2005 (5) TMI 302 - SC - VAT and Sales Tax

TURNOVER INTEREST MANUFACTURER OF SUGAR - INTEREST ON DELAYED PAYMENT OF TAX ONLY WHEN TAX ON TURNOVER AS SHOWN IN RETURN NOT PAID WITHIN DUE DATE

Summary

Issues Involved:
1. Whether the advance paid, pursuant to the advice of the Government, can be considered to be price and thus includible in the monthly turnover of the appellants.
2. Whether interest under section 24(3) can be charged on the price fixed under clause 5-A and/or on the advance paid and if so, from what date.

Issue-wise Detailed Analysis:

1. Consideration of Advance as Price in Monthly Turnover:
The appellants, manufacturers of sugar, paid an advance price for sugarcane pursuant to the Government's advice. The Supreme Court had to determine if this advance could be considered as part of the monthly turnover. The appellants argued that the advance was not the actual price since the price under clause 5-A of the Sugarcane (Control) Order, 1966, could only be determined at the end of the sugar year. They relied on the judgment in *State of Tamil Nadu v. Kothari Sugars & Chemicals Ltd.*, which indicated that advances over the clause 5-A price cannot be considered as the price. However, the Court clarified that this judgment addressed only the amounts paid over and above the clause 5-A price. The Court held that advances paid towards the clause 5-A price should be considered as part of the turnover, as they are payments towards the price, even if paid in advance.

2. Charging of Interest under Section 24(3):
The second issue was whether interest could be charged on the price fixed under clause 5-A or the advance paid. The appellants contended that interest could not be levied until the price under clause 5-A was determined and a notice of demand was issued. The Court agreed that the price under clause 5-A could not be known until the end of the sugar year, making it impossible to include in the monthly returns. The Court noted that interest could not be levied on an unknown price. However, the Court also recognized that the monthly returns should have included the advances as part of the turnover. The Court examined sections 13 and 24 of the Tamil Nadu General Sales Tax Act, 1959, and concluded that interest under section 24(3) could only be levied after a provisional assessment and a notice of demand. Since the appellants had paid tax as per their revised returns before the final assessment, the Court held that the claim for interest from the date of advance payment was not sustainable.

Conclusion:
The Supreme Court set aside the judgment of the High Court and the orders of the Tribunal and the assessing authority to the extent they levied interest under section 24(3). The Court allowed the appeals, stating that interest could not be charged on the clause 5-A price or the advance paid without a provisional assessment and a notice of demand. The Court emphasized that the levy of interest must follow the statutory procedure and cannot be imposed retroactively on amounts that were not known or determinable at the time of the monthly returns.