2022 (11) TMI 995 - HC - VAT and Sales Tax

Adjustment of interest under Section 42 (3) of TNVAT Act, 2006 - It is submitted that the adjustment of the amount towards interest itself is unwarranted as the Department was having a sum of Rs.24,19,835/- of the petitioner - HELD THAT - In this case, the petitioner had admittedly not filed a return for the month of June 2017 and later sent representations to the respondents to adjust the tax against the tax due. The order came to be passed on 27.06.2018 by the 3 rd respondent as the Original Authority. Though a copy of the order has not been served on the petitioner, the fact remains that the petitioner has also not contested the same and is amenable for the tax liability arrived at therein. Since the petitioner's amount was already with the respondent Department, the imposition of interest under Section 42(3) of the Act at 2% per annum appears to be unreasonable and unwarranted. This writ petition is allowed with a direction to the 3rd respondent to refund a sum of Rs.6,26,404/- together with interest at 2% from the date of 1st July 2017.

Summary

Issues:
Adjustment of interest under Section 42(3) of TNVAT Act, 2006 without proper orders under Rule 14(18) of TN Value Added Rules, 2007. Availability of alternate remedy under Section 59 of TNVAT Act. Justification of levying interest when the petitioner's amount was already with the respondent Department.

Analysis:
The petitioner filed a writ petition against an order passed by the Revisional Authority upholding the tax liability and interest imposed by the 2nd and 3rd respondents. The petitioner claimed entitlement to a refund of Rs.24,19,835/- as per an order by the Appellate Commissioner. The respondents adjusted the refund amount against the tax liability and interest, leading to a balance of Rs.1,48,636/- to be paid by the petitioner. The petitioner argued that the adjustment of interest under Section 42(3) was improper and that the respondents should have followed Rule 14(18) of the TN Value Added Rules, 2007.

The petitioner contended that the tax liability confirmation was not served, and the interest adjustment was unwarranted as the petitioner's amount was already with the respondents. The Tribunal had dismissed an appeal against the Appellate Commissioner's order, making the issue final. The Government Advocate argued that the petitioner should have pursued a statutory appeal under Section 59 of the TNVAT Act instead of filing a writ petition.

The court noted that the petitioner's refund entitlement was established by orders of the Appellate Commissioner and Tribunal. The petitioner had not filed a return for June 2017 but sought adjustment against the tax due. The court found the imposition of interest at 2% per annum unreasonable since the petitioner's amount was available for adjustment. The court directed the 3rd respondent to refund Rs.6,26,404/- with 2% interest from July 1, 2017, within six weeks, and pay proportionate interest on the entire amount as per Section 42(5) of the Act.

In conclusion, the court allowed the writ petition, directing the refund and interest payment by the 3rd respondent, emphasizing the unwarranted nature of the interest imposition when the petitioner's amount was already held by the respondent Department.