2015 (12) TMI 1386 - HC - VAT and Sales Tax

Rejection of applications for settlement under the Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2011 - Failure to produce the Books of Accounts and other connected records, despite service of summons on them - Held that - In cases of settlement of disputes, the quantum of demand and the quantum of admitted amount may vary. Therefore, the parties may strike a deal for resolving the dispute and it is this deal that becomes known as settlement. But, in cases of settlement of arrears, the term settlement connotes payment or payment terms. - Every Samadhan Scheme has to be understood and interpreted in the light of the provisions contained in the Scheme itself. It is not possible to invoke an external aid for the construction of a provision in an Act containing a Samadhan Scheme. - appellant had availed the benefit of deferred payment of sales tax under a particular scheme. They committed a breach of the agreement executed with the department. Therefore, as per the agreement and the interest free deferral scheme, they were liable to pay interest from the date of filing of monthly returns. The emphasis on bonafide conduct of an assessee made by the Division Bench in EID Parry is completely absent in this case. This case is governed not merely by the statutory provisions relating to payment of interest, but also by the agreement executed by the appellant with reference to the interest free deferral scheme. A person who had collected tax from the customers and allowed to retain it under a deferred payment scheme, cannot claim that he would pay 40% of what was collected by him together with interest calculated from the date of assessment. This is not the purport of the Samadhan Scheme. - Decided against assessee.

Summary

Issues Involved:
1. Rejection of applications for settlement under the Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2011.
2. Applicability of Section 7(a) vs. Section 7(c) of T.N. Act 29/2011.
3. Calculation of interest from the date of assessment or from the date of filing returns.

Detailed Analysis:

Issue 1: Rejection of Applications for Settlement
The appellant, a cement manufacturer, challenged the rejection of their applications for settlement under the Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2011 (T.N. Act 29/2011). The applications were rejected because the appellant did not pay 100% of the tax admitted in their returns, as required under Section 7(c) of the Act. The court upheld the rejection, noting that the appellant had collected tax from customers but failed to remit it, violating the terms of the Interest Free Sales Tax Deferral Scheme.

Issue 2: Applicability of Section 7(a) vs. Section 7(c) of T.N. Act 29/2011
The appellant contended that their case should fall under Section 7(a), which requires payment of 40% of the arrears of tax assessed on the best of judgment due to non-production of accounts. However, the court found that the clauses in Section 7 are not mutually exclusive and are designed to prevent dishonest conduct. The court illustrated this with a hypothetical example, showing that dishonest taxpayers should not benefit more than honest ones. Since the best of judgment assessment orders were set aside by the Special Committee, the appellant's case fell under Section 7(c), requiring payment of 100% of the admitted tax.

Issue 3: Calculation of Interest
The appellant argued that interest should be calculated from the date of assessment, not from the date of filing returns. The court rejected this argument, stating that the appellant had committed a breach of the agreement under the Interest Free Sales Tax Deferral Scheme. Therefore, they were liable to pay interest from the date of filing monthly returns. The court distinguished this case from the E.D.I. Parry (India) Limited case, where the issue was about supplementary returns and bonafide conduct.

Conclusion
The court dismissed all the writ appeals, emphasizing that the appellant's conduct did not warrant the benefits they sought under the Samadhan Scheme. The court upheld the requirement for the appellant to pay 100% of the admitted tax along with interest from the date of filing returns, as per Section 7(c) of T.N. Act 29/2011. The judgment underscores the importance of adhering to statutory provisions and agreements, especially in tax matters.