2014 (4) TMI 993 - HC - VAT and Sales Tax

Quashment of order Levy of interest as delayed payment of admitted tax - Held that - Judgment in M/s Hindustan Lever Limited vs. State of UP 2010 (10) TMI 945 - ALLAHABAD HIGH COURT (LB) followed - the interest has been calculated on the ground that there was a valid demand and which was so made after excluding the stock transfer and consignment sale from the base production - The stock transfers and consignment sales have to be included in calculating the base production, in the judgment rendered on 27.10.2010, there could be no demand of tax for the year 2002-03, and accordingly there was no question of payment of delayed interest However, the judgment will be subject to the decision of the Supreme Court in Special Leave to Appeal (Civil) No (s). 4257/2011 - Decided in favour of assessee.

Summary

Issues:
Challenge to order levying interest on delayed payment of admitted tax for specific months based on a previous judgment. Interpretation of exemption on base production in relation to stock transfers and consignment sales. Calculation of interest excluding stock transactions and consignment sales. Validity of interest calculation post clarification on base production calculation. Challenge to interest demand based on Full Bench judgment. Status of challenge to the judgment in M/s Hindustan Liver's case.

Analysis:
The petitioner-company sought to quash an order levying interest on delayed payment of admitted tax for certain months based on a previous judgment. The petitioner argued that the interest calculation excluded stock transactions and consignment sales from base production for granting exemptions. The Full Bench judgment clarified that stock transfers and consignment sales must be included in base production calculation, rendering the interest demand invalid. The counter affidavit stated that interest was calculated on admitted delayed tax payment, which remains payable despite the Full Bench judgment.

The Court noted that the interest was calculated on a valid demand excluding stock transfers and consignment sales from base production. However, post the Full Bench judgment, there was no valid demand for tax in the specified year, thereby nullifying the interest calculation. The State challenged the judgment in M/s Hindustan Liver's case, but no stay or contrary direction was issued. Consequently, the Court concluded that there was no valid demand for interest under Section 8 (1) of the Act as per the impugned order.

The writ petition was allowed, setting aside the order raising a demand for interest. However, the judgment's applicability was made subject to the decision of the Supreme Court in the pending challenge to the judgment in M/s Hindustan Liver's case.