2015 (11) TMI 1076 - HC - VAT and Sales Tax

Levy of interest on differential amount arising due to final assessment - Whether section 12(1B) is attracted to the assessment order passed under section 12(3) of the Act - Held that - When a dealer files a return states what is the tax payable but he fails to make payment of the said tax or makes short payment then he is liable to pay interest on the tax due under the Act. After the filing of the return if the assessing authority is satisfied that any return submitted under sub-section (1) is correct and complete he shall assess the dealer on the basis thereof by virtue of the power conferred on him under sub-section (2) of section 12 of the Act. However if no return is submitted by the dealer under sub-section (1) before the date prescribed or specified in that behalf or if the return submitted by him appears to the assessing authority to be incorrect or incomplete the assessing authority shall assess the dealer to the best of his judgment recording the reasons for such assessment. On such assessment if it is found that the dealer is due in any amount of tax then he shall issue notice to the dealer in form 6 calling upon the dealer to pay the tax as finally assessed within 21 days from the date of service of notice on such dealer. If the amount is not paid within 21 days from the date of service of notice then under section 13 he is liable to pay interest on such difference in the tax finally assessed. - section 12(1B) is attracted when there is a default in payment of tax due under the Act from the dealer. It has no application to the interest payable in terms of final assessment. Therefore in this case the order passed under section 12(1B) of the Act levying interest at the rate of two per cent. per month on the difference in the amount is unsustainable - Decided in favour of assessee.

Summary

Issues:
Interpretation of section 12(1B) of the Karnataka Sales Tax Act, 1957 in relation to assessment under section 12(3) - Applicability of section 12(1B) to assessment orders passed under section 12(3) of the Act.

Analysis:
1. The case involved revision petitions by the Revenue against the Karnataka Appellate Tribunal's order regarding the applicability of interest under section 12(1B) of the Karnataka Sales Tax Act, 1957 to an assessment made under section 12(3) of the Act. The assessee, a private limited company dealing in motor cars, was assessed for two consecutive years, with short-payments of tax identified in both assessments.

2. The assessing authority issued a demand notice for the tax differences along with interest, which was challenged by the assessee. The Joint Commissioner of Commercial Taxes upheld the interest levy, leading to an appeal to the Karnataka Appellate Tribunal. The Tribunal ruled that no interest was payable under section 12(1B) for amounts found due in assessments under section 12(3), prompting the Revenue's appeal.

3. The Government Advocate argued that section 12(1B) applies when the tax paid in advance is less than the tax found due by the assessing authority under section 12(3). Conversely, the assessee's counsel contended that section 12(1B) pertains to defaults in tax payment after filing returns, not to amounts found due during assessments under section 12(3).

4. The key legal question was whether section 12(1B) is attracted to assessment orders passed under section 12(3) of the Act. The relevant sections of the Act mandate monthly return filings, advance tax payments, and penalties for defaults, emphasizing the importance of timely tax payments and accurate reporting by dealers.

5. The judgment highlighted the distinction between sections 12B and 12 in terms of advance tax payments, return filings, and consequences for defaults or short-payments. It clarified that interest under section 12(1B) is applicable to defaults in tax payment after return filings, not to amounts found due during assessments under section 12(3).

6. Citing a Supreme Court precedent, the judgment emphasized that interest under section 12(1B) is not applicable to amounts found due on final assessments, as it pertains to post-assessment situations. The Tribunal's decision to set aside the interest levy under section 12(1B) for differences in tax amounts was deemed legally sound and in line with the Act's provisions.

7. Ultimately, the High Court dismissed the Revenue's revision petitions, affirming the Tribunal's decision to set aside the interest levy under section 12(1B) for amounts found due in assessments under section 12(3). The judgment underscored the legal principles governing tax assessments, return filings, and interest levies under the Karnataka Sales Tax Act, 1957.