2016 (9) TMI 270 - HC - VAT and Sales Tax

Demand of interest - Section 24(3) of the Tamil Nadu General Sales Tax Act - cheques given by petitioner to Enforcement Wing Officials during inspection got dishonoured - demand of interest arises where there is an Assessment in terms of sub-section (1) of Section 24 of the Act and within the specified date, the tax is not paid - Held that - the case relied upon is EID Parry (India) Ltd., Vs. CCT 2005 (5) TMI 302 - SUPREME COURT OF INDIA . It was held in the case that interest becomes payable under Section 24(3) on an amount remaining unpaid after the date specified for its payment under sub-section (1) of Section 24. Sub-section (1) of Section 24 deals with an assessed tax or tax which has become payable under the Act. In case covered by Section 13(2) tax must be paid without any notice of demand. But as stated above, under Section 13(2) tax is to be paid on the basis of such returns . Tax as per the returns has admittedly been paid. If the returns were incomplete or incorrect as now claimed the assessing authority had to determine the tax payable and issue a notice of demand. In the absence of any assessment, even provisional, and a notice of demand no interest would be payable under Section 24(3) - demand of interest without jurisdiction - writ petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to notice demanding interest under Section 24(3) of the Tamil Nadu General Sales Tax Act based on dishonored cheques.

Analysis:
The petitioner, a registered dealer, challenged a notice demanding interest under Section 24(3) of the Act due to dishonored cheques collected during inspection. The demand was made without any assessment to tax, solely relying on the dishonor of cheques. The Additional Government Pleader argued that the petitioner voluntarily accepted the liability, citing a statement recorded by Enforcement Wing Officials. However, the court held that relying on the petitioner's statement alone cannot justify levying statutory interest under Section 24(3) without fulfilling the specified conditions.

The court referred to the Supreme Court's decision in EID Parry (India) Ltd. case, emphasizing that interest becomes payable under Section 24(3) only on unpaid amounts after the specified payment date in Section 24(1). The court highlighted the need for assessment and a notice of demand for interest to be levied. In a similar case involving Dharmapuri District Co-operative Milk Producers Union Ltd., the court ruled in favor of the dealer, stating that once returns are accepted, there must be a provisional assessment before claiming dues. The court clarified that if the dealer does not admit the return and assessment is completed later, interest cannot be levied without proper assessment procedures.

Based on the legal principles established by the Supreme Court and previous judgments, the court concluded that the demand for interest in the present case was unjustified and lacked jurisdiction. Consequently, the court allowed the Writ Petition, quashed the impugned order demanding interest, and closed the connected miscellaneous petition without costs.