2020 (2) TMI 34 - HC - VAT and Sales Tax

Levy of interest for delayed remittance of tax - section 9(2A) read with 24(3) of the Tamil Nadu General Sales tax Act, 1959 - HELD THAT - The facts involved in the case of JAGADEESWARAN TEXTILES (P) LTD. VERSUS COMMERCIAL TAX OFFICER, UDUMALPET 2009 (10) TMI 866 - MADRAS HIGH COURT , may not be applicable to the instant case. While analysing the second proviso to section 24(3) of the TNGST Act, the court had held that the proviso enables postponement of payment of only the disputed tax and the petitioner ought to have paid at least the tax on the turnover, which is not in dispute. In the said case, the petitioner had not paid the tax even on the admitted turn over and therefore, the petitioner cannot take refuge under the theory of merger and contend that the original order of assessment stood erased. As such, the said decision may not be applicable to the petitioner's case. In view of the decision of the honourable apex court in EID. PARRY (INDIA) LTD. VERSUS ASSISTANT COMMISSIONER OF COMMERCIAL TAXES, CHENNAI (AND ANOTHER APPEAL) 2005 (5) TMI 302 - SUPREME COURT , the levy of interest between the month of April to August 2000, cannot be justifiable or sustainable. Petition allowed.

Summary

Issues:
Levy of interest under section 9(2A) read with 24(3) of the Tamil Nadu General Sales Tax Act, 1959 for delayed remittance of tax.

Analysis:

Issue 1: Interpretation of Eligibility for Deferral Scheme
The petitioner argued that penal interest can only be demanded upon admission of liability or omission to pay the admitted tax after demand. The petitioner contended that Unit-II was a diversification unit entitled to IFST deferral benefit. On the contrary, the Additional Government Pleader asserted that the petitioner wrongly availed the deferral scheme without reaching the benchmark, justifying the levy of interest. The petitioner maintained that their returns were correct, and any discrepancy should have led to an assessment before demanding tax. Citing E. I. D. Parry (India) Ltd. v. Assistant Commissioner of Commercial Taxes, the petitioner argued that interest cannot be imposed without a notice of demand post-assessment.

Issue 2: Application of Precedent and Statutory Provisions
The Additional Government Pleader relied on the decision in Jagadeeswaran Textiles (P) Ltd. v. Commercial Tax Officer to support the impugned order. However, the court found the facts in that case not directly applicable. The court highlighted that the proviso to section 24(3) allows postponement of payment only for disputed tax, emphasizing that tax on undisputed turnover should be paid. The court differentiated the petitioner's case from the precedent, concluding that the petitioner cannot claim the original assessment was erased.

Issue 3: Justifiability of Interest Levy
In light of the apex court's decision in E. I. D. Parry's case, the court deemed the interest levy between April to August 2000 unjustifiable and unsustainable. Consequently, the court quashed the impugned order demanding interest, thereby allowing the writ petition and closing the connected miscellaneous petition without costs.