Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: ARTICLES ON INPUT TAX CREDIT IN VAT :: VAT RATES :: form 3cd :: due date for vat payment :: empanelment :: VAT Audit :: Central Excise rule to resale the machines to a new company :: ACCOUNTING STANDARDS :: ACCOUNTING STANDARD :: articles on VAT and GST in India :: cpt :: TAX RATES - GOODS TAXABLE @ 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: list of goods taxed at 4% :: TDS
Indirect Tax »
 Finance Minister Favours Cess Over Additional Tax To Compensate States Under GST
  Indirect Tax collections up
 A GST rate that can unlock India’s potential
 Why India fared badly in World Bank’s Doing Business survey
 Income Tax dept to intensify anti-black money operations
 Applicability of TDS provisions of section 194-I of the Income-tax Act, 1961 on lump sum lease premium paid for acquisition of long term lease-regarding
 CBDT seeks monthly data of disposed I-T appeals
 Further indirect tax may be levied in 2017
 India has to make its own tax law
 Centre warns against criticism of GST network
 Indirect tax collection jumps 26% in April-September, direct tax 9%

Interest on refund allowed even if law is silent
June, 30th 2015

We are sharing with you an important judgement of the Hon’ble High Court of Gujarat in the case of State of Gujarat Vs. Indian Petro Chemicals Ltd. [2015 (6) TMI 541 – Gujarat High Court] on following issues:


Whether the entitlement of interest on refund subject to meeting with the test of constitutional provision?

What happen, when the legislature is silent about entitlement of interest on refund of the tax amount already paid by the citizen, whether the interest can be considered by way of a compensatory measure?

Facts & Background:

In the instant case, Indian Petro Chemicals Ltd. (“the Assessee”or “the Respondent”was allowed refund of the tax amount by the Appellate Authority. However, as the interest was not awarded on such refund of the tax amount, the Assessee preferred second appeal before the Hon’ble Tribunal.

It was submission of the Department that entitlement of interest under Section 54 of the Gujarat Sales Tax Act (“Gujarat Sales Tax Act”) is only for such refund amount which has arisen in the Assessment Order under Section 41 thereof and not at the Appellate stage. Thus, the Assessee was not entitled to interest on such refund amount that has arisen at the Appellate stage.

The Hon’ble Tribunal relying upon its earlier decision in the case of Saurashtra Chemical Ltd. Vs. State of Gujarat in Second Appeal No.603 of 2007 decided on August 01, 2014 and on account of the principles of doctrine of merger and reasonable construction of the provisions of Section 41 of the Gujarat Sales Tax Act held that when the interest on refund of tax upon the Assessment is available, such interest should be made available on the refund of the tax which has accrued on account of the Order passed in appeals against the Assessment Order.

Being aggrieved, the Department preferred an appeal before the Hon’ble High Court of Gujarat.


The Hon’ble High Court of Gujarat held that once an Order is passed by the competent authority for Assessment and the appeal is preferred before the Appellate Authority against such Assessment Order, which is modified by the Appellate Authority, the principles of doctrine of merger would squarely apply.

Thus, the interpretation canvassed by the Department for Section 54(1)(aa) of the Gujarat Sales Tax Act, if accepted, would run counter to the basic principles of doctrine of merger which is well accepted doctrine incorporated in the system of administration of justice.

Further, the Hon’ble High Court relying upon the following judgment of the Apex court:

  • Sandvik Asia Ltd. Vs. Commissioner of Income Tax and others reported in [2006 (1) TMI 55 - SUPREME Court]
  • Commissioner of Income Tax Vs. Gujarat Fluoro Chemicals reported in [2013 (10) TMI 117 - SUPREME COURT]

And held that the principles of compensatory measure may apply where the legislature is silent about entitlement of interest on refund of the tax amount, which is already paid by the Assessee. Thus, by considering interest by way of a compensatory measure, the Hon’ble High Court rejected the argument of the Department that interest cannot be awarded by way of compensation unless the interest was expressly provided on any amount of refund.

Hope the information will assist you in your Professional endeavours. In case of any query/ information, please do not hesitate to write back to us.

Thanks & Best Regards,

Bimal Jain

FCA, FCS, LLB, B.Com (Hons)


Tax and Law Practitioners


Flat No. 34B, Ground Floor,

Pocket – 1, Mayur Vihar Phase-1

Delhi – 110091 (India)

Tel: +91 11 22757595/ 42427056


H. No. 908, Sector 12-A,

Panchkula, Haryana – 134115


Ist Floor, 10 R G Kar Road

Shyambazar, Kolkata – 700 004



Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the authors nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this document nor for any actions taken in reliance thereon.

Readers are advised to consult the professional for understanding applicability of this newsletter in the respective scenarios. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. No part of this document should be distributed or copied (except for personal, non-commercial use) without our written permission.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Custom Software Development Outsourcing Custom Software Development Offshore Cus

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions