2017 (9) TMI 1305 - HC - VAT and Sales Tax

Liability of interest - relevant date - whether the first respondent was justified in demanding interest from the due date for re-payment of the loan or the petitioner is liable to pay interest only from the date of the returns? Held that - the liability to pay penal interest can be only from the date on which repayment is due and not on the date on which return has been filed. The interpretation sought to be given by the first respondent in the impugned notice is incorrect interpretation - matter is remanded to the first respondent for fresh consideration - petition allowed by way of remand.

Summary

Issues:
Challenge to notices demanding penal interest under deferral agreement.

Analysis:
The petitioner, a registered dealer under the CST Act and TNGST Act, challenged notices demanding penal interest for defaulting in payment of deferral amount under the IFST deferral agreement. The main issue is whether interest should be demanded from the due date for repayment of the loan or from the date of returns. The petitioner relied on a judgment by the Hon'ble Division Bench in a similar case. The first respondent interpreted the judgment differently, leading to the demand for penal interest without providing an opportunity for a personal hearing to the petitioner.

The judgment in the case of Amutha Mills Private Limited vs. Assistant Commissioner was crucial in determining the liability for penal interest. The Division Bench held that penal interest should be calculated only from the due date for repayment of the loan and not from the date the deferral loan was availed. This decision was based on the terms of the deferral agreement and the absence of specific incorporation of circular recommendations in the agreement. The judgment emphasized the importance of following the terms of the agreement in determining the liability for penal interest.

In another case, Srinivasa Steel challenged the rejection of their application under the Samadhan Scheme due to the cancellation of the IFST deferral agreement. The petitioner argued for interest calculation from a later date, relying on previous judgments. The Court considered the legal position established in the Amutha Mills case and directed the authorities to collect penal interest only from the date of agreement cancellation, aligning with the principles laid down in the Division Bench judgment.

The Court reiterated the importance of the W.A.No.1482 of 2006 judgment, which governs the field regarding the calculation of penal interest under deferral agreements. The current interpretation by the first respondent was deemed incorrect, leading to the setting aside of impugned notices and remanding the matter for fresh consideration. The petitioner's request for reconsideration was to be reviewed by the first respondent, ensuring compliance with legal principles and providing an opportunity for a personal hearing.

In conclusion, the writ petitions were allowed, impugned notices were set aside, and the matter was remanded for fresh consideration by the first respondent. The decisions referred to in the analysis were to be considered, and orders were to be passed in accordance with the law after providing a personal hearing to the petitioner.