2019 (10) TMI 1498 - HC - VAT and Sales Tax

Validity of assessment order - reversal of input-tax credit (ITC) allegedly claimed in excess - interest in terms of section 42(3) of TNVAT Act - HELD THAT - The scheme of levy of interest under section 42 is applicable to all assessments of tax barring a self assessment under section 21. Thus where any amount is due as per the return filed by the petitioner the same is immediately payable and no separate notice of demand need be issued in that regard as the return of income is itself an assessment of the petitioner. In all other cases where pre-assessment notice was issued to the petitioner and a demand raised vide an order of assessment such order of assessment shall be deemed to be a demand notice and the demand raised there under is to be paid within 30 days from the date of service of the order of assessment. In such cases interest under section 42(3) is liable to be paid in addition to the tax demanded at the rate of two per cent. per month for such month for the entire period of assessment. In the present case the petitioner has admittedly remitted the demand for the years 2007-08 and 2008-09 on January 31 2011 and June 23 2011 even prior to the dates of assessment i. e. December 23 2011. Thus and since the demands have been paid within the time lines stipulated in terms of section 42(1) no interest can be levied in terms of section 42(3). As far as the period 2009-10 is concerned the order of assessment is dated September 9 2011 and the demand raised has been remitted on October 7 2011 within 30 days from date of order itself. Thus even in this case the provisions of section 42(1) and 42(3) of the Act are inapplicable. The writ petitions are allowed.

Summary

Issues:
Challenge to three assessment orders under the Tamil Nadu Value Added Tax Act, 2006 regarding input-tax credit (ITC) reversal and levy of interest under sections 19(4), 19(5)(c), 42(1), and 42(3).

Analysis:

1. Assessment Orders Impugned: The petitioner, a manufacturer and dealer, challenged three assessment orders dated December 23, 2011, and September 9, 2011, for the periods 2007-2008, 2008-2009, and 2009-2010 under the Tamil Nadu Value Added Tax Act, 2006. The orders proposed reversal of input-tax credit (ITC) claimed in excess and levying of interest under sections 19(4), 19(5)(c), 42(1), and 42(3).

2. Contentions of the Petitioner: The petitioner contended that the provisions of section 42(3) should not apply as the demanded amount was remitted before the stipulated 30-day period for the first two periods. The petitioner argued that interest should not be levied as the demands were paid within the timelines specified in section 42(1) for the third period as well.

3. Government's Argument: The Additional Government Pleader argued that the petitioner should have claimed the correct amount of ITC, and the self-assessment was incorrect. Referring to section 42(1), it was contended that interest was justified for the shortfall in remittance of self-assessment tax until the actual payment was made, as per the statutory provisions.

4. Legal Provisions: Sections 42(1) and 42(3) of the Act deal with the payment and recovery of tax, penalty, and interest. The provisions specify the manner and timeline for payment of tax, including interest at two per cent per month on unpaid amounts after the specified due date, unless the amount is minimal and the default period is short.

5. Judgment: The court held that the scheme of interest levy under section 42 applies to all tax assessments except self-assessment under section 21. Since the petitioner had remitted the demands for the first two periods before the assessment dates and for the third period within 30 days of the assessment order, no interest could be levied under section 42(3). The court rejected the argument that incorrect ITC claims warranted interest levy, stating that such disputes fall under assessment matters and not self-assessment or advance tax computation.

6. Final Decision: The High Court allowed the writ petitions, ruling in favor of the petitioner, and no costs were imposed. The connected miscellaneous petitions were closed as a consequence of the judgment.