2016 (8) TMI 1337 - HC - VAT and Sales Tax

Waiver of interest - non-payment of tax - statutory liability - Section 24 of the Bihar VAT Act. Held that - It is admitted fact that the petitioner was granted exemption from payment of tax for a period of 10 years i.e. from 14th of April, 1998 to 13th of April, 2008 but due to enactment of the VAT Act with effect from 1st of April, 2005, the provision of exemption came to an end. Section 96 of the VAT Act contains transitory provisions. The petitioner has failed to deposit the amount of tax after the enactment of the VAT Act with effect from 1st of April, 2005. Since the liability is statutory, therefore, it is presumed that the petitioner has collected tax from its consumers as a manufacturer of non-alcoholic beverages. It is not the stand of the petitioner that the burden of amount of interest paid by it was not passed on to the consumers. The petitioner cannot claim that the interest would not be payable as the same is payable in either situation for non-filing of return or for not filing the deferred tax returns. There was no immunity to pay the tax amount and consequently the interest. Once the interest has been deposited, the burden of the said interest must have passed on to the consumers. The interest for not paying tax in terms of Section 24 of the VAT Act or seeking deferment in terms of Section 96(3)(b) of the VAT Act is a statutory interest and cannot be claimed by the petitioner once there is no assertion that the burden has not been passed on to the consumers. Petition dismissed.

Summary

Issues:
Challenge to order declining waiver of interest under the Industrial Policy, 1995; Interpretation of provisions under Bihar Finance Act, 1981 and Bihar Value Added Tax Act, 2005; Dispute over deferment of tax liability and payment of interest; Claim for refund of interest paid by the petitioner.

Analysis:
The writ application challenges the order refusing waiver of interest under the Industrial Policy, 1995. The petitioner, a Private Limited Company producing non-alcoholic beverages, received Sales Tax exemptions under the Industrial Policy, 1995 until April 2008. The Bihar Value Added Tax Act, 2005 came into force on April 1, 2005, allowing deferment of tax liability for units previously exempted. The petitioner failed to opt for deferment, leading to a dispute over interest payment. The State Government decided to grant exemptions to units affected by the VAT Act, reimbursing the amount. However, the petitioner's request for interest refund was denied, prompting the writ petition.

The State argued that post-VAT Act, exemption under the Bihar Finance Act became optional for deferment, necessitating payment of VAT and interest. The petitioner's failure to opt for deferment resulted in a liability of over ?10 crores. The petitioner contended that the interest on delayed VAT payment should be refunded, but the State maintained that statutory interest was payable irrespective of deferment. The petitioner's late exercise of deferment option in 2013, seeking the State's grant, led to delayed tax payment and interest liability.

The Court noted the petitioner's statutory liability to pay VAT and interest post-VAT Act, emphasizing that interest was due whether for non-filing of returns or delayed tax payments. Referring to the principle of undue enrichment, the Court held that the petitioner, as a manufacturer, likely passed the interest burden to consumers. Citing precedent, the Court ruled that statutory interest, once paid, could not be refunded if the burden was passed on. Consequently, the Court dismissed the writ petition, finding no merit in the petitioner's claim for interest refund.

In conclusion, the judgment upholds the statutory liability of the petitioner to pay VAT and interest post-VAT Act, rejecting the claim for interest refund due to the presumption of consumer burden. The Court's decision emphasizes the statutory nature of interest payments and the principle of undue enrichment, leading to the dismissal of the writ petition.