2007 (10) TMI 564 - HC - VAT and Sales Tax

Interest on base level sales tax belatedly paid - Held that - This court hereby directs that even though the assessee had not paid the base level tax in terms of G.O. Ms. No. 119 dated April 13, 1994, the Secretary to Government, Commercial Taxes Department, shall consider positively and sympathetically in terms of the Division Bench decision of this court in W. A. No. 509 of 1994 dated February 22, 1995, the appeal for waiver of interest payable on the amount of base level payment as per G.O. Ms. No. 119 dated April 13, 1994. The assessee herein is directed to make the representation to that effect before the Secretary to Government, Commercial Taxes Department, Government of Tamil Nadu, within a period of four weeks from the date of receipt of a copy of this order and till orders are passed on the representation made by the assessee, there shall not be any coercive action in respect of the interest demanded under the recovery notice. Accordingly, the writ petitions are disposed of.

Issues Involved:
1. Legality of the demand for interest on delayed payment of base level sales tax.
2. Eligibility and terms of the deferral of sales tax.
3. Applicability of G.O. Ms. No. 119 dated April 13, 1994.
4. The authority of the Government to waive interest under the Tamil Nadu General Sales Tax Act, 1959.

Issue-wise Detailed Analysis:

1. Legality of the demand for interest on delayed payment of base level sales tax:
The writ petitions were filed to quash the order demanding interest on the ground that the assessee had paid the base level sales tax belatedly while availing the benefit of deferral of sales tax. The Tribunal initially set aside the order of demand but later upheld the demand for penal interest under section 24(3) of the Tamil Nadu General Sales Tax Act, 1959, for the late payment of the base amount of tax. The court noted that the assessee had not been put on notice regarding the base level payment of tax either through an amended agreement or an intimation after the issuance of G.O. Ms. No. 119, thus questioning the validity of the interest demand.

2. Eligibility and terms of the deferral of sales tax:
The deferral of sales tax was granted to the petitioner for three expansion units on different dates, governed by G.O. Ms. No. 500 dated May 14, 1990, and G.O. Ms. No. 119 dated April 13, 1994. The eligibility certificates issued were subject to conditions mentioned in the respective G.O.s. The court observed that the eligibility certificates and agreements did not specify the requirement of maintaining base level production/sales for the first two units, thus making the demand for interest on non-maintenance of base level production questionable.

3. Applicability of G.O. Ms. No. 119 dated April 13, 1994:
The court emphasized that G.O. Ms. No. 119 was prospective and applicable to industries set up after its publication. The first two units of the petitioner were set up before this date, and hence, G.O. Ms. No. 119 did not apply to them. The court referred to a previous decision in W.A. No. 509 of 1994, which held that industries set up prior to April 13, 1994, would not fall under G.O. Ms. No. 119. Therefore, the demand for interest based on this G.O. was not justified for the first two units.

4. The authority of the Government to waive interest under the Tamil Nadu General Sales Tax Act, 1959:
The court highlighted the power of the Government under Section 16B and Section 17 of the Tamil Nadu General Sales Tax Act, 1959, to reduce or waive penalties and to notify exemptions and reductions of tax. Section 17A(2) specifically states that deferred payment of tax shall not attract interest provided the conditions for payment are satisfied. Given the genuine doubt regarding the base level payment and the lack of intimation for maintaining it, the court directed the Secretary to Government, Commercial Taxes Department, to consider the assessee's appeal for waiver of interest positively and sympathetically.

Conclusion:
The court directed the Secretary to Government, Commercial Taxes Department, to consider the appeal for waiver of interest on the base level payment and restrained any coercive action until a decision was made. The writ petitions were disposed of with no costs, and the connected W.P.M.P. Nos. were closed.

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