2006 (7) TMI 626 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of sections 11D and 10(4) for the assessment year 1982-83.
2. Applicability of the decision in Associated Cement Co. Ltd. v. Commercial Tax Officer [1981] 48 STC 466.
3. Jurisdiction and sustainability of interest levy under section 11D.

Analysis:

1. Interpretation of sections 11D and 10(4): The petitioner, a registered dealer under the Punjab General Sales Tax Act, 1948, was involved in the business of tyres and tubes. An additional demand of tax and interest under section 11D was raised for the assessment year 1982-83, which was paid by the assessee. Subsequently, reassessment proceedings were initiated under section 11A, resulting in a further demand for tax and penalty. The Revenue also claimed interest under section 11D on the basis that the tax was due on the date of filing the return. The Tribunal upheld this demand based on the judgment in Associated Cement Co. Ltd. v. Commercial Tax Officer [1981] 48 STC 466.

2. Applicability of Associated Cement Co. Ltd. case: The counsel for the assessee argued that the decision in Associated Cement Co. Ltd. case had been overruled by a Constitution Bench of the Supreme Court in J.K. Synthetics Ltd. v. Commercial Taxes Officer [1994] 94 STC 422. It was contended that interest becomes payable from the date of demand following assessment/reassessment, not from the date of return, as the assessee cannot foresee any excess liability at the time of filing. This argument was supported by precedents such as Frick India Limited v. State of Haryana [1994] 95 STC 188, Maruti Wire Industries Pvt. Ltd. v. Sales Tax Officer [2001] 122 STC 410, and a Full Bench decision in United Riceland Limited v. State of Haryana [1997] 104 STC 362.

3. Jurisdiction and sustainability of interest levy under section 11D: The High Court, considering the settled law in J.K. Synthetics Ltd. case, held that interest liability post reassessment arises from the date of demand, not the date of return. The Court, in line with a Division Bench decision, ruled in favor of the assessee, concluding that interest payment is triggered by the demand following reassessment. Consequently, the questions raised by the petitioner were answered in their favor, leading to the disposal of the petition in favor of the assessee.