2013 (5) TMI 149 - HC - VAT and Sales Tax

Chargeability of interest u/s 27(1) - As per petitioner provision of interest u/s 27(1) would only apply where the petitioner/ dealer failed to pay the tax due as required by section 21(3) of the said Act. Thus, according to the petitioner, prior to an assessment, unless and until the dealer filed a return, there could not be any tax due because that would have relation to the amount of tax due according to the return - Held that - From an examination of the decisions of Rajasthan v. Ghasilal 1965 (1) TMI 41 - SUPREME COURT OF INDIA and Maruti Wire Industries Pvt. Ltd. v. STO & ORS 2001 (3) TMI 856 - SUPREME COURT OF INDIA it is apparent that the expression tax due as appearing in section 27(1) of the said Act would have to be read in relation to the provisions of section 21(3) thereof. Section 21(3) of the said Act has clear reference to the furnishing of a return. Moreover, it has reference to the full amount of tax due from a dealer under the Act according to such return . The tax which is said to be due under section 27(1) of the said Act must be the tax which is due according to a return . It is obvious that if no return is filed then there could be no tax due within the meaning of section 27(1) of the said Act read with section 21(3) thereof. The tax which is ultimately assessed is the tax which becomes due on assessment and if this tax so assessed is not paid even after the demand is raised then the dealer would be deemed to be in default and would be liable to pay interest under section 27(2) of the said Act. But till such tax is assessed no interest can be levied on such a dealer, who has not filed a return under section 27(1) of the said Act. Thus, it is evident that the impugned order is not in accord with the Constitution Bench decisions of the Supreme Court in Rajasthan v. Ghasilal 1965 (1) TMI 41 - SUPREME COURT OF INDIA . Thus, writ petition is allowed to the aforesaid extent.

Summary

Issues Involved:
1. Chargeability of interest under Section 27(1) of the Delhi Sales Tax Act, 1975.
2. Legality of the Assistant Commissioner's suo moto revision of the assessment orders.
3. Applicability of penalties and interest in the context of non-filing of returns.

Detailed Analysis:

1. Chargeability of Interest under Section 27(1) of the Delhi Sales Tax Act, 1975:
The primary issue in this case was whether interest under Section 27(1) of the Delhi Sales Tax Act, 1975 could be levied on a dealer who had not filed any return for the year 1980-81. The petitioner argued that interest under Section 27(1) applies only when there's a failure to pay the "tax due" as required by Section 21(3), which necessitates the filing of a return. Since no return was filed, there could be no "tax due" under Section 27(1). The court examined the statutory provisions and relevant case law, including the Constitution Bench decision in State of Rajasthan v. Ghasilal and J.K. Synthetics Ltd. v. CTO. It was concluded that the expression "tax due" in Section 27(1) must be read in relation to Section 21(3), which refers to the tax due "according to such return." Therefore, in the absence of a return, no tax could be considered due under Section 27(1), and hence, no interest could be levied.

2. Legality of the Assistant Commissioner's Suo Moto Revision of the Assessment Orders:
The Assistant Commissioner had issued a show-cause notice for suo moto revision of the assessment orders under Section 46, which included the issue of non-levy of interest under Section 27(1). The Tribunal found that the Assistant Commissioner had overstepped his powers by revising the orders on grounds that were within the purview of reassessment under Section 24, which is the domain of the Sales Tax Officer. The Tribunal held that the exercise of revisionary powers by the Assistant Commissioner was illegal and beyond his authority. Consequently, the Tribunal quashed the Assistant Commissioner's order and restored the original assessment orders.

3. Applicability of Penalties and Interest in the Context of Non-Filing of Returns:
The petitioner contended that non-filing of returns attracts penalties under Section 55 and can be treated as an offense under Section 50, but does not attract interest under Section 27(1). The court agreed, noting that Section 55 provides for penalties for failure to furnish returns or pay tax due according to the return, and Section 50 prescribes punishment for such defaults. The court emphasized that the statutory scheme differentiates between penalties for non-filing of returns and interest for non-payment of tax due according to returns filed. The court referenced the Supreme Court's decisions, including Maruti Wire Industries Pvt. Ltd. v. STO, which supported the view that interest under Section 27(1) cannot be levied in the absence of a return.

Conclusion:
The Delhi High Court concluded that the impugned order dated 13.02.1994, which required the petitioner to pay interest under Section 27(1), was not in accord with the Constitution Bench decisions of the Supreme Court. Consequently, the order was set aside to the extent it required the petitioner to pay interest under Section 27(1). The court directed the sales tax department to provide consequential relief to the petitioner regarding the amount deposited towards interest. The writ petition was allowed to the aforesaid extent, with no order as to costs.