2013 (4) TMI 674 - HC - VAT and Sales Tax

Belated return - non-compliance of Rule 98(1) on the part of the petitioner rendering him liable for interest - KVAT Act - Held that - As from Ext.P3 endorsement made by the authorised signatory of ICICI Bank, it is seen that the cheques presented by the petitioner could have been collected in any location of ICICI Bank including at Manjeri. Therefore, when the cheque was presented by the 1st respondent to SBT, Manjeri, its Bank, the SBT could have locally collected the cheque and avoided any delay in realising the amount. On the other hand, they chose to send it to Kottayam for encashment and it was in that process the delay has occurred. Thus once payment has been made as above, for reasons beyond the control of the petitioner, if realization has been delayed, either for reasons which are attributable to the respondents or the Bank, the dealer cannot be made liable on the basis that on account of the delay in realising the tax due, delay has occurred. If the payment made by the petitioner was in any manner defective, the 1st respondent had an obligation to issue demand notice,as per Rule 22(7) which requirement has not been complied with. Secondly, Rule 98 at the relevant time provided that the cheques shall be of a Bank which is a member of the clearing house situated within the jurisdiction of the authority before whom it is presented and petitioner has made available SRO 318/05 issued under Section 3(3) of the KVAT Act, which show that while the headquarters of the 1st respondent is at Malappuram, his functional jurisdiction extended to functions assigned by the Commissioner. Thus the functional jurisdiction of the 1st respondent is not confined to Manjeri alone, going by the terms of the SRO. It is apparently on account of the above vagueness in the matter that the expression within the jurisdiction occurring in Rule 98 was substituted with the expression in the headquarters by SRO 7/08 dated 31/2/07 - non-compliance of Rule 98(1) not proved.

Summary

Issues:
1. Challenge to order levying interest for belated realization of tax due.
2. Interpretation of provisions of KVAT Act and Rules regarding submission of returns and payment of tax.
3. Compliance with Rule 98(1) regarding payment by cheque.

Analysis:
1. The petitioner, an assessee, challenged an order levying interest for delayed realization of tax due from the petitioner's branch. The respondent contended that delay was due to the process of encashment and the petitioner should bear the interest. The court analyzed if the petitioner should be liable for interest under Section 31(5) of the KVAT Act, which requires default in tax payment within the prescribed time. The court found that the delay was not attributable to the petitioner, who had paid tax on time via crossed cheques along with the returns.

2. The court examined the provisions of the KVAT Act and Rules, particularly Section 20(1) and Rule 22, which mandate submission of returns with payment of tax. It noted that the petitioner had complied with the requirement by submitting crossed cheques. The court emphasized that once payment was made on time, any delay in realization beyond the petitioner's control should not make them liable for interest. The court highlighted the importance of distinguishing between default in payment and delays in realization.

3. The issue of compliance with Rule 98(1) regarding payment by cheque was raised. The government pleader argued that the cheque should have been drawn on a bank within the jurisdiction of the assessing authority. However, the court found that the assessing authority's functional jurisdiction extended beyond Manjeri, as per relevant orders. The court held that the petitioner did not violate Rule 98(1) and quashed the order levying interest on the petitioner. The judgment emphasized the importance of clarity in legal provisions to avoid ambiguity in interpretation.