THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No.26215 of 2010 Dated:10.11.2010 Between: M/s.Clough Engineering Limited. …Petitioner and The Deputy Commissioner (CT), Kakinada Division, Kakinada, And others. …Respondents THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No.26215 of 2010 ORDER: (per Hon’ble Sri Justice V.V.S.Rao) The petitioner – an incorporated entity of Australia, executed certain works for Oil & Natural Gas Corporation Limited (ONGC) in respect of G-15 Projects in Krishna-Godavari Basin. For the purpose of executing those onshore and offshore works, the petitioner scored certain turnover, statedly, under Section 5(2) of the Central Sales Tax Act, 1956 (CST Act), and Section 5 of the Andhra Pradesh Value Added Tax Act, 2005 (VAT Act). As a registered dealer on the rolls of the second respondent, they filed the returns for April 2005 to November 2006. The assessment was completed on the best judgment basis on 12.03.2007. When the petitioner appealed, the Appellate Deputy Commissioner, after verifying the books, determined the tax liability of Rs.16,22,34,490/-, which included TDS. As a consequence thereof, the original assessing authority determined the tax refund of Rs.6,45,56,673/- vide order dated 17.12.2007. While doing so, the fourth respondent in separate order held the petitioner liable to pay an amount of Rs.34,87,092/-, and after adjusting the refund, the excess refundable amount of Rs.6,10,69,581/- was determined. In so far as the fourth respondent disallowed the exemption claim under Section 5(2) of the CST Act, the petitioner appealed to the Appellate Deputy Commissioner. The same was dismissed on 23.02.2008. The petitioner then preferred an appeal, being T.A.No.241 of 2008. The same was allowed on 18.11.2008. As a result of this, the petitioner became entitled to refund of Rs.9,62,92,531/-. The petitioner’s application for refund of the two amounts was sent to the second respondent. In purported exercise of the power under Section 40(2) of the VAT Act, the second respondent passed the impugned order dated 19.07.2010 rejecting the claim on the ground that the Government’s revision, being TREVC No.72 of 2009, is pending, and that the petitioner closed their business and shifted their operations to their headquarters at Perth in Australia. This Court during the preliminary hearing on 26.10.2010 directed the Special Counsel for the Department to file their counter. Counter affidavit is filed by the second respondent mainly sustaining its reasoning. It is also pleaded by the Department that when there is no time limit fixed for refunds, the petitioner cannot have any enforceable right to seek a mandamus from this Court. Sections 38, 39 and 40 are a group of provisions in the VAT Act, which deal with the refunds. When a VAT/TOT dealer is entitled to refund as of right, the rule is to order refund, default of which attracts interest at 12% per annum for the delayed payment. Section 40(2) of the VAT Act contains two exceptions. The first one is, the prescribed authority instead of ordering refund, may adjust the refundable amount towards the tax dues and secondly, if such “refund is likely to adversely affect the revenue”, the prescribed authority with the previous approval of the Deputy Commissioner may withhold the refund. A Division Bench of this Court in BSNL v State of Andhra Pradesh[1] interpreted these legal provisions. Another Division Bench of this Court considered Section 33C of the Andhra Pradesh General Sales Tax Act, 1957, which almost is in pari materia with Section 40(2) of the VAT Act in Pulp N’Pack Private Limited v CTO[2]. The ratio of these two precedents is that mere pendency of an appeal or revision before the departmental authority or High Court is no ground to routinely record conclusion that such refund is likely to adversely affect the revenue. The Special Counsel for the Department contends that when admittedly the petitioner Company has closed their business in India and left for Australia, if any refund is granted pending the Tax Revision Case by the Government and suo motu revision by the jurisdictional Deputy Commissioner, the recovery of amount would become nearly impossible adversely prejudicing the revenue. It is no doubt true that ordinarily in such an event we would have countenanced the submission of the revenue. In this case the fact that the petitioner is an international company specializing in onshore and offshore drilling, and carry on transactions through HSBC Bank, Mumbai Branch, we may have to ignore the submission of the Department. We, however, hasten to add that to protect the interest of the revenue we can always order refund on imposing stringent conditions like asking the petitioner to furnish the unconditional bank guarantee for the entire amount given by HSBC Bank, Hyderabad Branch. Accordingly, for the above brief reasons, we allow the writ petition. A mandamus shall issue to the respondents to refund the amount of Rs.9,62,92,531/- (Rupees nine crores sixty two lakhs ninety two thousand five hundred and thirty one only), and an amount of Rs.6,10,69,581/- (Rupees six crores, ten lakhs, sixty nine thousand five hundred and eighty one only), on condition of the petitioner furnishing two separate unconditional, renewable and irrevocable bank guarantees of any Nationalized Bank or HSBC Bank, Hyderabad Branch, within a period of four weeks from today. The mandamus shall be implemented by the respondents only on furnishing such bank guarantee within a period of two weeks thereafter. The payment under Section 39(2) of the VAT Act shall be subject to the result of the Tax Revision Case and suo motu revision by the Deputy Commissioner. The refund and bank guarantee ordered now shall be subject to the final result in the two revisions. _______________ (V.V.S.RAO, J) _____________________________ (RAMESH RANGANATHAN, J) 10.11.2010 Note: Issue C.C in one week. B/o. vs [1] (2009) 25 VST 511 (AP) [2] (2009) 23 VST 573 (AP)