necessarily attracts statutory consequences.

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The Court “allowed the Writ Petition” and “quashed the endorsement dated 23.06.2023.” It issued “a direction … to the respondents to make the payment of interest on the belated refund amount, for the belated period as per Section 38 of the Act r/w Rule 35(8) of the APVAT Rules, 2005 till the date of actual refund. There shall be no order as to costs” and pending interlocutory applications shall stand closed.

Advocates Representing the Parties

For the Petitioner: Sri C. Sanjeeva Rao, Advocate
For the Respondents: Sri Mannam Venkata Krishna Rao, Government Pleader for Commercial Tax

Case Title: M/s. JBD Educationals Pvt. Ltd. v. State of Andhra Pradesh & Others
Neutral Citation: APHC010100412024
Case Number: Writ Petition No. 5898 of 2024
Bench: Justice Ravi Nath Tilhari, Justice Subhendu Samanta