2010 (7) TMI 917 - HC - VAT and Sales Tax

Whether the mistake on the part of the petitioner in having paid the entry tax by filling up an incorrect form does not entitle respondent No. 3 to hold that entry tax has not been paid when in fact, the actual tax payable had been paid by the petitioner and had been accepted by the bank as payment of tax under the Entry Tax Act? Held that - A bona fide mistake on the part of the petitioner cannot be sought to be taken advantage of by the Revenue merely with a view to extract more money from the petitioner in the form of interest and penalty taking shelter behind a highly-technical objection that the amount payable by way of entry tax, though actually deposited with the Department well within the prescribed time-limit, had been deposited under a wrong form. Thus the petitioner having paid the amount payable towards entry tax within the prescribed period of limitation, albeit under a wrong form, the respondents are not justified in raising demand for payment of interest and penalty against the petitioner The action of the respondents in attaching the bank account for recovery of the entire amount, including penalty and interest during the pendency of the petition also deserves to be deprecated. Considering the fact that the petitioner having already deposited the amount in question, may be under a wrong form, and the amount was lying with the Department, the circumstances did not justify resorting to such drastic action. Hence, the respondents are not justified in attaching the bank account of the petitioner.Appeal allowed.

Issues Involved:
1. Validity of assessment orders under the Entry Tax Act and GVAT Act.
2. Legitimacy of payments made towards entry tax using incorrect challan forms.
3. Entitlement to input-tax credit for entry tax paid.
4. Justification for attaching the petitioner's bank account for recovery of tax, interest, and penalty.

Issue-wise Detailed Analysis:

1. Validity of Assessment Orders under the Entry Tax Act and GVAT Act:
The petitioner sought to quash the assessment orders dated May 1, 2010, under the Entry Tax Act and GVAT Act, which demanded payment of tax, interest, and penalty. The court found that the petitioner had indeed paid the entry tax but used the incorrect form (Form No. 207 under the GVAT Act instead of Form No. 1 under the Entry Tax Act). The court ruled that the use of the wrong form, a bona fide mistake, does not equate to non-payment of tax. Therefore, the assessment orders and the demands for additional payment, interest, and penalty were quashed and set aside.

2. Legitimacy of Payments Made Towards Entry Tax Using Incorrect Challan Forms:
The petitioner paid entry tax using Form No. 207, explicitly stating that the payments were for entry tax. The court noted that the respondents did not dispute the payment of entry tax but objected to the use of the wrong form. The court held that a bona fide mistake in using the wrong form, especially when the department is the same, should not be treated as non-payment. The court directed the respondents to refund the amounts paid and allowed the petitioner to re-deposit the same using the correct form without any interest or penalty.

3. Entitlement to Input-Tax Credit for Entry Tax Paid:
The petitioner claimed input-tax credit for the entry tax paid, which was disallowed by the respondents due to the use of the wrong form. The court found this denial unjustified, as the petitioner had indeed paid the entry tax. The court emphasized that the mistake was bona fide and did not result in any financial loss to the Revenue. Thus, the petitioner was entitled to input-tax credit for the entry tax paid.

4. Justification for Attaching the Petitioner's Bank Account for Recovery of Tax, Interest, and Penalty:
During the pendency of the petition, the respondents attached the petitioner's bank account to recover the demanded amount. The court found this action unjustified, as the petitioner had already deposited the entry tax amount, albeit using the wrong form. The court directed the respondents to lift the attachment of the petitioner's bank account and refrain from such drastic actions in similar circumstances.

Conclusion:
The court allowed both the petition and the civil application, quashing the impugned assessment orders and the demand for tax, interest, and penalty. The court directed the respondents to refund the amounts paid by the petitioner towards entry tax and allowed the petitioner to re-deposit the same using the correct form without any interest or penalty. The attachment of the petitioner's bank account was also ordered to be lifted immediately. The court emphasized the need for a pragmatic approach by the Revenue in cases of bona fide mistakes, avoiding unnecessary litigation.

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