2017 (12) TMI 1601 - HC - VAT and Sales Tax

Demand of Interest - Transfer of right to use goods - contract for transportation of foodgrains excuted for and on behalf of the FCI - whether the Food Corporation of India (FCI) is liable to pay interest on the amount deducted by it from the bills of the petitioners which they failed to deposit with the State-respondents during the period stipulated by sub-rule (3) of Rule 7 of the Tripura Value Added Tax Rules, 2005? Held that - A combined reading of sub-rules (2) and (3) of Rule 7 of the Rules so extracted plainly shows that the person responsible for making payment (FCI in this case) to any person (the petitioner in this case) is required to deduct from the bills of the petitioner any sum payable for the transfer of the right to use any goods other than goods in the exempted list of the Tripura Value Added Tax Act, 2004 and that the amount so deducted shall be deposited into the Government Treasury by the person making such deduction within 7 days of the month following that in which the deduction is made. Sub-rule (11) mandates that if such person fails to make the deduction or, after making the deduction fails to deposit the amount so deducted, he shall be liable to pay simple interest at the rates contained in Section 44 (it should be read as Section 45 ) of the Act on the amount so deducted. The FCI never complied with sub-rule (3) of Rule 7 of the Rules requiring them to deposit all the deducted amounts into the Government Treasury by Challans in Form XVIII within 7 days of the month following the date on which the deductions were so made from the bills of the petitioners in both the cases. The belated deposits made by them cannot now save them from paying the statutory interest to the petitioners. The FCI has entered into the shoes of the State-respondents for any liability to pay statutory interest to the petitioners with respect to the deducted amount not deposited by them to the State-respondents within the statutory period - On account of such omissions, deliberate or otherwise, the provision of sub-rule (11) of Rule 7 of the Rules shall enure to the benefit of the petitioners in both the cases. The petitioners in both the cases are, therefore, entitled to the statutory interest. Petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Interpretation of provisions related to deduction and deposit of tax amounts by FCI.
2. Liability of Food Corporation of India (FCI) to pay interest on deducted amounts.
3. Compliance with statutory requirements by FCI in depositing deducted amounts.
4. Entitlement of petitioners to statutory interest.

Analysis:
1. The judgment addresses the interpretation of Rule 7 of the Tripura Value Added Tax Rules, 2005, concerning the deduction and deposit of tax amounts by the Food Corporation of India (FCI) from the bills of contractors. The court emphasizes the obligation of the FCI to deduct and deposit such amounts within the stipulated time frame as per the rules.

2. The central issue revolves around the liability of FCI to pay interest on the deducted amounts that were not deposited with the State-respondents within the statutory period. The court examines the provisions of sub-rules (2) and (3) of Rule 7, which mandate the payment of interest by FCI if they fail to deposit the deducted amounts promptly.

3. The judgment scrutinizes the compliance of FCI with the statutory requirements regarding the deduction and deposit of tax amounts. The court notes the failure of FCI to deposit the deducted amounts within the specified timeline, leading to the conclusion that FCI did not fulfill its obligations as required by the rules.

4. Lastly, the court determines the entitlement of the petitioners to receive statutory interest on the deducted amounts. The judgment rules in favor of the petitioners, directing FCI to pay the statutory interest at specified rates and complete the payments within a prescribed timeline. Additionally, the court expresses concerns over FCI's conduct and emphasizes the importance of timely compliance with legal obligations to avoid unnecessary litigation.

This detailed analysis of the judgment highlights the key issues addressed by the court regarding the interpretation of relevant legal provisions, the liability of FCI, compliance with statutory requirements, and the entitlement of the petitioners to receive statutory interest.