2017 (7) TMI 228 - HC - VAT and Sales Tax

Liability of interest - U.P. Tax on Entry of Goods Into Local Areas Act, 2007 - whether the petitioner is liable to pay interest for the delay in making the payment of entry tax even though no such direction is contained in the assessment order and the bonafides of the petitioner are lit large? - Held that - the matter of levy and collection of tax, the admitted tax or the tax due is to be paid on or by the date if any specified under the statute. The assessment order is only supposed to determine the taxable income/turnover and the amount of the tax payable thereon and that no particular direction for payment of any interest is necessary when the statute itself obliges for payment of interest at the specified rate in case of non payment of tax within the stipulated period or for the delay in its payment - the liability to pay tax runs from the date stipulated for the payment of tax as per the statute irrespective of the date of assessment order and the liability to interest on delay in depositing tax is automatic for which neither any assessment order is required nor any notice of demand. In view of provision of Section 33 of the U.P. Value Added Tax Act which are mutatis mutandis applicable to entry tax, the petitioner is liable for payment of interest on such delayed payment of entry tax for the above period of 15 months irrespective of the fact whether such a direction for payment of interest is contained in the assessment order or not. Petition dismissed - decided against petitioner.

Issues Involved:
1. Liability to pay interest on delayed payment of entry tax.
2. Validity of the recovery notice demanding interest.
3. Applicability of VAT Act provisions to the Entry Tax Act.
4. Requirement of assessment order to specify interest liability.
5. Right to appeal against the interest calculation.

Detailed Analysis:

1. Liability to Pay Interest on Delayed Payment of Entry Tax:
The primary issue is whether the petitioner is liable to pay interest for the delay in making the payment of entry tax, despite the absence of such a direction in the assessment order. The court noted that the petitioner deposited ?1,76,75,224/- on 3.1.2012, which was due by 1.10.2010, resulting in a delay of about 15 months. According to Section 33 of the U.P. VAT Act, which applies mutatis mutandis to the Entry Tax Act, the petitioner is liable for interest on delayed payments. The Supreme Court in *Haji Lal Mohd. Biri Works* and *Pepsico India Company Limited* established that liability to pay interest is automatic and arises by operation of law, irrespective of the assessment order's silence on this matter.

2. Validity of the Recovery Notice Demanding Interest:
The petitioner challenged the recovery notice demanding ?33,36,199/- as interest for the delayed payment. The court held that the liability to pay interest is statutory and automatic for delayed payments, and thus, the department is justified in issuing the recovery notice. The court referenced *Commissioner of Sales Tax Vs. Qureshi Cruchible Center* and *Kalyan Kumar Ray Vs. Commissioner of Income Tax* to support the view that interest liability does not require a specific direction in the assessment order.

3. Applicability of VAT Act Provisions to the Entry Tax Act:
Section 13 of the Entry Tax Act makes certain provisions of the VAT Act applicable to proceedings under the Entry Tax Act, including Sections 31 and 33. Section 33 details the procedure for payment and recovery of tax, including interest on unpaid amounts. The court confirmed that these provisions apply to the Entry Tax Act, thereby validating the demand for interest on delayed payments.

4. Requirement of Assessment Order to Specify Interest Liability:
The court clarified that there is no specific provision or power conferred upon the Assessing Officer to determine the amount of interest payable on delayed entry tax payments. The liability to pay interest is embedded in the statute itself. The court cited *Kalyan Kumar Ray* and *Commissioner of Income Tax Vs. Bhagat Construction Company Private Limited* to emphasize that the assessment order need not contain a specific direction for interest payment, as the statutory obligation suffices.

5. Right to Appeal Against the Interest Calculation:
The court acknowledged that while the liability to pay interest is automatic, it is prudent for the department to provide detailed tax calculations as part of the assessment order to enable the assessee to file a proper appeal if needed. The petitioner is entitled to raise objections regarding the interest calculation before the concerned authority. The court granted the petitioner the liberty to challenge the interest calculation if it was not provided or if disputed, ensuring that the right to appeal is preserved.

Conclusion:
The court dismissed the writ petition, affirming the statutory obligation to pay interest on delayed entry tax payments. The recovery notice demanding interest was upheld, and the petitioner was granted the liberty to raise objections regarding the interest calculation before the concerned authority. The judgment emphasized the automatic nature of interest liability under the statute, irrespective of specific directions in the assessment order.

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