2018 (4) TMI 365 - HC - VAT and Sales Tax

Demand of interest - additional demand of tax due to denial of ITC where credit notes issued by the party - whether the petitioner is liable to pay interest under section 18(4)(a) of the M. P. V. A. T. Act, 2002 for the assessment year 2011-12? - Held that - the levy of interest is unsustainable in view of the Constitutional Bench decision of the Supreme Court;in the case of J. K. Synthetics Ltd. v. Commercial Taxes Officer 1994 (5) TMI 233 - SUPREME COURT , where it was held that any provision made in a statute for charging or levying interest on delayed payment of tax must be construed as a substantive law and not adjectival law. The provision for levy of interest clearly shows that so long as the assessee pays the tax which according to return is due on the basis of information furnished in the return filed by him, there would be no default on his part to meet the statutory obligation and therefore, it cannot be held that the tax payable by him is not paid to make him liable to pay interest. The law does not envisage assessee to predict final assessment and expecting to pay tax on that basis to avoid the liability to pay interest - demand of interest and recovery thereof is unsustainable in law - Petition allowed - decided in favor of petitioner.

Issues Involved:
1. Liability to pay interest under section 18(4)(a) of the M.P. VAT Act, 2002 for the assessment year 2011-12.
2. Denial of set-off of input rebate on VAT paid to GAIL.
3. Additional demand inclusive of interest and recovery notice issued by the assessing officer.
4. Suo motu revision of the assessment order by the Additional Commissioner of Commercial Tax.
5. Assessment of entry tax and interest (given up during arguments).

Issue-wise Detailed Analysis:

1. Liability to Pay Interest under Section 18(4)(a) of the M.P. VAT Act, 2002:
The primary question was whether the petitioner was liable to pay interest under section 18(4)(a) of the M.P. VAT Act, 2002 for the assessment year 2011-12. The petitioner, a registered dealer engaged in refining and distributing petroleum products, had paid the full tax amount of VAT along with returns in the prescribed manner. The assessing officer raised an additional demand inclusive of interest under section 18(4) of the VAT Act and issued a recovery notice. However, the court found that the levy of interest was unsustainable in view of the Constitutional Bench decision of the Supreme Court in J.K. Synthetics Ltd. v. Commercial Taxes Officer, which held that so long as the assessee pays the tax due according to the return filed, there would be no default to meet the statutory obligation, and thus, no liability to pay interest.

2. Denial of Set-off of Input Rebate on VAT Paid to GAIL:
The petitioner had purchased LPG from GAIL, paying full tax under the MPVAT Act. However, the assessing officer denied the set-off of input rebate on the VAT paid to GAIL on the grounds that GAIL had issued credit notes due to price revision directed by the Petroleum Planning and Analysis Cell (PACC). The price revision affected only the base price, and no credit note was issued for the VAT paid by the petitioner and deposited by GAIL. The court noted that the petitioner had paid the tax as per the return filed in time, which did not fall under any of the four clauses of section 18(4)(a) of the MPVAT Act.

3. Additional Demand Inclusive of Interest and Recovery Notice Issued by the Assessing Officer:
The assessing officer's additional demand and recovery notice were based on the denial of the input rebate and the subsequent interest levied under section 18(4) of the VAT Act. The court found that the petitioner had paid the tax due according to the return filed, and thus, the demand for interest and its recovery were unsustainable in law.

4. Suo Motu Revision of the Assessment Order by the Additional Commissioner of Commercial Tax:
The Additional Commissioner of Commercial Tax took up the assessment order in suo motu revision, corrected certain calculation mistakes, allowed the adjustment of the refund order in input tax rebate, but sustained the levy of interest charged under section 18(4)(a) of the VAT Act. The court, however, quashed the demand for interest based on the Supreme Court's decision in J.K. Synthetics Ltd., which clarified that the tax paid according to the return filed does not attract interest liability.

5. Assessment of Entry Tax and Interest:
Although the petitioner initially questioned the assessment of entry tax and interest, this issue was given up during the course of arguments by the learned senior counsel. Consequently, the court did not address this aspect of the matter.

Conclusion:
The court concluded that the demand for interest and its recovery was unsustainable in law, quashed the same, and allowed the writ petition to the extent indicated. The assessment of entry tax and interest was not addressed as it was given up during the arguments.

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