2015 (7) TMI 1367 - HC - VAT and Sales Tax

Benefit of Interest free Sales Tax deferral (IFST deferral) - levy of differential tax for certain turnovers for the reason that the petitioner did not file Form-C/Form-H and other declarations - HELD THAT - It is not in dispute that the respondent has passed the assessment orders for the years CST 2001-02, 2002-03 2003-04 and TNGST 2002-03 2003-04, levying differential tax for certain turnovers on the ground that the petitioner had not filed Form- C/Form-H and other declarations as required and these assessment orders levying differential tax were not questioned by the petitioner. The petitioner contended that as per the scheme, the petitioner is eligible for IFST deferral of full tax, subject to the ceiling specified in Eligibility Certificate, not exceeding ₹ 1725.46 lakhs and Clause 12 of the Deferral agreement excludes only the tax and penalty levied or leviable by the assessing officer on taxable turnover suppressions from IFST deferral and since the petitioner has not made any suppressions no case of non-declaration of taxable turnover in returns was made out against the petitioner and therefore, they are entitled for IFST deferral on the entire tax assessed on the taxable turnover declared in returns. This technical ground raised by the petitioner, in my opinion, is illogical and untenable for the simple reason that even without collecting the actual taxes and declaring the same in monthly returns, the petitioner cannot avail IFST scheme. The intention of the petitioner behind not declaring in the monthly returns by filing Form C and H, etc., is that if the department fails to take note of the same, the petitioner can get the benefit of the IFST scheme in respect of transactions where the actual collection of taxes was in fact not taken place. As regards the issuance of notice before resorting to impose penal interest under Section 24(3) of the Act as per the instructions of the Special Commissioner and Commissioner for Commercial Taxes dated 20.04.2001 which insist that penalty should be imposed only after providing sufficient opportunity to the assesses is concerned, this Court finds no considerable force in the said contention. Admittedly, the respondent sent arrear notice on 30.5.2013 and thereafter, by proceedings dated 29.8.2013, the respondent once again requested the petitioner to pay the tax while clarifying the eligibility of the petitioner to avail IFST scheme and only on 28.1.2014, the respondent has invoked Section 24(3) of the Act and levied penal interest since the petitioner failed to pay the tax. Thereafter, at the instance of the petitioner, 15 days time was given for filing objections and also granted personal hearing. It is the specific contention of the petitioner that the liability to pay interest under Section 24(3) of the Act is automatic and absolute and no notice is necessary for levying interest. In fact, a bare perusal of Section 24(3) of the Act, this Court find that there is no provision contemplated that the levy of interest should be imposed only after issuance of notice. This Court does not find any irregularity or illegality in the impugned proceedings issued by the respondent - Petition dismissed.

Summary

Issues Involved:
1. Eligibility of differential tax for adjustment against Interest Free Sales Tax (IFST) deferral.
2. Levy of penal interest under Section 24(3) of the TNGST Act, 1959 without issuing a notice.

Issue-wise Detailed Analysis:

1. Eligibility of Differential Tax for Adjustment Against IFST Deferral:

The petitioner, a registered dealer under the Tamil Nadu Value Added Tax Act, 2006, and Commercial Sales Tax Act, 1956, had established an industrial unit and was granted an eligibility certificate for availing IFST deferral to an extent of Rs. 1725.46 lakhs. The petitioner availed sales tax deferral amounting to Rs. 1376.96 lakhs and reserved Rs. 348.19 lakhs for contingencies. The respondent levied differential tax for certain turnovers due to non-submission of Form-C/Form-H and other declarations. The petitioner contended that the differential tax should be adjusted against the reserved IFST deferral amount. However, the respondent maintained that the differential tax could not be adjusted under the IFST scheme as it pertains to transactions where actual tax collection did not occur. The court upheld the respondent's stance, stating that the petitioner was not eligible for IFST deferral in respect of transactions where actual tax collection did not take place. The court found no merit in the petitioner's claim, emphasizing that without collecting and declaring the actual taxes, the petitioner could not avail the IFST scheme.

2. Levy of Penal Interest Under Section 24(3) of the TNGST Act, 1959 Without Issuing a Notice:

The petitioner argued that the respondent's unilateral decision to levy penal interest was contrary to the instructions of the Special Commissioner and Commissioner for Commercial Taxes dated 20.04.2001, which required issuing a notice and providing an opportunity to the assessee before imposing penal interest. The respondent contended that penal interest under Section 24(3) of the TNGST Act was automatic and absolute, and no notice was necessary. The court agreed with the respondent, noting that the petitioner was given adequate opportunities to file objections and attend a personal hearing before the impugned proceedings were issued. The court referred to a precedent set by the decision in "M/s. Kone Elevator India Pvt. Ltd. versus The Commercial Tax Officer, Mandaveli Assessment Circle," which supported the automatic nature of penal interest under Section 24(3) without the need for a prior notice. Consequently, the court found no irregularity or illegality in the respondent's proceedings and dismissed the writ petition.

Conclusion:

The court dismissed the writ petition, upholding the respondent's actions regarding the non-adjustment of differential tax against the IFST deferral and the automatic levy of penal interest under Section 24(3) of the TNGST Act without the necessity of issuing a notice. The petitioner's claims were found to be without merit, and the court emphasized adherence to the statutory provisions and previous judicial interpretations.