2014 (7) TMI 403 - HC - VAT and Sales Tax

Levy of interest - assessee contended that difference in the tax liability on return filed and as assessed on reassessment was less than five per cent hence no interest can be levied - Held that - The mistake of filing of incorrect turnover was detected and corrected only by reassessment order and not by the assessee having undertaken voluntary correction of the return within three months period - even understanding a situation within section 20 36(1) of the Act with reference to section 72(2) of the Act cannot be under stood as one importing the requirement of difference being more than five per cent for levy of penalty as an essential condition for levy of interest under section 36(1) of the Act also, then it is a fortiori so for the purpose of section 36(2)(c) of the Act. We say so for the reason that the two provisions are independent and in fact levy of interest is not made subject to levy of penalty and therefore it cannot be contended that it is only when penalty is levied, interest under section 36 can be levied. In our understanding and as submitted by learned Additional Government Advocate, the word subject to under section 36(1) of the Act can only be to say that levy of interest is in terms of section 36 of the Act notwithstanding levy of penalty under section 72 of the Act. In situation where revised return has been filed within the margin period of three months and the tax also paid, the levy of interest under section 36(1) of the Act being not attracted is in no way affected because of the situation where levy of penalty under section 72 of the Act is attracted - revision petitions dismissed - Decided against assessee.

Summary

Issues Involved:
1. Levy of interest under Section 36 of the Karnataka Value Added Tax Act, 2003.
2. Applicability of Section 72(2) of the Act in relation to the levy of interest under Section 36.
3. Interpretation of the provisions under Section 36(1) and Section 36(2)(c) of the Act.

Detailed Analysis:

Levy of Interest under Section 36:
The core issue in these sales tax revision petitions revolves around the levy of interest under Section 36 of the Karnataka Value Added Tax Act, 2003. The petitioner, a registered dealer, filed returns for the period from April 2005 to March 2007. Upon reassessment, discrepancies were found, leading to the determination of additional tax liabilities. The assessing authority levied interest under Section 36 for the omitted tax amounts. The petitioner contested this levy, arguing that the difference in tax liability was less than five percent, thus should not attract interest as per Section 36(1) read with Section 72(2) of the Act.

Applicability of Section 72(2):
The petitioner argued that Section 36(1) is subordinate to Section 72(2), which stipulates that penalties are applicable only if the understated tax liability exceeds five percent of the actual liability. The appellate authority, however, clarified that Section 72(2) pertains to penalties and not the levy of interest. The Tribunal upheld this view, stating that the interest under Section 36 is independent of the penalty provisions under Section 72(2).

Interpretation of Section 36(1) and Section 36(2)(c):
The petitioner's counsel argued that the interest levied under Section 36(2)(c) should be subject to the conditions of Section 36(1), which includes the provision of correcting omissions within three months. The appellate authority and the Tribunal disagreed, noting that Section 36(2)(c) deals with situations where a dealer fails to declare any tax or interest that should have been declared. The authorities emphasized that the reassessment revealed undeclared turnover, justifying the levy of interest under Section 36(2)(c).

Judgment Conclusion:
The High Court found no merit in the petitioner's arguments. It was established that the incorrect returns were corrected only after reassessment, not voluntarily within the stipulated period. The court clarified that Section 36(1) and Section 36(2)(c) operate independently of Section 72(2). The levy of interest under Section 36 is not contingent upon the conditions for penalties under Section 72(2). Thus, the revision petitions were dismissed, upholding the levy of interest as per the reassessment orders.