2014 (4) TMI 991 - HC - VAT and Sales Tax

Demand of interest for not depositing tax - Cheque was presented before the officer concerned - Held that - Once the cheque is presented by the dealer before the officer concerned, he is to follow the procedure for depositing the said cheque in the manner prescribed under Rules 48 and 49 - Punjab National Bank issued a certificate vide annexure 4 - The certificate has been issued by the Punjab National Bank certifying that the cheque for Rs.33,904.87 being cheque no.768897 was not presented to the Bank for payment - No reason not to accept the said bank certificate - The fact remains neither the cheque was returned to the petitioner, nor he was ever informed that the said cheque has been dishonoured by the Bank - The department cannot take the advantage of its own wrong - The demand of interest from the petitioner is not justified - The writ petition succeeds and is allowed - The impugned notice dated 1.1.1990 filed as annexure-5 to the writ petition demanding interest quashed - Decided in favour of assessee.

Summary

Issues:
Challenge of demand of interest for not depositing admitted tax for 3rd quarter of assessment year 1981-1982.

Analysis:
The petitioner, a registered dealer under the U.P Sales Tax Act and Central Sales Tax Act, contested the demand of interest for not depositing the admitted tax for the 3rd quarter of the assessment year 1981-1982. The assessing authority noted a missing challan for a certain amount and required the petitioner to provide a bank certificate if the amount had been recovered. The petitioner subsequently deposited the amount, but the department claimed it was not deposited along with the returns, leading to the demand for interest. The petitioner argued that the cheque was filed with the return, and any fault in non-encashment lay with the department. The department contended that since the cheque was not encashed, the petitioner was liable to pay interest.

Upon reviewing the submissions and evidence, the court found that the cheque for the admitted tax amount was indeed filed by the petitioner within the stipulated time. The department stated that the cheque was presented but not encashed, without providing further details or evidence. However, a certificate from Punjab National Bank confirmed that the cheque was not presented for payment, contradicting the department's claim. The court emphasized that the department failed to inform the petitioner about the cheque status, as required.

The court referenced a Division Bench decision and highlighted the obligation of the department to follow proper procedures for cheque deposit and notification to the dealer if not encashed. Relying on previous judgments, the court concluded that the demand for interest was unjustified in this case. The court held in favor of the petitioner, quashing the notice demanding interest on the disputed amount for the specified period. The judgment favored the petitioner, emphasizing the department's responsibility and rejecting the demand for interest due to the department's failure to follow proper procedures and notify the petitioner about the cheque status.