Taxpayer Granted Refund with Interest: Wrong Adjustment Against Cancelled Liability
The Kerala High Court ruled that a taxpayer is entitled to a refund, along with statutory interest, when the tax authorities wrongly adjust a legitimate refund claim against an outstanding demand that had already been cancelled by the appellate authority.
Key Points of the Judicial Ruling
- Illegitimate Adjustment: The tax authorities processed the petitioner’s genuine GST refund claim but adjusted the refund amount against a previously raised outstanding liability.
- Cancelled Liability: The court found that this outstanding liability had already been set aside and cancelled by the Appellate Authority much earlier. Therefore, the adjustment made by the respondent was entirely without legal basis.
- Entitlement to Interest: Because the tax department wrongfully withheld the refund by adjusting it against a non-existent liability, the petitioner became entitled not only to the immediate release of the full refund amount but also to the statutory interest applicable from the date the refund was illegally adjusted until the date of its actual payment.
- Legal Precedent: This decision reinforces the principle that legitimate tax refunds cannot be denied or adjusted based on demands that are not legally enforceable or have been successfully appealed and set aside.