2007 (3) TMI 715 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of levy and demand of interest for belated payment of sales tax for the assessment year 1991-92.
2. Applicability of Section 24A of the Tamil Nadu General Sales Tax Act, 1959 regarding creation of charge on property.
3. Interpretation of Sections 24(2) and 24(3) of the said Act in relation to payment of interest on belated tax.

Analysis:
1. The petitioner challenged the levy and demand of interest for belated payment of sales tax for the assessment year 1991-92. The petitioner argued that as an auction purchaser of the property, he was not liable to pay the sales tax due, which he had already paid to the respondent. The petitioner contended that the charge created over the property ceased once the amount was accepted by the department, and therefore, the demand for interest was not legally sustainable. However, the court held that under Section 24(2) of the Act, an automatic charge is created over the property upon tax becoming payable. Since there were sales tax arrears, the statutory charge was created over the property sold to the petitioner, justifying the payment of sales tax and interest for belated payment.

2. The court examined the applicability of Section 24A of the Act, which deals with creating a charge on assets to defraud revenue. The petitioner argued that since there were no pending proceedings and the charge was created over the property after completion of proceedings, the demand for interest was not valid. However, the court reasoned that until the tax due along with interest under the Act is completely discharged, the argument based on Section 24A cannot be accepted. The court emphasized that the automatic charge created over the property justified the demand for interest on belated tax payment.

3. In interpreting Sections 24(2) and 24(3) of the Act, the court clarified that upon tax becoming payable, a charge is automatically created over the property. The court emphasized that the petitioner was liable to pay interest for belated payment of tax as per the statutory provisions of the Act. The court rejected the argument that the charge created over the property ceased upon payment of tax to the department, highlighting the legal obligation to pay interest on belated tax payment until the entire amount due is discharged. Consequently, the court dismissed the writ petitions challenging the levy and demand of interest for belated payment of sales tax for the assessment year 1991-92, finding no illegality or irregularity in the authorities' orders.