2009 (6) TMI 962 - HC - VAT and Sales Tax

Penal interest levied applying section 24(3) of the Tamil Nadu General Sales Tax Act for belated payment of additional sales tax - Held that - On the above limited ground of not giving notice and opportunity of hearing to the petitioner before imposing penalty the impugned orders are set aside and the matters are remitted back to the respondent. The first respondent is directed to issue notice to the petitioner with regard to the liability of the petitioner to pay penalty amount within a period of two weeks from the date of receipt of copy of this order.

Summary

Issues:
Challenge to impugned proceedings for assessment years 2002-03 to 2006-07, Reduction of tax liability under Entry Tax Act, Levying of penal interest under Tamil Nadu Additional Sales Tax Act without notice, Non-compliance with circular on penalty imposition, Availability of alternate remedies.

Analysis:
The petitioner, an authorised selling agent for SKODA motor cars, challenged the impugned proceedings for assessment years 2002-03 to 2006-07. As an importer of motor vehicles, the petitioner was liable to pay entry tax under the Entry Tax Act and entitled to a reduction of tax liability under the Tamil Nadu General Sales Tax Act and Additional Sales Tax Act. The petitioner reported sales and claimed set-off of entry tax paid towards sales tax. However, the respondent raised demands for penal interest without issuing show-cause notices, alleging belated payment of additional sales tax.

Regarding the imposition of penal interest without notice, the respondent contended that the petitioner paid additional sales tax belatedly, justifying the levying of interest under the Sales Tax Act. The petitioner argued that assessments were incomplete, and no additional tax or penalty could be imposed. The petitioner also highlighted a circular by the principal Commissioner on penalty imposition, which the respondent did not follow. The respondent suggested availing revision petitions as an alternate remedy before challenging the impugned orders directly.

The court noted the lack of notice and opportunity for the petitioner before imposing penalties, as mandated by the circular. Citing precedents, the court emphasized the binding nature of circulars on authorities and the necessity of following procedural requirements. The court set aside the impugned orders for not complying with the circular and remitted the matters back to the respondent. The respondent was directed to issue notices, provide the petitioner with an opportunity to respond, and proceed lawfully. Enforcement of impugned orders was stayed until fresh orders were passed in compliance with the directive.

In conclusion, the court ruled in favor of the petitioner based on the failure to provide notice and an opportunity to be heard before imposing penalties. The court emphasized adherence to procedural guidelines and directed the respondent to follow due process. The judgment highlighted the importance of following circulars and providing a fair chance for parties to present their case before imposing penalties.