2004 (4) TMI 561 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Justification of the demand under Section 24(3) of the TNGST Act.
2. Validity of penalty imposition during the period of stay orders.
3. Interpretation of Section 24(3) as penalty or interest.
4. Applicability of precedents from other cases and jurisdictions.

Issue-wise Detailed Analysis:

1. Justification of the demand under Section 24(3) of the TNGST Act:
The primary question was whether the second respondent was justified in demanding Rs. 41,67,981 under Section 24(3) of the Tamil Nadu General Sales Tax Act (TNGST Act). The petitioner argued that the stay orders granted by the High Court and the Supreme Court should negate the default period, thereby invalidating the penalty. However, the court found no substance in this argument, stating that the stay order merely postponed the recovery or collection of tax and did not eliminate the tax liability itself.

2. Validity of penalty imposition during the period of stay orders:
The petitioner contended that the stay orders should exclude the period from being considered for default, thus negating any penalty. The court referred to the doctrine "actus curiae neminem gravabit" (an act of the court shall prejudice no one) and concluded that the stay only postponed the collection, not the liability. The court cited the Supreme Court's judgment in Calcutta Jute Manufacturing Co. v. Commercial Tax Officer, which reinforced that the tax amount retained by the petitioner during the stay period should be compensated to the state.

3. Interpretation of Section 24(3) as penalty or interest:
Section 24(3) of the TNGST Act was scrutinized to determine whether it imposed a penalty or interest. The court noted that despite the term "penalty," the provision essentially required the payment of interest for the delayed payment of tax. This interpretation was supported by the Division Bench ruling in Sakthi Sugars Ltd. v. Assistant Commissioner of Commercial Taxes, which held that the so-called "penalty" was compensatory, not punitive. The court emphasized that this interpretation had become final as it was not challenged further in the Supreme Court.

4. Applicability of precedents from other cases and jurisdictions:
The petitioner referenced the Supreme Court ruling in Consolidated Coffee Ltd. v. Agricultural Income-tax Officer, which dealt with the Karnataka Agricultural Income-tax Act, arguing that penalties should not apply during the stay period. However, the court found this precedent inapplicable, noting that the provisions of the Karnataka Act differed from the TNGST Act. The court also dismissed reliance on Yeshaswi Cashew v. State of Karnataka, as it was based on similar provisions to the Karnataka Agricultural Income-tax Act and did not overrule the relevant Tamil Nadu precedent.

Conclusion:
The court concluded that the demand under Section 24(3) of the TNGST Act was justified as it represented interest for delayed tax payment, not a penalty. The stay orders did not negate the tax liability, and the petitioner was liable for the interest accrued during the stay period. Consequently, the writ petition was dismissed, and the connected W.P.M.P. was closed.