2020 (2) TMI 600 - HC - VAT and Sales Tax

Demand of differential tax - imposition of penalty - settlement of disputes relating to arrears of tax, penalty or interest pertaining to sales tax - application of settlement rejected on the ground that the petitioner had not paid the amounts under section 7(1)(c) Tamil Nadu Sales Tax (Settlement of Disputes) Act, 2002 - HELD THAT - The provisions of Tamil Nadu Sales Tax (Settlement of Disputes) Act, 2002 provides for an expeditious settlement of disputes relating to arrears of tax, penalty or interest pertaining to sales tax and the matters connected therewith or incidental thereto. The rate applicable in determining the amount payable for settling the dispute is provided in Section 7 of the said Act. This is a case where the disputed tax is lesser than the penalty imposed as a result of which if the case is settled in Section 7(1)(b) of the Tamil Nadu Sales Tax (Settlement of Disputes) Act, 2002, amount payable by the petitioner is far below 15% of the penalty that would have been payable by the petitioner if the case was pertaining to penalty simplicitor and was to be settled under Section 7(1)(c) of the Tamil Nadu Sales Tax (Settlement of Disputes) Act, 2002. The provision of the Tamil Nadu Sales Tax (Settlement of Disputes) Act, 2002 is to be read plainly without any addition or deletion - Though the settlement of dispute is to prejudice of the revenue, nevertheless it is on account of the defect in the method prescribed under the provisions of the Tamil Nadu Sales Tax (Settlement of Disputes) Act, 2002. Therefore, the impugned order cannot be sustained. Though, the petitioner benefits by being a lesser amount under Section 7(1)(b) of the Tamil Nadu Sales Tax (Settlement of Disputes) Act, 2002, nevertheless it is purely on account of the defect in the Act. The benefit which flows from such defective drafting of the Act cannot be denied based on the presumed and assured intention of the legislature. Unless the law was amended, the benefit of such enactment cannot be denied - the impugned order passed by the respondent is unsustainable - petition allowed - decided in favor of petitioner.

Issues:
1. Interpretation of provisions under the Tamil Nadu Sales Tax (Settlement of Disputes) Act, 2002.
2. Determination of the amount payable for settling the dispute under Section 7 of the Act.
3. Discrepancy in the calculation of the amount to be paid by the petitioner.
4. Application of penalty under the Act and its relation to the tax assessed.
5. Compliance with the provisions of the Act in settling disputes.
6. Consideration of legal principles in tax laws and interpretation of taxing statutes.

Analysis:
1. The judgment involves the interpretation of provisions under the Tamil Nadu Sales Tax (Settlement of Disputes) Act, 2002. The Act aims to provide for the expeditious settlement of disputes related to arrears of tax, penalty, or interest pertaining to sales tax. The rate applicable for determining the amount payable for settling the dispute is outlined in Section 7 of the Act.

2. The determination of the amount payable for settling the dispute under Section 7 of the Act is crucial. The section specifies different rates based on the nature of the dispute, such as tax in dispute, tax and penalty in dispute, penalty in dispute, or interest in dispute. The calculation of the amount to be paid by the petitioner hinges on the correct application of these rates.

3. A discrepancy arises in the calculation of the amount to be paid by the petitioner. The petitioner contends that the rate applicable is under Section 7(1)(b) of the Act, while the respondent argues for the application of Section 7(1)(c) for an additional amount. The difference in interpretation leads to conflicting amounts to be paid by the petitioner.

4. The application of penalty under the Act and its relation to the tax assessed is a point of contention. The respondent asserts that the petitioner must pay an additional amount based on the penalty levied, which is distinct from the penalty imposed as a result of the tax assessed. This distinction impacts the amount payable by the petitioner.

5. The compliance with the provisions of the Act in settling disputes is crucial for the resolution of the case. The court evaluates whether the petitioner adhered to the requirements set forth in the Act while filing the application for settlement and responding to the show cause notice issued by the respondent.

6. The judgment delves into the consideration of legal principles in tax laws and the interpretation of taxing statutes. It emphasizes the cardinal rule that taxing statutes must be interpreted based on what is clearly expressed without implying or adding provisions. The court refers to legal precedents to underscore the importance of adhering to the language of the statute in tax matters.

In conclusion, the judgment quashes the impugned order passed by the respondent, citing the unsustainable nature of the decision. The court allows the writ petition with consequential benefit to the petitioner, highlighting the unintended benefit accruing to the petitioner due to a defect in the Act's design. The ruling underscores the necessity to interpret taxing statutes based on the explicit language used and not to imply provisions beyond what is expressed.

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