1997 (5) TMI 400 - AT - VAT and Sales Tax

Summary

Issues Involved:

1. Whether a dealer can validly adjust any excess amount paid earlier as tax with the tax payable according to returns for subsequent periods under the West Bengal Sales Tax Act, 1954.
2. Can such a dealer avoid interest payable under section 8A of the Act by such adjustment?

Issue-wise Detailed Analysis:

1. Validity of Adjusting Excess Tax Paid in Earlier Periods:

The applicant-company, engaged in the manufacture and sale of ships, adjusted the excess tax paid in earlier years with the tax payable for the months of January, February, and March 1989. The company informed the Commercial Tax Officer (CTO) about this adjustment through letters but did not deposit the tax according to the monthly returns. The CTO completed the assessment for these periods on March 24, 1993, and levied interest for non-payment of tax, not considering the applicant's letters or the refund entitlement of Rs. 71,16,258 from June 27, 1991. The applicant's statutory appeals were partially allowed, directing a fresh determination of interest, but rejecting the adjustment of excess tax paid earlier. The West Bengal Commercial Taxes Appellate and Revisional Board upheld this decision, stating that the accrual of interest on unpaid tax cannot be halted by such adjustments. The Tribunal found that section 11(1) of the Act and rule 29(1) of the Rules of 1954 do not allow for unilateral adjustments by the dealer. The power of adjustment is conferred on the prescribed authority or its delegate, and any excess tax becomes refundable only after assessment under rule 23 or 24. Therefore, the applicant's unilateral adjustment was outside the statutory provisions for refund.

2. Avoidance of Interest Payable Under Section 8A:

Section 8A(1) mandates that a dealer must pay a simple interest at the rate of two percent per month for default on unpaid tax from the prescribed date until full payment or assessment. The applicant argued that the returns were accepted as valid since no action was taken under section 8(3), but the Tribunal found that the returns were not accepted, as the assessing officer enhanced the gross turnover and made an assessment under section 9(2). The Tribunal noted that section 8(3) pertains to verification of returns and has no direct connection with assessment or acceptance of returns. The applicant's failure to pay the admitted tax and furnish receipts along with the returns constituted non-payment of tax, attracting interest under section 8A(1). The Tribunal also rejected the applicant's contention of a bona fide belief in the validity of the adjustment, stating that the action was knowingly contrary to statutory provisions. The Tribunal concluded that the applicant's case clearly involved failure to make full payment of tax by the prescribed dates, thus attracting interest as per section 8A(1).

Substantive Justice:

The Tribunal acknowledged that the refund of Rs. 71,16,258 was quantified on June 27, 1991, but paid only on June 22, 1993. It directed that no interest should be charged on the unpaid tax for January, February, and March 1989 to the extent of Rs. 71,16,258 from June 27, 1991, to June 22, 1993. The Deputy Commissioner was instructed to dispose of the applicant's pending appeal and segregate the determination of interest accordingly.

Conclusion:

The application was disposed of without any order for costs, with all members of the Tribunal concurring.