2017 (3) TMI 486 - HC - VAT and Sales Tax

Liability of interest - Section 8 (1) of the Act - there was a bonafide dispute with regard to liability to pay tax, and the assessment order was passed after nearly 3 years - Held that - there was no dispute relating to classification of goods or the rate of tax payable. The turnover and the rate of tax were clearly mentioned in the books of account and therefore, the present case was fully covered by the explanation to Section 8(1) of the Act - The intent of Section 8(1) read with explanation is clear, that once the assessee is found to have admitted its turnover, in the books of account, and rate of tax is not in issue, the total tax payable becomes the admitted tax. Any set off claimed by the assessee, if is disallowed and is accepted by the assessee, would not form a valid basis for assessee to contend that the amount of tax payable was not admitted - the Tribunal was justified in holding that the assessee is liable to pay interest under Section 8(1) of the Act, upon the shortfall in payment of tax - revision fails - decided against applicant.

Issues Involved:
1. Liability to pay interest under Section 8(1) of the U.P. Trade Tax Act.
2. Definition and scope of "tax admittedly payable."
3. Applicability of set-off under Section 4-BB of the Act.
4. Distinction between admitted tax and assessed tax.
5. Relevance of bona fide disputes in the context of interest liability.

Detailed Analysis:

1. Liability to Pay Interest under Section 8(1):
The revision challenges the Tribunal's order requiring the assessee to pay interest under Section 8(1) of the U.P. Trade Tax Act. The Tribunal held that the shortfall in tax payment was admitted and thus liable for interest. The assessee argued that there was a bona fide dispute regarding the set-off amount under Section 4-BB, and therefore, the deficient tax could not be treated as admitted tax, negating the interest liability under Section 8(1).

2. Definition and Scope of "Tax Admittedly Payable":
Section 8(1) mandates that the tax admittedly payable must be deposited within the prescribed time, failing which interest at 2% per month is due. The explanation to Section 8(1) clarifies that "tax admittedly payable" means the tax payable on the turnover of sales or purchases as disclosed in the dealer's accounts or admitted in any return or proceeding. The Tribunal's interpretation aligns with the Supreme Court's ruling in Commissioner of Sales Tax Vs. Qureshi Crucible Centre, which emphasized that interest liability arises by operation of law regardless of the dealer's intent or any bona fide dispute.

3. Applicability of Set-Off under Section 4-BB:
The assessee claimed a set-off of ?57,76,673.57 under Section 4-BB, but the department allowed only ?42,26,036 based on actual use of raw materials. The first Appellate Authority adjusted the interest liability to Section 8(1-B), citing a bona fide dispute over the set-off amount. However, the Tribunal reinstated the interest under Section 8(1), noting that the turnover and tax rate were not disputed, thus constituting admitted tax.

4. Distinction Between Admitted Tax and Assessed Tax:
The Tribunal differentiated between admitted tax and assessed tax, emphasizing that the former pertains to amounts disclosed in the dealer's accounts or returns, while the latter involves post-assessment scenarios. The Tribunal's decision was influenced by the fact that the assessee accepted the partial set-off and did not challenge the determination of set-off based on actual use of raw materials.

5. Relevance of Bona Fide Disputes in Interest Liability:
The assessee's reliance on various judgments, including E.I.D. Parry (India) Ltd. and Indian Oil Corporation Limited, was found inapplicable as those cases involved disputes over tax liability or classification from the outset. In contrast, the present case involved admitted turnover and tax rates, with the dispute limited to the extent of set-off, which was eventually accepted by the assessee. The Tribunal concluded that a bona fide dispute over set-off does not negate the interest liability under Section 8(1).

Conclusion:
The Tribunal was justified in holding the assessee liable to pay interest under Section 8(1) of the Act for the shortfall in tax payment. The revision was dismissed, affirming the Tribunal's decision. The court clarified that hardship is not a relevant consideration in fiscal statutes, and interest liability cannot be avoided on such grounds.

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