2014 (10) TMI 92 - HC - VAT and Sales Tax

Liability to tax - Payment already made not credited to account - Held that - It is trite that under Section 55C of the KGST Act, appropriation has to be made first towards interest and the balance available towards principal outstanding. Hence, satisfaction of interest first and the balance against the demand of ₹ 7,46,427/- towards TOT is justified. But, the Assessing Officer shall not calculate any interest prior to 14.03.2013. The amount payable as on 14.03.2013 is crystallized in the order Exhibit P4 and definitely future interest could be computed as per the appropriation made under Section 55C and a statement issued to that extent of the payments made in instalments. Hence, subsequent to Exhibit P4, when instalments are made, as directed in Exhibit P3; first the interest due should be satisfied. While any portion of the interest remains due, the tax demand would carry interest. On the interest being satisfied, payments should be credited to the tax demand. There shall be a direction to the 1st respondent to compute such amounts and give a statement to the petitioner within three weeks from today and if the petitioner remits the said amounts within three weeks therefrom, there shall be no further demand made. Decided in favour of assessee.

Summary

Issues:
1. Dispute over Exhibit P6 notice for realisation of arrears under the KGST Act for the year 2009-10.
2. Allegation of payments not being credited and subsequent rectification through Exhibit P4 order.
3. Applicability of Section 55C of the KGST Act regarding appropriation towards interest and principal outstanding.
4. Claim for interest and collection charges in Exhibit P6 notice.
5. Interpretation of whether collection charges are justified based on the circumstances of the case.

Analysis:
1. The petitioner challenged Exhibit P6 notice for arrears under the KGST Act for the year 2009-10. The assessment and demand were undisputed, with revenue recovery proceedings initiated as per Exhibit P2. The petitioner contended that payments made were not credited, leading to a rectification through Exhibit P4 order, which substantiated the claim. The petitioner complied with the instalments granted by the court, and the subsequent demand in Exhibit P6 was disputed based on the rectification made earlier.

2. The court addressed the appropriation of payments under Section 55C of the KGST Act, emphasizing the satisfaction of interest first before the principal outstanding. It was clarified that interest should not be calculated before 14.03.2013, as per Exhibit P4 order. The Assessing Officer was directed to compute future interest based on payments made in instalments and provide a statement to the petitioner. The court specified that once interest is satisfied, payments should be credited towards the tax demand, with a deadline for the petitioner to remit the amounts to avoid further demands.

3. Regarding the collection charges claimed in Exhibit P6, the court considered the petitioner's motivation to pay based on revenue recovery proceedings and the rectification of the mistake in computation through Exhibit P4 order. Referring to a previous judgment, the court held that no collection charges could be demanded if payments were voluntary and based on court orders. As the mistake was rectified as per court directions and instalments were paid accordingly, the court ruled that no collection charges could be recovered from the petitioner, instructing the Department not to demand such charges while providing the computation statement.

4. The judgment concluded by disposing of the writ petition, with each party bearing their respective costs, after addressing the issues related to the Exhibit P6 notice, payment appropriation, interest calculation, and the claim for collection charges in a detailed and comprehensive manner.