2011 (8) TMI 1018 - HC - VAT and Sales Tax

Interest and penalty was levied under section 24(3) of the Tamil Nadu General Sales Tax Act, 1959? Held that - As far as the present case is concerned, as already pointed out, the assessee admitted its liability in the form of revised return. When once in the revised return the assessee admitted its liability to the assessment year 1992-93 and paid tax, applying the decision of this court reported in 1994 (10) TMI 279 - MADRAS HIGH COURT (Godrej & Boyce Manufacturing Co. Ltd. v. Joint Commissioner of Commercial Taxes IV), we have no hesitation in holding that section 24(3) of the Act stood attracted. Hence, we have no hesitation in confirming the view of the Tribunal. The writ petitions are dismissed.

Summary

Issues:
Assessment of tax liability on consumables used in dyeing contract, levy of penal interest under section 24(3) of the Act, applicability of interest on belated payment of tax, interpretation of revised return filing and admission of tax liability.

Analysis:
The case involved a dyeing contractor who initially believed that chemicals purchased for dyeing contracts were exempt from tax under the Tamil Nadu General Sales Tax Act, 1959. However, due to uncertainties in tax liability, assessments were pending since 1986-87. Following a Tribunal direction, a demonstration was conducted which revealed a 50% transfer of property in dyes but no transfer in chemicals. The assessee then voluntarily paid taxes on 50% of dyes used, leading to a revised return and payment of tax. Despite this, penal interest under section 24(3) was levied by the assessing officer.

The Joint Commissioner upheld the penalty, stating that the assessee failed to pay taxes in time as per the Act, justifying the automatic levy of interest. The High Court supported this view, emphasizing that once a liability is admitted through a revised return, the payment is treated as overdue from the original tax payment date. The Court highlighted the automatic nature of interest under section 24(3) for delayed tax payments, with no discretion available for waiver.

Regarding the apex court decision cited by the assessee, the Court differentiated it, noting that it was based on unique circumstances involving a sugar manufacturer's tax assessment. The Court reiterated the provisions of section 24(3) for levying interest on belated tax payments, emphasizing the statutory requirement for timely tax payment and consequences of default.

In conclusion, the Court affirmed the Tribunal's decision, stating that the assessee's admission of tax liability through revised returns triggered the applicability of penal interest under section 24(3) of the Act. The Court referenced previous judgments to support the automatic nature of interest on delayed tax payments, disregarding the delay in filing revised returns as a relevant factor in interest imposition.

Therefore, the writ petitions were dismissed, and no costs were awarded.