1989 (7) TMI 326 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Legality and validity of the imposition of turnover tax.
2. Liability to pay interest on the turnover tax.
3. Date from which the liability to pay interest would accrue.
4. Refusal to issue declaration forms due to non-payment of turnover tax and interest.

Detailed Analysis:

1. Legality and Validity of the Imposition of Turnover Tax
The applicants challenged the imposition of turnover tax under the West Bengal Taxation Laws (Second Amendment) Act, 1979, on the grounds that it violated Articles 14, 19, and 300A of the Constitution of India. The High Court had previously dismissed these appeals, finding the imposition of turnover tax to be valid and not unconstitutional.

2. Liability to Pay Interest on the Turnover Tax
The applicants contended that under Section 10A of the Bengal Finance (Sales Tax) Act, 1941, which came into effect on October 1, 1983, no interest could be demanded from them. They argued that even if interest was payable, it could not be demanded prior to February 24, 1988, when the appellate decision was made. The respondents countered that the applicants were liable to pay interest as per the statute and that obtaining a stay on payment at their own risk did not exempt them from this liability.

The Tribunal examined Section 10A, which specifies that interest is payable if a dealer fails to make full payment of tax by the prescribed date. The applicants argued that they had filed returns and paid taxes according to these returns, thus Section 10A(1) was not applicable. However, the Tribunal held that the term "return" in Section 10A(1) must mean a complete return, including all items of tax such as turnover tax. Since the applicants did not include turnover tax in their returns, they did not submit a complete return. Therefore, the liability to pay interest under Section 10A could not be avoided.

3. Date from Which the Liability to Pay Interest Would Accrue
The Tribunal clarified that the liability to pay interest accrues from October 1, 1983, the date when Section 10A came into effect, and not from the date of the appellate decision (February 24, 1988). The Tribunal emphasized that the statute, not the judgment, creates the liability to pay interest. The running of time for the payment of interest is not stopped by the operation of any stay order, and the liability remains irrespective of the pendency of appeals or interim orders.

4. Refusal to Issue Declaration Forms Due to Non-Payment of Turnover Tax and Interest
The applicants also raised the issue of the refusal by the authorities to issue declaration forms due to non-payment of turnover tax and interest. The Tribunal acknowledged that substantial amounts of tax and interest might have accumulated, making it difficult for applicants to clear arrears all at once. Rule 27AA empowers the Commercial Tax Officer to grant time for payment in lump sum or installments. The Tribunal directed the appropriate authorities to consider each case on its merits and sympathetically consider granting installments for issuing declaration forms.

Conclusion
The applications were dismissed, and all interim orders were vacated. The Tribunal held that the imposition of turnover tax was valid, the liability to pay interest accrued from October 1, 1983, and the refusal to issue declaration forms was justified due to non-payment of turnover tax and interest. However, the Tribunal directed the authorities to consider granting installments for clearing arrears to facilitate the issuance of declaration forms.