2014 (3) TMI 906 - HC - VAT and Sales Tax

Liability to pay tax and interest - Demand of interest for not depositing the tax within deferred Held that - While taking over the possession of the Assessee s unit by the M/s Universal Dairy Products Private Limited, the petitioner s unit was actually closed down on 23.12.2002 - The Commissioner u/s 8(2-A) & 4-A of the Act r/w Rule 43 under U.P. Trade Tax Rules, 1948 allowed the deferment in place of exemption in tax on the manufactured products during 31.10.1996 to 22.12.2002 with direction to deposit the admitted tax in terms of Rule 43(4) (b) within three months from 23.12.2002, the day on which the unit was closed down - It was also mentioned in the order itself that on account of closure of business on 23.12.2002, the facility of deferment automatically comes to an end and tax amount ought to have deposited. The Assessing Authority has already granted the benefit of deferment of all the previous years till the date of closure of the unit and only asked the interest after three months from the date of closure of the unit till the date of actual deposit of tax by the petitioner - the petitioner is liable to pay tax after closure of the unit in terms of Rule 43(4) along with interest There is no illegality, infirmity or jurisdictional error in asking the petitioner for the payment of interest by the impugned orders and the recovery sought to be made cannot be said to be against the provisions of the Act or the Rules made thereunder No merits Petition dismissed Decided against Assessee.

Issues:
1. Quashing of order passed by Commissioner, Trade Tax
2. Demand for interest by the Deputy Commissioner
3. Application for deferment facility under Section 8(2-A) of the Act
4. Grant of eligibility certificate and deferment facility
5. Sale of unit to another entity
6. Deposit of admitted tax under the deferment scheme
7. Issuance of notices demanding interest
8. Liability of petitioner to pay interest post closure of business

Analysis:

1. The petitioner sought the quashing of the order passed by the Commissioner, Trade Tax, along with notices issued by the Deputy Commissioner. The petitioner also requested a direction to restrain the demand for interest. The High Court examined the facts and circumstances leading to the issuance of the order and notices, focusing on the legality and implications of the actions taken by the tax authorities.

2. The undisputed facts revealed that the petitioner, a registered dealer engaged in the manufacturing of ice cream, applied for an eligibility certificate under Section 4-A of the Uttar Pradesh Trade Tax Act. The eligibility certificate was granted, and the petitioner subsequently applied for a deferment facility under Section 8(2-A) of the Act. However, complications arose due to the sale of the petitioner's unit to another entity, leading to the closure of the business.

3. The Commissioner's order dated 17.06.2004 allowed deferment of tax on manufactured products until the closure of the unit on 23.12.2002. The order stipulated the deposit of admitted tax within three months from the closure date. Despite the petitioner depositing the tax amount by 30.06.2004, the tax department issued notices demanding interest for the delayed payment, prompting the petitioner to challenge the demand through the writ petition.

4. The legal counsels representing the petitioner and the tax department presented arguments regarding the petitioner's liability to pay interest post-closure of the business. The petitioner contended that the tax was deposited within the stipulated timeframe after the Commissioner's order, absolving them of any interest liability. Conversely, the tax department argued that the deferment period could not extend beyond the closure date, emphasizing the petitioner's obligation to pay interest as per Rule 43(4) of the U.P. Trade Tax Rules, 1948.

5. Rule 43 of the U.P. Trade Tax Rules, 1948 outlined the conditions for granting moratorium under Section 8(2-A) of the Act, specifying the obligations and timelines for tax payment and moratorium cessation. The Court analyzed the rule in conjunction with the petitioner's actions and the Commissioner's order to determine the legal basis for the demand of interest by the tax authorities.

6. Ultimately, the High Court found no illegality, infirmity, or jurisdictional error in the tax department's demand for interest post-closure of the petitioner's business. The Court dismissed the writ petition, upholding the validity of the orders issued by the tax authorities and affirming the petitioner's liability to pay interest as per the provisions of the Act and Rules.

This detailed analysis of the judgment provides a comprehensive overview of the legal issues, arguments presented, and the Court's decision regarding the quashing of the order, demand for interest, and the petitioner's liability under the tax laws.

← Previous Next →