2015 (8) TMI 1372 - HC - VAT and Sales Tax

Liability of interest - relevant date for calculation of interest - denial of samadhan scheme on the ground that the arrears of interest was more than 10% - Held that - the Department is directed to collect the penal interest only from the date on which the agreement was cancelled and not from the date of returns filed by the petitioner firm - petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to rejection of application under Samadhan Scheme based on calculation of penal interest and arrears of tax.

Analysis:
The Writ Petitions were filed to challenge the rejection of the petitioner firm's application under the Samadhan Scheme by the first respondent. The petitioner firm had availed the Scheme for the Tamil Nadu General Sales Tax Act AY 1995-1996 to 2001-2002 and Central Sales Tax Act AY 1996-1997 to 1999-2000. The issue revolved around the calculation of interest and arrears of tax under the Scheme.

The petitioner firm contended that interest should be calculated based on the date of cancellation of the tax deferred payment plan and not from the date of violation or cancellation of the agreement. They relied on previous judgments like M/s. Kalpatharu Spinning Mills Vs. Commercial Tax Officer and Amutha Mills Pvt.Ltd Vs. Commercial Tax Officer to support their argument. The petitioner argued that interest should be calculated only from the repayment period as per the law laid down by the Court.

The first respondent, however, proposed to reject the petitioner's application under the Samadhan Scheme citing a Circular issued by the Commissioner of Commercial Taxes. The Circular stated that interest should be calculated from the date of filing monthly returns if there was a violation of the agreement during the Deferral Scheme. The first respondent also pointed out that as per Section 6(3) of the Tamil Nadu Settlement of Arrears Act 29/2011, the applicant should have paid 90% of the arrears of tax for the application to be accepted.

The Court referred to previous judgments like Amutha Mills Pvt Ltd Vs. Assistant Commissioner and M/s. Kalpatharu Spinning Mills case to decide on the issue. It was observed that the penal interest should be calculated only from the date of cancellation of the agreement and not from the date of returns filed by the petitioner firm. The Court directed the Department to collect the penal interest only from the date of cancellation of the agreement.

In conclusion, the Writ Petitions were allowed, and the Department was directed to collect penal interest only from the date of cancellation of the agreement. The Court emphasized that each case should be decided based on its facts and circumstances, and in this case, the interest calculation was to be done as per the date of agreement cancellation.