2009 (8) TMI 1104 - HC - VAT and Sales Tax

Whether the first respondent has no jurisdiction to invoke the provisions of section 25 of the Revenue Recovery Act, as it does not pertain to arrears of land revenue? Held that - In the event of default in repayment of Government loan, the same shall be recoverable in such manner as specified under the Revenue Recovery Act, as per section 24(2) and section 26 of the TNGST Act. Therefore, even though under G.O. Ms. No. 48 the deferred sales tax will be treated as Government loan, by virtue of the agreement executed by the petitioner, the petitioner has agreed that the amount shall be recoverable under sections 26 and 24(2) of the TNGST Act. Therefore, reading the G.O. Ms. 48 along with the agreement which is also mentioned in the said G.O., the petitioner has agreed for the recovery of the Government loan as arrears of land revenue as per sections 26 and 24(2) of the TNGST Act . Thus the first respondent is justified in invoking the section 25 of the Revenue Recovery Act by issuing the impugned notice. Writ petition dismissed.

Issues:
1. Interpretation of Interest-free Sales Tax Deferral Scheme.
2. Jurisdiction to invoke provisions of section 25 of the Revenue Recovery Act.
3. Validity of invoking Revenue Recovery Act for recovery of sales tax dues.

Analysis:

1. Interpretation of Interest-free Sales Tax Deferral Scheme:
The petitioner, a manufacturer of fireworks and crackers, availed benefits under the Interest-free Sales Tax Deferral Scheme initiated by the Government to promote industries in industrially backward areas. The scheme allowed deferment of sales tax for a specified period, treating it as a deemed payment and converting it into an interest-free loan repayable to the Government. The petitioner argued that the sales tax amount ceased to be tax liability and became a loan, hence not subject to recovery under the Revenue Recovery Act. However, the court noted that the agreement executed by the petitioner explicitly allowed recovery of the loan as arrears of land revenue under relevant provisions of the TNGST Act. Therefore, the court held that the petitioner had agreed to the recovery of the loan as per the statutory provisions, dismissing the contention that the amount was not liable for recovery under the Revenue Recovery Act.

2. Jurisdiction to invoke provisions of section 25 of the Revenue Recovery Act:
The petitioner challenged the jurisdiction of the first respondent to invoke section 25 of the Revenue Recovery Act for recovering the sales tax dues, arguing that it did not pertain to arrears of land revenue. The court analyzed the provisions of the Interest-free Sales Tax Deferral Scheme and the agreement executed by the petitioner. It observed that the agreement specifically allowed for the recovery of the loan as arrears of land revenue under the TNGST Act. Therefore, the court concluded that the first respondent was justified in invoking section 25 of the Revenue Recovery Act for the recovery of sales tax dues, as per the terms agreed upon by the petitioner.

3. Validity of invoking Revenue Recovery Act for recovery of sales tax dues:
The court further examined the contention of the petitioner that the proceedings under the Revenue Recovery Act were illegal as the sales tax amount had been converted into an interest-free loan repayable to the Government. However, based on the agreement executed by the petitioner, which allowed for recovery of the loan as arrears of land revenue under the TNGST Act, the court held that the first respondent's actions were valid. The court emphasized that the petitioner had agreed to the recovery mechanism specified in the agreement, dismissing the challenge to the validity of invoking the Revenue Recovery Act for the recovery of sales tax dues. Consequently, the writ petition and the connected miscellaneous petition were dismissed with no costs awarded.

In conclusion, the judgment clarified the legal implications of the Interest-free Sales Tax Deferral Scheme, upheld the jurisdiction to invoke the Revenue Recovery Act for recovering sales tax dues, and emphasized the importance of agreements in determining the recovery mechanisms for government loans.

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