2017 (3) TMI 1486 - HC - VAT and Sales Tax

Interest on delayed payment - Revenue s case is that once it is established that the amount of tax as was due in terms of the provisions of the Act and the notification issued thereunder had not been paid along with the returns there is nothing wrong in raising the demand of interest for its delayed payment - Held that - an assessee cannot foresee the additional demand of tax on account of reassessment or in revision and the interest would become payable only from the date the demand is raised and not from the date of filing of return - demand of interest set aside - petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to orders dated 30.9.2004 and 15.2.2005 regarding charging of interest on assessed tax amount.

Analysis:
The judgment of the High Court addressed the challenge in two CWP cases concerning the charging of interest on the assessed tax amount. The petitioner, a Franchisee of a soft drink product, was initially taxed at 8%. However, due to an amendment in tax rates, the product fell under a residual category taxed at 12%. The petitioner continued to charge and deposit tax at 8%, leading to a revisional assessment in 2004, which also imposed interest on the differential tax amount. The Tribunal upheld the interest levy, prompting the petitioner to challenge it in the High Court.

The petitioner argued that as the tax amount was paid within the permitted time, interest should not be charged, citing relevant judgments. The State, while not disputing the legal precedents, contended that interest could be demanded for delayed payment of the due tax amount. The Court acknowledged the error in the assessment but focused on the issue of interest on the differential tax amount.

The Court examined the facts, emphasizing that the petitioner paid the assessed tax promptly but disputed the interest demand. It referred to a similar case precedent where interest on additional tax due was quashed, relying on Supreme Court judgments and a Full Bench decision. The Court reasoned that interest should accrue only from the date of the demand for the additional tax, not from the return filing date.

In light of the precedents and the specific circumstances of the case, the High Court allowed the writ petitions, setting aside the demand for interest against the petitioner. The judgment highlighted the principle that interest on tax discrepancies should be levied from the date of the demand, not from the return filing date, to ensure fairness to the assessee.