2024 (6) TMI 379 - HC - VAT and Sales Tax

Levy of collection charges - revenue recovery proceedings initiated for recovery of amounts due to institutions notified under Section 71 of the Kerala Revenue Recovery Act - HELD THAT - In the facts and circumstances of this case, no collection charges could be levied on the amounts paid by the petitioner. It is clear from the judgment of the Division Bench in Usha Mary that the main issue considered by this Court was in respect of collection charges payable on account of revenue recovery proceedings initiated for recovery of amounts due to institutions notified under Section 71 of the Act - This Court, interpreting the provisions of the above proviso to Section 71 read with Rule 5 of the Kerala Revenue Recovery Rules, came to the conclusion that the State was authorized to collect collection charges in respect of amounts recovered on behalf of institutions notified under Section 71 of the Act and also justified the collection of service charges at 1% in respect of the amounts paid directly by defaulters to the institutions notified under Section 71 of the Act. A reading of paragraph No. 3 of the judgment in Usha Mary indicates beyond doubt that this Court was of the view that even in cases where steps are taken for recovery of amounts due to the institutions notified under Section 71 of the Act, where the amounts are paid immediately after the issuance of notice under Section 7 and/or Section 34 of the Act, even the service charge of 1% could not be levied. In the facts and circumstances of the present case, immediately on notice for recovery being issued to the petitioner, the tax amount was paid by the petitioner. A further amount of Rs. 36,79,791/- was paid by the petitioner as a condition for stay against recovery in an appeal filed by the petitioner challenging the order imposing penalty. Both these amounts were voluntarily paid by the petitioner and there is nothing on record to show that any steps were taken by the revenue recovery authorities to recover the amount from the petitioner apart from the issuance of notice. It is therefore clear that no collection charges are to be levied from the petitioner on the strength of the law laid by this Court in Usha Mary. Thus, it is declared that the petitioner is not liable to pay collection charges as demanded in Ext. P9. If any amount has been remitted by the petitioner towards collection charges, on the basis of the demand in Ext. P9, the said amount shall be refunded to the petitioner within a period of three months from the date of receipt of a certified copy - petition allowed.

Summary

Issues Involved:
1. Legitimacy of collection charges levied on the petitioner.
2. Applicability of the law laid down in Usha Mary v. Kerala Financial Corporation and Others.
3. Relevance of the judgment in W.A. No. 1107 of 2009 and the Supreme Court judgment in State of Kerala and Others v. Shibu Kumar P.K and Another.

Detailed Analysis:

1. Legitimacy of Collection Charges Levied on the Petitioner:
The petitioner, an assessee under the Kerala Value Added Tax Act, 2003, faced a delay in tax remittance for the period from July to November 2011-2012, resulting in a tax demand of Rs. 1,22,65,972/- and a penalty of Rs. 19,10,35,500/-. Upon receiving a notice from the Tahsildar (RR), the petitioner paid the tax and interest via e-payment and filed a statutory appeal against the penalty, paying Rs. 36,79,791/- as a condition for stay. The petitioner contested the collection charges of Rs. 9,19,948/- and Rs. 2,75,984/- on these amounts, arguing that no recovery proceedings were initiated beyond the issuance of notice.

2. Applicability of the Law Laid Down in Usha Mary v. Kerala Financial Corporation and Others:
The petitioner's counsel cited Usha Mary v. Kerala Financial Corporation and Others, emphasizing that mere issuance of notice under Section 7 or Section 34 of the Kerala Revenue Recovery Act, 1968, does not justify collection charges if the amount is immediately paid. The court in Usha Mary clarified that collection charges cannot be levied when only notice is issued and no further recovery steps are taken. The relevant legal provisions, including Section 71 and Rule 5 of the Kerala Revenue Recovery Rules, were interpreted to conclude that collection charges are only justified when further recovery steps are taken beyond mere notice issuance.

3. Relevance of the Judgment in W.A. No. 1107 of 2009 and the Supreme Court Judgment in State of Kerala and Others v. Shibu Kumar P.K and Another:
The respondents referred to the Division Bench judgment in W.A. No. 1107 of 2009, where collection charges were upheld even when the defaulter paid amounts directly to a notified institution. However, this judgment was set aside by the Supreme Court in State of Kerala and Others v. Shibu Kumar P.K and Another. The court distinguished the present case from W.A. No. 1107 of 2009, noting that the latter pertained to institutions notified under Section 71, where a service charge of 1% was justified. In contrast, the present case involved tax recovery for the Government, and no further recovery steps were taken beyond notice issuance.

Conclusion:
The court concluded that no collection charges could be levied on the petitioner based on the law laid down in Usha Mary. The petitioner paid the tax amount and the penalty conditionally for stay immediately upon notice issuance, without any further recovery steps taken by the authorities. Therefore, the petitioner was not liable for the collection charges demanded. The writ petition was allowed, and the court ordered the refund of any amount paid by the petitioner towards collection charges within three months from the date of receipt of the judgment's certified copy.