2007 (11) TMI 583 - HC - VAT and Sales Tax

Interest levied for belated payment of tax - Held that - In this particular case it is neither a case of failure to include turnover in the return nor escapement of turnover, but wrong classification of turnover in the return. In the original return filed by the petitioner, turnover was declared as exempted turnover. When sales tax exemption was withdrawn, the return should have been revised by transferring turnover on which exemption was claimed to taxable turnover and the petitioner should have paid the tax thereon. Failure to do so is also a situation covered by sub-section (3A) of section 23 because on account of misclassification, escapement of self-assessment and payment of tax on taxable turnover happens which attracts interest under the said section. In the circumstances since the petitioner s is a case squarely falling under sub-section (3A) of section 23 as held above, the impugned orders are to be necessarily upheld. The writ petition is devoid of any merit and is dismissed. However, the interest paid during pendency of writ petition should be adjusted and only the balance should be recovered from the petitioner.

Summary

Issues:
Challenge to order confirming interest for belated payment of tax; Interpretation of sections 23(3) and 23(3A) of the Kerala General Sales Tax Act, 1963.

Analysis:
The petitioner contested exhibit P15 order confirming interest for late tax payment, arguing it was illegal and unauthorized, citing precedents. Despite initially having sales tax exemption, it was withdrawn in 1998. The petitioner neither filed a revised return nor paid the tax post-exemption withdrawal. The petitioner claimed that the turnover in question was already included in the return, hence interest should not be payable under sections 23(3) and 23(3A) of the Act. However, the court disagreed, stating that sub-section 3A applies when turnover is not included in the return or has escaped assessment, which was not the case here. The misclassification of turnover as exempted led to non-payment of tax on taxable turnover, falling under sub-section 3A and attracting interest. The court distinguished previous judgments, noting they were not applicable due to differing circumstances. As the petitioner's case aligns with sub-section 3A, the impugned orders confirming interest were upheld, and the writ petition was dismissed. The court directed adjusting the interest paid during the petition's pendency and recovering only the remaining balance from the petitioner.

Conclusion:
The court upheld the interest levied for belated tax payment, emphasizing the misclassification of turnover as exempted resulted in non-payment of tax on taxable turnover, attracting interest under section 23(3A). The petitioner's argument based on precedents was deemed inapplicable due to the specific circumstances of the case. The court dismissed the writ petition, directing the adjustment of interest paid during the petition's pendency and recovery of the remaining balance from the petitioner.