2016 (8) TMI 1124 - HC - VAT and Sales Tax

Demand of interest - Classification - Skimmed Milk Powder - rate of tax 10% - milk food - rate of tax 4% - interim injunction for limited period - restrain from collecting of tax more than 4% on the skimmed milk - remittance of differential 6% of tax on withdrawal of interim injunction - section 24(3) of the Act states that on any amount remaining unpaid after the date specified for its payment as referred to in sub section (1) of Section 24 or in the order permitting payment in installments, the dealer or person shall pay, in addition to the amount due, interest @ 1 % of such amount for the first three months of default and 2% for the subsequent period - Section 13 of the Act deals with advance payment of tax and for the remaining tax, there should be a provisional assessment and on such determination and intimation to the dealer, he shall pay the tax - whether belated remittance of differential tax would attract interest under section 24(3) of the Act? Held that - there is no provision under the TNGST Act, which permits charging of interest unless and until there has been provisional assessment and notice of demand prescribing the period within which tax was to be paid. There is no record to show that provisional assessment was made and the notice calling upon the petitioner to pay the differential rate of tax was only on the ground that the petitioner did not remit 10% tax but remitted only 4% tax. The petitioner did not admit his return and assessment was completed and he was assessed to tax @ 10% only on 27.10.1997 i.e. after about seven years after the relevant period viz., August and September 1991. After the Assessing authority held that tax is liable to be paid @ 10%, the petitioner paid the differential tax of 6% immediately after the order was passed in 1997. In such circumstances, the provisions of Section 13 would not be attracted to the facts of the present case. Demand of interest not justified - petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Whether the petitioner is liable to pay penal interest under Section 24(3) of the Act for belated remittance of differential tax.
2. Whether the provisions of Section 13 of the Act are applicable in the present case.
3. Whether the demand for interest is legally tenable based on the principles established by the Supreme Court in E.I.D Parry (India) Ltd. vs. Assistant Commissioner of Commercial Taxes.

Analysis:
1. The petitioner, a Cooperative Society, sought a Writ of Certiorari to challenge an order calling for the payment of penal interest under Section 24(3) of the Act. The petitioner had initially paid tax at a reduced rate of 4% instead of 10% for Skimmed Milk Powder, based on a government order. However, after a temporary injunction expired, the petitioner paid the differential tax at 10%. The question arose whether the belated payment of differential tax attracts interest under Section 24(3). The court examined the circumstances under which this provision would be applicable, citing the Supreme Court's ruling in E.I.D Parry case.

2. The court delved into the applicability of Section 13 of the Act, which deals with advance payment of tax and provisional assessment. The Additional Government Pleader argued that once returns are accepted, there should be no further assessment. However, in this case, the petitioner did not admit the return, and the assessment to tax at 10% was made after a significant delay. The court analyzed the requirement for provisional assessment and the crystallization of tax liability, ultimately concluding that Section 13 did not apply to the facts of this case.

3. Relying on the legal principles established by the Supreme Court in the E.I.D Parry case, the court held that the demand for interest was not legally sustainable. The court found that the petitioner's situation did not meet the criteria for attracting interest under Section 24(3) of the Act. Consequently, the Writ Petition was allowed, the impugned order was quashed, and no costs were awarded. The judgment closed the related application.

This detailed analysis of the judgment provides a comprehensive understanding of the legal issues involved and the court's reasoning in arriving at its decision.