2017 (11) TMI 1299 - HC - VAT and Sales Tax

Delay in payment of tax - TNVAT Act and TNVAT Rules - sale of liquor - Form U notice / garnishee order - payment of arrear of tax in instalments - Held that - the respondent cannot seek indulgence everytime to make the payment in instalments by stating one reason or the other, and further observed that once the tax liability is fixed and also admitted by the respondents, it is the bounden duty to pay without dragging the matter. As per Rules 7(1)(a) and 7(1) (b), respondent has to pay tax due along with the monthly returns in Form I, as prescribed - As per the statutory provisions, tax has to be paid, before the 12th day of the succeeding month. Contention of the appellant in the grounds of appeal that even after receiving the tax amount along with the sale price from TASMAC Limited, well before the date of filing of the return, the respondent has not remitted the tax to the government, has not been refuted by filing any counter in this appeal. As per the statute, tax has to be paid in time, failing which interest is levied. There is no provision in the statute to pay tax in installments. The respondent has suppressed collection of tax from the buyer, and failed to remit the same to the government in time - It is thus clear that though the appellant- Company had approached the High Court under Article 226 of the Constitution, it had not candidly stated all the facts to the Court. The High Court is exercising discretionary and extraordinary jurisdiction under Article 226 of the Constitution. Over and above, a Court of Law is also a Court of Equity. It is, therefore, of utmost necessity that when a party approaches a High Court, he must place all the facts before the Court without any reservation. If there is suppression of material facts on the part of the applicant or twisted facts have been placed before the Court, the Writ Court may refuse to entertain the petition and dismiss it without entering into merits of the matter. The respondents having collected tax from TASMAC Limited, has not only failed to remit tax, due to the Government, in time, but also withheld the same for a considerable period and by filing successive writ petitions, has been gaining long time, for payment of tax, on installment basis, which the statute does not contemplate - Taking note of the averments in the supporting affidavit to W.P.No.24657 of 2017 as regards financial constraint, respondent seemed to have persuaded the writ Court to exercise discretion in favour of the respondent, which on the facts and circumstances of the case, not entitled. Section 45 (1)(b) of TNVAT Act, 2006, states that any person who holds or may subsequently hold money for, or on account of the dealer or other person who has become liable to pay any amount due under this Act, to pay to the assessing authority either forthwith upon the money becoming due or being held at or within the time specified in the notice - When the dealer had collected the tax from the buyer, the tax should be paid to the Government, within time. Retention of the same, would amount to unjust enrichment and as rightly pointed out would pave way, to similar request. The action of the 3rd appellant in issuing U Form dated 31.08.2017, cannot be set at naught, by granting liberty to the respondent to pay tax in installments - Appellants are empowered to collect the amount from the buyer, due and payable by respondent - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Validity of the garnishee order issued by the Deputy Commissioner.
2. Compliance with statutory provisions for tax payment.
3. Financial constraints and their impact on tax payment.
4. Suppression of material facts by the respondent.
5. Equitable relief under Article 226 of the Constitution of India.

Detailed Analysis:

1. Validity of the Garnishee Order:
The respondent challenged the garnishee order dated 31.08.2017 issued by the Deputy Commissioner (CT-1), Large Tax Payers Unit, Chennai. The writ Court granted liberty to the respondent to pay the arrears of tax together with applicable interest in five equal monthly installments. The garnishee order was to be kept in abeyance subject to compliance with the installment payments. If the respondent failed to pay any installment, the garnishee order would automatically revive.

2. Compliance with Statutory Provisions for Tax Payment:
The respondent, a company engaged in the manufacture and sale of Indian Made Foreign Liquor, faced financial constraints due to increased production costs and static selling prices. As per Rule 7 of the Tamilnadu Value Added Tax Rules, 2007, dealers with a turnover above ?200 crores must file returns and pay tax by the 14th of the succeeding month. The respondent failed to remit the tax for March 2017, leading to the issuance of a garnishee order to TASMAC to pay the VAT dues. The respondent sought to quash the garnishee order and requested ten months to pay the arrears.

3. Financial Constraints and Their Impact on Tax Payment:
The respondent cited financial difficulties due to increased production costs and static selling prices, leading to delays in tax payments. The writ Court permitted the respondent to pay the arrears in installments, considering the financial constraints. However, the appellants contended that the respondent had collected the tax amount from TASMAC but failed to remit it to the government, instead using it for business promotion activities.

4. Suppression of Material Facts by the Respondent:
The respondent had previously obtained an order to pay tax arrears in installments in W.P.No.10573 of 2017. The writ Court had explicitly stated that no further indulgence would be granted for future arrears. However, the respondent suppressed this fact in the subsequent writ petition (W.P.No.24657 of 2017) and sought similar relief. The appellants argued that the respondent's suppression of material facts and failure to remit collected tax amounted to unjust enrichment.

5. Equitable Relief under Article 226 of the Constitution of India:
The Court emphasized that equitable relief under Article 226 requires the petitioner to come with clean hands and not suppress material facts. The respondent's conduct of withholding tax collected from TASMAC and seeking repeated indulgence from the Court was deemed improper. The Court noted that statutory provisions do not allow payment of tax in installments, and granting such relief would set a dangerous precedent.

Conclusion:
The High Court set aside the writ Court's order permitting the respondent to pay tax in installments. The Court held that the respondent's suppression of material facts and failure to remit collected tax to the government in time amounted to unjust enrichment. The Court emphasized that statutory provisions must be strictly followed, and equitable relief cannot be granted to a party with unclean hands. The garnishee order issued by the Deputy Commissioner was upheld, and the writ appeal was allowed.

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