2015 (9) TMI 251 - HC - VAT and Sales Tax

Power to issue demand notice - manufacture of industrial alcohol as well as potable alcohol - Demand of interest u/s 38A - Held that - In the case of the petitioner while questioning the validity of the amendment made in Rule 12 of the Rules a Division Bench of this Court held in its judgment 2011 (7) TMI 1122 - ALLAHABAD HIGH COURT that Rule 12 of the Rules was made in exercise of powers under Section 41 of the Act and such overtime charges required to be paid under Rule 12 of the Rules is in fact for grant of any exclusive or other privilege granted under Section 24 or Section 24-A of the Act or for storing any intoxicant. The Division Bench held that prescription of overtime charges was a condition of the licence and that by the nature of its imposition it is a fee connected with parting in the privilege to run the distillery. - Therefore if excise revenue is not paid within the stipulated period then interest becomes leviable under Section 38-A of the Act. We are of the opinion that so long the decision of this Court dated 26.07.2011 stands and is not set aside by the Supreme Court the imposition of interest by the respondent is justifiable under Section 38-A of the Act - Decided against the assessee.

Summary

Issues:
Challenge to amendment in rates of overtime charges under the U.P. United Provinces Excise Act, 1910. Demand for payment of overtime charges and interest. Interpretation of Section 38-A of the Act. Validity of demand notices for interest on late deposit of overtime charges.

Analysis:
The petitioner, engaged in manufacturing industrial and potable alcohol, challenged the amendment in rates of overtime charges under the U.P. United Provinces Excise Act, 1910. The petitioner contended that the enhancement lacked statutory backing and correlation with services rendered by the Excise Department. Despite the challenge, a Division Bench upheld the amendment's validity, stating that overtime fees are a condition of the license and a fee connected with the privilege to operate the distillery.

Subsequently, demand notices were issued for payment of interest on late deposit of overtime charges. The petitioner argued that interest could only be charged under Section 38-A of the Act on arrears of excise revenue. The petitioner disputed that overtime charges, governed by Rule 12 of the Rules, do not constitute excise revenue and hence, interest under Section 38-A could not be levied. The petitioner also contested the applicability of a paragraph in the previous judgment as obiter dicta.

Upon considering Section 38-A of the Act, the court noted that interest is payable on excise revenue not paid within three months. The Act defines excise revenue to include revenue from duties, fees, taxes, fines, or confiscations. The petitioner argued that overtime charges do not fall within this definition. However, a previous judgment held that overtime charges are a fee under the Act, justifying interest under Section 38-A until set aside by the Supreme Court.

The court concluded that as long as the previous judgment stands, interest on late deposit of overtime charges is justifiable under Section 38-A. Therefore, the demand notices for interest were upheld, and the writ petition was dismissed.