2019 (8) TMI 1362 - HC - VAT and Sales Tax

Levy of Interest - belated payment of additional sales tax - It is the case of the petitioner that during the course of the revision of assessment made in the year 1997, tax was levied on the sale of REP licences and thereafter since the petitioner had paid the tax within the due dates, interest cannot be levied in view of Section 24(3) of the TNGST Act - whether the petitioner is liable to pay interest when he had paid the tax within the due date in view of Section 24(3) of the TNGST Act? HELD THAT - The petitioner's liability to pay the tax on sales of REP licences was very much in existence during the due date for the assessment years 1993- 94 and 1994-95 and the Assessing Officer was unable to confirm the proposal to levy tax on this REP licences only in view of the interim stay orders of the Hon'ble Supreme Court. The revisional authority had also followed this position which was existing even during the time of original assessment, but which came to be stalled for some time, owing to the interim orders of the Hon'ble Supreme Court. Just because the petitioner had chosen to pay the tax within the due date after the revisional authority had assessed the demand raised on sales of REP licences, it cannot be said that there was no liability cast on the petitioner during the time of original proposal to levy tax on REP licences for the relevant assessment years 1993-94 1994-95. Hence, when the question whether REP licences constitute goods came to be resolved by this Court in the year 1994 itself and there were no other contrary view expressed by any of the High Courts, the Hon'ble Supreme Court had only affirmed the views of the High Courts holding that REP licences constitute goods. In the instant case, the petitioner herein had sought for exemption from payment of tax on REP licences and the issue was pending before the Hon'ble Supreme Court in which the petitioner had also filed a SLP. During the pendency of such proceedings, there was no certainty on the decision to be taken in the issue as to whether there is liability cast on the petitioner, in view of the interim orders granted by the Hon'ble Supreme Court. The clarification came only after the final orders were pronounced in favour of the department. The additional ground raised by the petitioner is that the levy of interest on belated payment of additional sales tax is not warranted in the absence of an express provision under the Tamil Nadu Additional Sales Tax Act, providing for levy of interest. Such a contention cannot be sustained since the petitioner has lost sight of the amendment made to the Tamil Nadu Additional Sales Tax Act, wherein a specific provision has been inserted providing for levy of interest in respect of additional sales tax. The Amendment Act also provides for validation of any interest paid or payable for belated payments of additional sales tax with effect from 01.04.1970. Petition dismissed.

Summary

Issues Involved:
1. Levy of interest on tax for the sale of REP licenses.
2. Applicability of interest on additional sales tax.
3. Validity of tax assessment and interest levied post-judgment by the Supreme Court.

Issue-wise Detailed Analysis:

1. Levy of Interest on Tax for the Sale of REP Licenses:
The petitioner, a dealer in hides, skins, and shoe uppers, contested the levy of interest on tax for the sale of REP licenses during the assessment years 1993-94 and 1994-95. The petitioner argued that since they reported the turnover and paid the tax within the due date after the revision of assessment, interest should not be levied. The petitioner relied on the Supreme Court decisions in M/s. J.K. Synthesis Limited and M/s. EID Parry (India) Limited, which held that interest is not payable if the tax is paid within the due date after the final assessment. However, the court noted that the liability to pay tax on REP licenses was established by the Karnataka High Court and affirmed by the Madras High Court in P.S. Apparels' case. The interim stay by the Supreme Court only delayed the assessment but did not negate the liability. The court concluded that the petitioner was liable to pay interest from 01.05.1996, the date when the Supreme Court affirmed that REP licenses constitute goods.

2. Applicability of Interest on Additional Sales Tax:
The petitioner argued that interest on the belated payment of additional sales tax was not warranted in the absence of an express provision under the Tamil Nadu Additional Sales Tax Act. The court rejected this contention, citing the amendment to the Tamil Nadu Additional Sales Tax Act, which provided for the levy of interest on additional sales tax. The court also referenced the Supreme Court's decision in Indodan Industries Limited, which upheld the validation of actions under the amended Act, including the levy of interest on additional sales tax.

3. Validity of Tax Assessment and Interest Levied Post-Judgment by the Supreme Court:
The petitioner contended that the assessment and demand for tax on REP licenses, and the subsequent interest levied, were not valid as the assessments were made after the Supreme Court's judgment. The court noted that the liability to pay tax on REP licenses existed during the original assessment period, and the interim stay by the Supreme Court only temporarily halted the assessment process. The court found that the revisional authority correctly levied interest from 01.05.1996, the date of the Supreme Court's judgment in Vikas Sales Corporation, affirming that REP licenses constitute goods. The court also referenced the Supreme Court's decision in Calcutta Jute Manufacturing Company, which held that interim orders do not absolve the liability to pay interest on delayed tax payments.

Conclusion:
The court dismissed the writ petitions, upholding the orders of the first respondent. The court found no infirmity in the levy of interest on the tax for the sale of REP licenses and the additional sales tax, validating the actions taken by the tax authorities post the Supreme Court's judgment. The court emphasized that the liability to pay tax and interest was consistent with the established legal position and the amendments to the relevant tax laws.