2018 (2) TMI 1546 - HC - VAT and Sales Tax

Whether the first respondent was justified in levying and demanding interest under the provisions of the Tamil Nadu Tax on Luxuries Act 1981 when there is no such provision provided under the Act especially Section 9 of the Act? Held that - identical issue decided in the case of S. Gurunathan Versus The Deputy Commercial Tax Officer 2014 (7) TMI 579 - MADRAS HIGH COURT where it was held that During the relevant assessment year there was no provision to levy interest on belated payment of additional tax or in other words there was no provision enabling the applicability of Section 24(3) towards tax due under the Act - interest cannot be demanded for belated payment on Additional Sales Tax as there is no substantial provision in the TNAST Act itself and similarly no penalty can be levied as there is no charging Section under the TNAST Act to levy penalty for the relevant Assessment year. Demand do not sustain - petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
Interpretation of provisions under Tamil Nadu Tax on Luxuries Act, 1981 regarding the levy of interest and penalty.

Analysis:
The primary legal issue in this case revolved around whether the first respondent was justified in levying and demanding interest under the Tamil Nadu Tax on Luxuries Act, 1981, particularly in the absence of a specific provision for such levy under Section 9 of the Act. The first respondent attempted to rely on Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 to impose penal interest. However, a previous case, S.Gurunathan Vs. Deputy Commercial Tax Officer, had addressed a similar issue under the Tamil Nadu Additional Sales Tax Act, 1970, emphasizing that interest cannot be automatically levied without a charging section explicitly enabling such imposition.

The court referred to previous judgments to support its decision, highlighting that the provisions of the Tamil Nadu General Sales Tax Act cannot be applied to levy interest or penalty under the Tamil Nadu Additional Sales Tax Act in the absence of a charging section within the latter Act. The court emphasized the importance of substantive law and charging provisions for the imposition of penalties, citing precedents such as India Carbon and J.K. Synthetics. The judgment clarified that without a specific provision allowing for the levy of interest or penalty, the power to impose such charges cannot be derived from external statutes like the Tamil Nadu General Sales Tax Act.

Ultimately, the court set aside the proceedings of the first respondent, confirming the levy and demand of interest and penalty on the petitioner. The court directed the respondents to pass fresh orders, providing relief by overturning the imposition of interest and penalty. Additionally, the court rejected the argument that the petitioner's submission under the Samadhan Scheme precluded them from challenging the interest and penalty orders, emphasizing that jurisdictional issues can be raised at any time. The court also dismissed the notion of waiver in a taxing statute context, highlighting the importance of legal points and the state's obligations under Article 265.

In conclusion, the court allowed the writ petitions, quashing the impugned notices demanding interest and penalty. The court held that since there was a lack of jurisdiction to levy penal interest, the petitioner should not be barred from challenging the notices and filing objections. The decision was based on legal principles established in prior cases, ensuring that interest and penalty cannot be imposed without explicit statutory provisions enabling such actions.