2015 (3) TMI 740 - HC - VAT and Sales Tax

Arrears of commercial tax - Proceedings for recovery of same initiated - Court granted option to pay a sum of ₹ 5 crores within a period of six weeks and the remaining amount in eight equal monthly installments - whether the learned Single Judge was correct in permitting the assessee to pay the amount in installments - Held that - Section 42 of the Act gives a clear indication that it is open to the assessing authority to permit the assessee to pay the amount in instalments. The section provides that the amount due under the Act shall be paid in such manner, meaning thereby, tax amount should be paid within the time indicated in the order or in such instalments permitted by the assessing authority. Sub-clause 3 of Section 42 of the Act mandates payment of statutory interest at the rate of 2% per month for the entire period of default. The Act, therefore, gives the authorities, power to permit the assessee to pay the amount in instalments. The appellants are given discretion to fix the period of payment and instalments. It was only on the strength of the said provision, the learned Single Judge passed a discretionary order permitting the assessee to pay the tax amount in instalments. When there is a provision permitting payment of tax amount in instalments, subject to payment of statutory interest, the appellants cannot be heard to say that the learned Single Judge erred in quashing the coercive action taken by the fourth appellant and permitting the assessee to pay the amount in installments. - The order passed by the learned Single Judge should be read in the light of sub-clause (1) and sub-clause (3) of Section 42 of the Act, meaning thereby unless extension is given, the entire amount in arrears shall become due immediately, in case of default. We are of the view that no interference is necessary in the order passed by the learned Single Judge, in the light of Section 42 of the Act. - Decided against Revenue.

Summary

Issues:
1. Quashing of coercive proceedings for tax arrears and permission for instalment payment.

Analysis:
The judgment revolves around the quashing of coercive proceedings initiated against the assessee for tax arrears and the subsequent permission granted for payment in instalments. The first respondent, a manufacturer of Indian Made Foreign Liquor, was in arrears to the Commercial Taxes Department. The learned Single Judge set aside the notices and directed the assessee to pay a sum of Rs. 5 crores initially and the remaining amount in monthly instalments. The Revenue challenged this order, arguing that the assessee failed to pay the tax despite collecting it and that coercive action was necessary for recovery. However, the Court found that the assessee's failure to pay tax despite opportunities led to the coercive proceedings. The Act provides for payment and recovery of tax, allowing authorities to realize arrears as land revenue and impose interest for default.

The Act's provisions empower authorities to permit payment in instalments, subject to interest, and restrict property transfers to prevent revenue fraud. The core issue was whether the Single Judge was correct in allowing instalment payments. Section 42 of the Act allows for such discretion, with default leading to immediate payment of the outstanding amount. The Court upheld the Single Judge's decision, emphasizing the Act's provisions and the need for tax collection. The conditional order for instalment payment was deemed appropriate, ensuring compliance with statutory requirements.

Disposition:
Ultimately, the Court dismissed the intra-Court appeal, affirming the Single Judge's decision. The judgment highlights the importance of statutory compliance in tax matters and the authority's discretion in permitting instalment payments, balancing the interests of tax collection and taxpayer obligations.