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2007 (12) TMI 414 - HC - VAT and Sales TaxWhether in the absence of any substantial provisions under the TNAST Act, authorising the levy of penal interest, the penalty imposed by the respondent under section 24(3) of the TNGST Act, for belated payment of additional sales tax is without jurisdiction? Held that - The issue has been already been answered by the Full Bench of the Special Tribunal in E.I.D. Parry (India) Ltd. v. Assistant Commissioner (CT), CAC, Chennai reported in 1998 (12) TMI 589 - TAMIL NADU TAXATION SPECIAL TRIBUNAL. That apart, the above amendment in Act 14 of 2005, giving retrospective effect, for the levy of penal interest on the remaining amount unpaid after the specified date, and the validation provision are squarely applicable to the facts of this case and therefore, the contentions of the petitioner that the demand made by the assessing officer without jurisdiction, is not tenable. The additional sales tax has to be paid on the prescribed date and after the due date, it becomes an amount remaining unpaid. It is not determined afresh and therefore, the question of providing an opportunity of issuing notice before the levy of penal interest does not arise. In view of the Full Bench decision of the Tamil Nadu Taxation Special Tribunal and the subsequent amendment, giving retrospective effect from April 1, 1970, the contention raised by the petitioner is not tenable.In the result, the writ petition is dismissed.
Issues Involved:
1. Jurisdiction to levy penal interest under the TNGST Act for belated payment of additional sales tax. 2. Applicability of the Supreme Court decision in India Carbon Ltd. v. State of Assam. 3. Validity of the amendment to the Tamil Nadu Additional Sales Tax Act, 1970, giving retrospective effect. 4. Requirement of issuing a notice before levying penal interest. 5. Principles of natural justice and the respondent's adherence to them. Issue-wise Detailed Analysis: 1. Jurisdiction to levy penal interest under the TNGST Act for belated payment of additional sales tax: The petitioner argued that section 24(3) of the TNGST Act authorizes penal interest only for belated payment of TNGST, not additional sales tax, as there was no substantial provision in the TNAST Act for such a levy. The respondent countered that section 24(3) of the TNGST Act prescribes interest for any unpaid amount and rule 9 of the TNAST Rules applies mutatis mutandis to additional tax, making the levy of penal interest valid. The court upheld the respondent's position, referencing the Full Bench decision in E.I.D. Parry (India) Ltd. v. Assistant Commissioner (CT), CAC, Chennai, which confirmed the adequacy of provisions under the TNGST Act for levying penal interest on additional sales tax. 2. Applicability of the Supreme Court decision in India Carbon Ltd. v. State of Assam: The petitioner relied on the Supreme Court's decision in India Carbon Ltd. v. State of Assam, which held that in the absence of a specific provision in the Central Sales Tax Act, penal interest could not be levied with reference to state provisions. The respondent argued that this decision was irrelevant as it pertained to the Central Sales Tax Act, whereas the present case involved state acts with adequate provisions for penal interest. The court agreed with the respondent, noting that the Full Bench of the Special Tribunal had already addressed this issue, distinguishing the Supreme Court's decision as inapplicable to the state context. 3. Validity of the amendment to the Tamil Nadu Additional Sales Tax Act, 1970, giving retrospective effect: The respondent highlighted that the Tamil Nadu government introduced Act 14 of 2005, which amended the TNAST Act to include section 2(1)(aaa), enabling the levy of penal interest retrospectively from April 1, 1970. The court noted that this amendment had not been challenged and validated the actions taken by authorities for the collection of interest on delayed payments. The court found the amendment and its retrospective application valid, thereby supporting the respondent's jurisdiction to levy penal interest. 4. Requirement of issuing a notice before levying penal interest: The petitioner contended that penal interest should only be imposed after issuing a show-cause notice, as per the instructions of the Special Commissioner for Commercial Taxes. The respondent argued that section 24(3) of the TNGST Act does not require prior notice for levying interest, as the levy is automatic upon default. The court upheld the respondent's position, stating that the additional sales tax becomes an unpaid amount after the due date, and no fresh determination or notice is required for levying penal interest. 5. Principles of natural justice and the respondent's adherence to them: The petitioner argued that the unilateral decision to levy penal interest violated the principles of natural justice. The respondent maintained that the levy was in accordance with statutory provisions and did not require prior notice. The court found no violation of natural justice principles, as the statutory framework did not mandate a notice before imposing penal interest. Conclusion: The court dismissed the writ petition, upholding the respondent's jurisdiction to levy penal interest under section 24(3) of the TNGST Act for belated payment of additional sales tax. The court validated the retrospective amendment to the TNAST Act and confirmed that no prior notice was required for levying penal interest. Consequently, the court found no violation of natural justice principles and dismissed the connected miscellaneous petition.
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