2015 (3) TMI 134 - HC - VAT and Sales Tax

Interest or penalty if there is an attempt to evade or avoid payment of tax- Adjustment of carried forward input tax credit - Whether Hon ble Tribunal erred in deleting the liability of penalty and interest by permitting such adjustment of carried forward input tax credit - Held that - It is not in dispute that the assessee had no surplus balance of input credit which has been adjusted against the demand of tax upon reassessment. Under these circumstances the element of avoidance of tax could be said as lacking. Consequently the deletion of interest and penalty on the part of Tribunal could not be said as unjustifiable. In the event when the issue is already covered by the above referred decision we do not find that any substantial question of law would arise as sought to be canvassed. Following decision of STATE OF GUJARAT Versus JAY STEEL AND TUBES TRADERS 2015 (2) TMI 372 - GUJARAT HIGH COURT - Decided against Revenue.

Summary

Issues:
Appeal against Tribunal's order confirming tax demand but deleting interest and penalty.

Analysis:
1. The Revenue appealed against the Tribunal's order confirming tax demand but deleting interest and penalty. The main question raised was whether the Tribunal erred in deleting the penalty and interest by allowing adjustment of carried forward input tax credit.

2. The Assessing Authority re-assessed and demanded a sum along with interest and penalty. The appeal to the Deputy Commercial Tax Commissioner was dismissed, and further appeal to the Tribunal led to confirmation of the re-assessment demand but deletion of interest and penalty. The Revenue challenged this decision.

3. The Court referred to a previous decision where it was held that if there was no attempt to evade or avoid tax payment, interest or penalty could not be imposed. The Tribunal in the present case found that the appellant had paid the tax in full and had sufficient input tax credit to adjust against the additional tax liability, leading to the removal of interest and penalty.

4. The Tribunal's decision was based on the availability of input tax credit to offset the additional assessed tax liability, indicating no intention to evade tax payment. The Court noted that the imposition of penalty required the intention to evade or avoid tax payment, which was absent in this case.

5. Since the Assessee had no surplus input credit balance and it was adjusted against the tax demand upon reassessment, the element of tax avoidance was deemed lacking. The Court found the deletion of interest and penalty by the Tribunal justifiable, especially considering the previous decision that covered a similar issue.

6. Ultimately, the Court found the Revenue's appeal meritless and dismissed it, as no substantial question of law arose from the Tribunal's decision to delete interest and penalty while confirming the tax demand.