2001 (10) TMI 1115 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Levy of interest under section 24(3) of the Tamil Nadu General Sales Tax Act, 1959.
2. Inclusion of freight charges and transport subsidy in the taxable turnover.
3. Bona fides of the assessee in filing supplementary returns under protest.

Detailed Analysis:

1. Levy of Interest under Section 24(3):
The assessee was subjected to interest under section 24(3) for failing to remit interest for the delay between the first of April of the relevant assessment year and the date on which supplementary returns were filed (September 12, 1995). The court examined whether the filing of supplementary returns under protest could be considered a self-assessment under section 13(2) for the purpose of levying interest. It was concluded that a return filed with a qualification disputing the liability cannot be regarded as self-assessment, and therefore, interest under section 24(3) was not applicable.

2. Inclusion of Freight Charges and Transport Subsidy:
The supplementary returns covered freight charges and transport subsidy paid to sugarcane growers or third-party transporters. Historically, there was conflicting judicial opinion on whether these charges formed part of the turnover. The Full Bench of the High Court in Chengalvarayan Cooperative Sugar Mills Ltd. v. State of Tamil Nadu [1997] 105 STC 497, affirmed by the Supreme Court, held that transport subsidy formed part of the consideration for the sale of sugarcane and thus part of the sale price. This judgment clarified the legal position, which was not settled when the assessee filed the supplementary returns.

3. Bona Fides of the Assessee:
The court considered whether the assessee acted in good faith when filing supplementary returns with the rider that the amount was being paid under protest. The court noted that the legal position regarding the taxability of freight charges and subsidy was not clear until the Full Bench's decision in 1996. The assessee's conduct in not including these charges in the original returns and disputing their taxability in supplementary returns was found to be bona fide. The court held that the bona fides of the assessee's action must be considered and that the levy of interest in such circumstances was not justified.

Conclusion:
The court set aside the interest levied on the assessee under section 24(3) for the years in question, finding that the assessee's actions were bona fide and that the legal position was not settled at the time of filing the supplementary returns. The writ petitions were allowed, and the interest levied was annulled.