2013 (4) TMI 686 - HC - VAT and Sales Tax

Summary

Issues involved:
The judgment deals with the quashing of an order passed by the Assessing Authority under the Haryana General Sales Tax Act, 1973, creating liability against the petitioners, including liability to pay interest under section 25(5) of the Act.

Challenge to tax liability under section 9 of the Act:
The writ petition raised contentions regarding the creation of purchase tax liability under section 9 of the Act if raw material is purchased in the State and used in manufacturing goods sent out from the State. Reference was made to the judgment in Goodyear India Limited v. State of Haryana [1983] 53 STC 163 (P&H) and the nature of tax on consignment of goods covered by entry 92B of List I. It was argued that liability to pay interest arises in respect of additional liability created under the assessment order, not at the time of the transaction or filing of return. The judgment in J.K. Synthetics Ltd. v. Commercial Taxes Officer [1994] 94 STC 422 (SC); AIR 1994 SC 2393 was cited in support.

Levy of interest prior to assessment order:
While the challenge to tax liability under section 9 was not disputed, the contention pressed was regarding the levy of interest for the period before the assessment. Reference was made to the judgment in Hotel Balaji v. State of Andhra Pradesh [1993] 88 STC 98 (SC); AIR 1993 SC 1048. The judgment in J.K. Synthetics Ltd.'s case [1994] 94 STC 422 (SC); AIR 1994 SC 2393 was cited to support the argument that interest should not be levied prior to the assessment order.

The court allowed the writ petition to the extent of the levy of interest for the period before the assessment order. The Assessing Authority was directed to issue a fresh notice of demand, modifying the interest component in accordance with the principles laid down in J.K. Synthetics Ltd.'s case [1994] 94 STC 422 (SC); AIR 1994 SC 2393.