1998 (12) TMI 589 - AT - VAT and Sales Tax

Issues Involved:
1. Quashing notices/orders levying penal interest under Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959.
2. Penal interest on additional tax/surcharge for belated payment.
3. Time from which penal interest is leviable for works contract assessees.
4. Adjustment of refunds and cancellation of penal interest.
5. Demands for penal interest post-revenue recovery initiation.
6. Security demands for penal interest pending revision.
7. Refund of penal interest under deferral schemes.
8. Penal interest on REP license premium turnover.
9. Specific arguments and contentions by various petitioners.
10. Government's stance on the automatic liability of interest under Section 24(3).

Detailed Analysis:

1. Quashing Notices/Orders Levying Penal Interest:
The Tribunal examined several petitions where the main prayer was to quash notices/orders levying penal interest for delayed submission/payment of tax. The Tribunal upheld the levy of penal interest under Section 24(3) of the Act, emphasizing that the liability to pay interest is automatic and arises by operation of law. The Tribunal dismissed the petitions, noting that the petitioners failed to file timely revisions or provide adequate justifications for delays.

2. Penal Interest on Additional Tax/Surcharge:
Petitions challenged the levy of penal interest on additional tax and surcharge for belated payments. The Tribunal confirmed that under the Tamil Nadu Additional Sales Tax Act, 1970, and the Tamil Nadu Sales Tax (Surcharge) Act, 1971, the levy of penal interest is valid and enforceable. The Tribunal dismissed the petitions, reinforcing that the provisions of the principal Act apply to additional taxes and surcharges.

3. Time from Which Penal Interest is Leviable for Works Contract Assessees:
The Tribunal addressed the issue of penal interest for works contract assessees, noting that the retrospective effect of Act 25 of 1993 validated the levy of tax and penal interest from June 26, 1986. The Tribunal dismissed the petitions, stating that the revised returns filed and taxes paid before final assessment still attracted penal interest for the period of delay.

4. Adjustment of Refunds and Cancellation of Penal Interest:
Several petitions argued improper adjustment of refunds, leading to penal interest. The Tribunal upheld the levy of penal interest, stating that the adjustment of refunds must be correctly applied to the relevant assessment years. The Tribunal dismissed the petitions, affirming that the petitioners should have sought timely revisions to address any discrepancies.

5. Demands for Penal Interest Post-Revenue Recovery Initiation:
The Tribunal examined cases where penal interest was demanded after initiating revenue recovery proceedings. The Tribunal upheld the demands, stating that penal interest accrues until the arrears are fully paid, regardless of revenue recovery actions. The petitions were dismissed.

6. Security Demands for Penal Interest Pending Revision:
In one case, the Tribunal quashed an order demanding security for penal interest while the matter was pending revision. The Tribunal noted that according to the second proviso to Section 24(3) of the Act, the interest payable is postponed during the pendency of revision. The petition was allowed.

7. Refund of Penal Interest Under Deferral Schemes:
Petitions seeking refunds of penal interest collected under deferral schemes were dismissed. The Tribunal advised petitioners to pursue statutory remedies through revision petitions, emphasizing that the proper course of action was to file revisions before the Deputy Commissioner.

8. Penal Interest on REP License Premium Turnover:
The Tribunal upheld the levy of penal interest on REP license premium turnover not disclosed in the return but paid before final assessment. The Tribunal advised the petitioner to file a revision petition to determine whether the case attracted penal interest or penalties.

9. Specific Arguments and Contentions by Various Petitioners:
The Tribunal extensively discussed arguments presented by petitioners, including contentions about the debatable nature of certain tax liabilities (e.g., subsidies, lease rentals). The Tribunal consistently upheld the levy of penal interest, emphasizing the automatic nature of interest under Section 24(3) and the necessity of timely tax payments.

10. Government's Stance on the Automatic Liability of Interest:
The Government Advocate argued that the liability to pay interest under Section 24(3) is automatic and arises by operation of law. The Tribunal agreed, citing precedents and statutory provisions to support the automatic accrual of interest on unpaid tax amounts.

Conclusion:
Except for O.P. No. 3818 of 1997 and O.P. No. 20 of 1998, which were allowed, all other petitions were dismissed. The Tribunal emphasized the automatic nature of penal interest under Section 24(3) and the necessity for petitioners to seek timely revisions or provide adequate justifications for delays in tax payments. The Tribunal provided detailed reasoning for each petition, reinforcing the statutory obligations of tax compliance and the consequences of defaults.

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