2018 (7) TMI 1768 - HC - VAT and Sales Tax

Demand of Interest - suo-moto revision u/s 35 of the Kerala General Sales Tax Act, 1963 - effect of provisions of section 55C, whether effective only from 01.01.2000 onwards? - appropriation of the amount paid by the petitioner towards the fictitious interest amount for which there was no demand - Whether the Tribunal was right in sustaining the order of the Deputy Commissioner passed in purported exercise of the power conferred under Section 35 of the KGST Act? Held that - Section 55C of the KGST Act, though brought into statute on 01.01.2000, is applicable in so far as all the assessment years. The general principles in appropriating amounts paid, first towards the interest, and then the principal dues was adopted by a clarificatory amendment to the statute. It is also to be noticed that Section 55C specifically refers to the amounts due under the Act including the interest and appropriation of payment; which applies whenever the recovery is made after the amendment was introduced, without reference to the assessment years, whether it is prior or post - Thus, Section 55C applies to all payments made on or after 01.01.2000 irrespective of the year to which arrears of the tax and interest relates - decided against assessee. Applicability of Section 23(3) of the KGST Act - Held that - When there has been no levy of interest made, at the time of assessment and as a result no demand raised, the liability for interest would not arise is the argument. Whether there is any liability for interest under Section 23(3) on the petitioner in the given situation with reference to the assessment year 1997- 1998 particularly in the light of the sequence of amendments brought to Section 23 by the legislature? - Held that - Section 23(3) of the KGST Act also mandates that the interest due should be paid by the dealer or other person in the manner prescribed in addition to the amount due. Hence there is a definite obligation cast on the dealer, assessee or such other person to pay the amounts due even without a determination. This is not to say that the assessee cannot dispute the computation, but the levy remains unaltered and there could be a dispute raised only on the actual amounts levied. Time Limitation - whether the assessment being completed under Section 17 of the KGST Act, is it possible to re-open it after five years? - Held that - The assessment was completed within the period of limitation provided under Section 17, in the year 2003; after Section 55C came into the statute. The assessee had filed appeals and later by Annexure D an order was passed giving effect to the modifications as made by the Appellate Tribunal. At that point, the levy of interest was not taken note of and the appropriation under Section 55C was not also applied - it was perfectly in order for the Deputy Commissioner to have invoked the jurisdiction under Section 35. Revision dismissed - decided against assessee.

Summary

Issues Involved:
Assessment year 1997-1998, Interest levy under Section 35 of KGST Act, Appropriation of payments, Applicability of Section 55C, Liability for interest under Section 23(3), Accrual of interest, Limitation period for assessment completion.

Analysis:

1. Applicability of Section 55C:
The petitioner contested the application of Section 55C to the assessment year 1997-1998, arguing that it came into effect only from 01.01.2000. However, the court held that Section 55C applies to all payments made after 01.01.2000, irrespective of the assessment year. Citing a previous judgment, the court emphasized that Section 55C pertains to amounts due under the Act, including interest, without distinction between assessment years. The questions raised regarding Section 55C were decided in favor of the revenue.

2. Appropriation of Payments and Interest Levy:
The petitioner challenged the appropriation of payments made towards interest and balance dues, as well as the levy of interest without a specific demand by the Assessing Officer. The court noted that the statute mandates automatic accrual of interest when tax or other amounts are not paid within the prescribed time. It clarified that interest accrues from the date the tax becomes due under the Act, and a notice of demand is not always necessary for interest to accrue. The court upheld the Deputy Commissioner's revision order directing the computation of interest and balance tax due.

3. Liability for Interest under Section 23(3):
The petitioner argued against the liability for interest under Section 23(3) due to the absence of a demand at the time of assessment. The court explained that interest accrues automatically under Section 23(3) when amounts assessed are not paid within the specified time, regardless of a notice of demand. The court highlighted that the obligation to pay interest is statutory, and the assessment order need not explicitly mention it. The court affirmed that the levy of interest is a dealer's obligation, irrespective of the assessment order's content.

4. Limitation Period for Assessment Completion:
The petitioner contended that the assessment, completed within the five-year limitation under Section 17 of the KGST Act, precluded the levy of interest after that period. However, the court clarified that interest accrues automatically upon assessment completion, and the limitation period does not absolve the assessee from interest liability. The court upheld the Deputy Commissioner's invocation of Section 35 jurisdiction due to the automatic nature of interest accrual and the absence of amendments affecting the relevant provisions for the assessment year.

In conclusion, the court rejected the revision, ruling in favor of the Revenue and upholding the Deputy Commissioner's order regarding interest levy and appropriation of payments. The judgment emphasized the automatic accrual of interest, statutory obligations of dealers, and the applicability of relevant provisions irrespective of the assessment year.