2002 (3) TMI 899 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the demand for interest on belated payment of tax under Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959.
2. Effect of interim stay order on the obligation to pay tax and interest.
3. Applicability of precedents cited by the petitioner.

Issue-wise Detailed Analysis:

1. Legality of the demand for interest on belated payment of tax under Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959:

The petitioner, an incorporated company, received lease rentals and challenged the imposition of tax on these transactions under Section 3-A of the TNGST Act. The court initially granted an interim stay on the operation of Section 3-A. However, the provision was later amended with retrospective effect, rendering the petition infructuous. Despite this, the petitioner paid the tax belatedly and was subsequently demanded to pay interest for the delay under Section 24(3) of the TNGST Act. The court held that the petitioner had no bona fide cause of action to challenge Section 3-A and that the transaction was taxable under both the unamended and amended provisions. The court emphasized that the liability to pay interest is compensatory, not penal, and arises automatically for any unpaid tax after the due date.

2. Effect of interim stay order on the obligation to pay tax and interest:

The court clarified that the interim stay order did not wipe out the provision of Section 3-A but merely rendered it inoperative temporarily. Upon the dismissal of the writ petition as infructuous, the petitioner was required to pay the tax along with interest for the period of delay. The court cited the principle that no act of the court should cause prejudice to any party (actus curiae neminem gravabit). The interim stay did not relieve the petitioner of the obligation to pay interest, as the stay was only a temporary relief and did not nullify the statutory liability.

3. Applicability of precedents cited by the petitioner:

The petitioner cited several Supreme Court decisions to argue against the imposition of interest. However, the court found these precedents inapplicable. In Kanoria Chemicals and Industries Ltd. v. U.P. State Electricity Board, the Supreme Court held that a stay order does not wipe out the obligation to pay dues, which supports the Revenue's case. In Consolidated Coffee Ltd. v. Agricultural Income-tax Officer, the Supreme Court distinguished between penalty and interest, holding that interest is compensatory, which aligns with the present case. The court also rejected the applicability of Food Corporation of India v. State of Haryana, as the facts were different. The court concluded that the petitioner's reliance on J.K. Synthetics Ltd. v. Commercial Taxes Officer was misplaced, as the provisions of the Rajasthan Sales Tax Act considered in that case were not comparable to the TNGST Act.

Conclusion:

The court dismissed the writ petitions, holding that the petitioner was liable to pay interest under Section 24(3) of the TNGST Act for the belated payment of tax. The interim stay did not absolve the petitioner of this liability, and the cited precedents did not support the petitioner's case. The court's decision emphasized the automatic and compensatory nature of the interest liability under the TNGST Act.