2009 (10) TMI 866 - HC - VAT and Sales Tax

Interest under section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 demanded for assessment years 1992-93, 1993-94, 1994-95, 1995-96 and 1996-97 Held that - Suppose a dealer was assessed to tax in the first instance and he also makes payment of the tax so assessed. But later on, if the tax assessed is found to be in excess, the refund of the excess amount is to be made within 90 days, failing which the Government is also liable to pay interest to the dealer, by virtue of section 24(4). Though the interest payable by the dealer under section 24(3) is higher than the interest payable by the Government under section 24(4), the choice is with the dealer, either to make full payment and claim refund under section 24(4) or to make part payment and run the risk of being imposed with a penal interest under section 24(3). W.P. dismissed.

Issues Involved:
1. Liability to pay interest under Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959.
2. Date on which the tax liability arises for the purpose of determining interest.
3. Applicability of deferred payment schemes and Section 17A(2) of the TNGST Act.
4. Liability to pay interest on disputed turnover until the dispute is resolved.

Detailed Analysis:

1. Liability to Pay Interest Under Section 24(3) of the TNGST Act:
The primary issue is whether the petitioner is liable to pay interest under Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959, for the belated payment of tax. The court noted that the assessment orders for the years 1992-93, 1993-94, and 1994-95, were passed on February 20, 1995, and June 5, 1996, respectively. These orders were not challenged for over ten years. Similarly, the orders for 1995-96 and 1996-97 were passed on March 24, 2000, and were not challenged for seven years. The fresh orders passed in 2009 related back to the original orders, making the petitioner liable for interest on delayed payments.

2. Date on Which the Tax Liability Arises:
The petitioner argued that the liability to pay tax should be construed to arise from the date of the fresh orders of assessment passed in 2009. However, the court held that by virtue of the second proviso to Section 24(3), the fresh orders of assessment relate back to the original orders. The court emphasized that the liability to pay interest is merely postponed until the disposal of any appeal or revision, but the interest is calculated from the date of the original assessment order. The court cited the "Doctrine of Relation Back" to support this view, indicating that the fresh orders do not erase the original liability but merely postpone the interest on the disputed amount.

3. Applicability of Deferred Payment Schemes and Section 17A(2):
The petitioner contended that under Section 17A(2) of the TNGST Act, deferred payment of tax should not attract interest. The court clarified that Section 17A(2) applies only if the conditions laid down for deferred payment are satisfied. Since the petitioner defaulted on the deferred payment scheme, the protection under Section 17A(2) was not available. The court noted that deferred payment schemes are essentially postponements of tax due dates, and any breach of the conditions nullifies the protection against interest liability.

4. Liability to Pay Interest on Disputed Turnover:
The petitioner argued that there should be no liability to pay interest on the disputed portion of the tax until the dispute is resolved. The court rejected this argument, stating that the second proviso to Section 24(3) merely postpones the interest on the disputed amount until the final order is passed. Once the appeal or revision is disposed of, the interest is calculated as if the amount had been specified in the original order of assessment. The court emphasized that the liability to pay interest on the admitted turnover remains, and the interest on the disputed amount is calculated retrospectively.

Conclusion:
The court dismissed the writ petitions, holding that the petitioner is liable to pay interest under Section 24(3) of the TNGST Act for the belated payment of tax. The fresh orders of assessment relate back to the original orders, and the protection under Section 17A(2) is not available due to the petitioner's default in the deferred payment scheme. The interest on the disputed portion of the tax is merely postponed until the resolution of the dispute, and the liability is calculated retrospectively.

← Previous Next →