2020 (2) TMI 1112 - HC - VAT and Sales Tax

Waiver of interest on the Interest Free Sales Tax Deferral Amount - petitioner became a sick industrial unit within the meaning of the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 by the time when it was required to discharge the tax liability under the agreement - Section 17-A (2) of the Tamil Nadu General Sales Tax Act, 1959 - HELD THAT - Interest Free Sale TCA Deferral Scheme is a special scheme prescribed under Section 17-A of the Tamil Nadu General Sales Tax Act, 1959 - Under the said provision, the Government may, by a notification defer the payment of the whole or any part of the tax payable in respect of any period of any new industrial unit or sick unit or sick textile mill. Interest Free Deferral of Sales Tax may be given prospectively or retrospectively. It is however to subject to such conditions as may prescribed which are incorporated in the Deferral Agreement. As per sub-section 2 to Section 17-A of the Tamil Nadu General Sales Tax Act, 1959, no interest is attracted under Section 24(3) of the Act during the deferral period, provided the condition laid down for payment of tax deferred are satisfied. A plain reading of Section 17A(2) of Tamil Nadu General Sales Tax Act, 1959 would indicate that petitioner is not entitled to waiver of interest even for the period during the deferral period as the petitioner breached the condition of the deferral agreement by not paying the tax in time as agreed - In this case, admittedly, the petitioner has not satisfied the condition for payment for deferred payment of tax and therefore interest is payable by the petitioner after the specified date. There is no basis on which the interest liability can be waived. The interest liability which could be waived by the respondent would have been be only in terms of 17-A (2) of the Tamil Nadu General Sales Tax Act, 1959 read with the Agreement. Thus at best the tax liability can be deferred. There is no power vested with the respondent to waive interest payable under Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 - Only when the assessing officer comes to a conclusion that the tax determined and payable by a dealer was less or the return was incomplete or where no returns were filed, a notice under section 13(2) of the Tamil Nadu Gen Sales Tax Act, 1959 is required to be issued to a registered dealer. Thus liability to pay is tax mandatory as long as same is reflected in the returns. For payment of tax, no assessment order is required and only in case of short payment of tax assessment is required after due notice - but for the deferral in payment of the tax under Section 17A of the Act, the petitioner would have been liable to pay tax irrespective of the assessment of tax liability as per Section 13 of the Act. Liability to pay tax is not dependent on the assessment order. Only in case of short payment such notice and assessment is required. Further, an assessment order merely completes the assessment and nothing more. If there is a deficit in payment of tax, a dealer can be asked to pay tax . If not assessment order will accept the tax paid and shown the sales tax return. The fact that the petitioner was within the purview of Board for Industrial and Financial Reconstruction and was declared as sick unit by the on 31.5.2006 and was de-registered on 05.12.2013 is of no avail - Petition disposed off.

Summary

Issues Involved:
1. Entitlement for waiver of interest on the Interest Free Sales Tax Deferral Amount.
2. Impact of the petitioner becoming a sick industrial unit on tax and interest liability.
3. Validity of the distraint order and recovery proceedings.
4. Applicability of various legal provisions and precedents.

Issue-wise Detailed Analysis:

1. Entitlement for Waiver of Interest:
The petitioner challenged the impugned letter dated 03.11.2004 and sought a waiver of interest on the Interest Free Sales Tax (IFST) Deferral Amount under Section 17-A (2) of the Tamil Nadu General Sales Tax Act, 1959. The court noted that the petitioner had breached the conditions of the deferral agreement by not paying the tax on time. Section 17-A (2) stipulates that no interest is attracted during the deferral period provided the conditions for payment of deferred tax are satisfied. Since the petitioner did not meet these conditions, they were liable to pay interest after the specified date.

2. Impact of Becoming a Sick Industrial Unit:
The petitioner argued that it became a sick company on 31.03.2002 and was thus protected under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). They contended that during this period, the respondents could neither demand tax nor charge interest. The court referenced several Supreme Court decisions, including TATA Davy Ltd Vs. State of Orissa and Gram Panchayat Vs. Shree Vallabh Glass works Ltd, which supported the suspension of recovery of dues during BIFR proceedings. However, the court concluded that the petitioner’s failure to discharge tax liability justified the respondents' demand for tax and interest as if there was no IFST Deferral.

3. Validity of the Distraint Order and Recovery Proceedings:
The distraint order dated 20.11.2014 demanded a total of ?1,45,49,116/-, including interest. The court observed that the petitioner had not complied with the deferral agreement and was therefore liable to pay the deferred tax and interest. The court also noted that the petitioner had failed to provide proof of payment of the principal tax amount by the stipulated date. Consequently, the distraint order was deemed justified, but the court allowed for reconsideration by a special committee.

4. Applicability of Legal Provisions and Precedents:
The court examined various legal provisions and precedents, including Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959, which mandates interest on unpaid amounts after the specified date. The court also referenced decisions like E.I.D. Parry (India) Ltd. Vs. Asst. Commissioner of Commercial Taxes and Krishna Smelters Ltd. Vs. The Joint Commissioner (CT), which clarified the conditions under which interest could be levied. The court concluded that the petitioner was bound by the deferral agreement and the statutory provisions governing tax and interest liability.

Conclusion:
The court acknowledged the petitioner’s breach of the deferral agreement and the consequent liability to pay interest. However, considering the petitioner’s status as a sick company and the lack of a copy of the IFST deferral agreement, the court referred the case back for reconsideration by a special committee. The committee was directed to consider any applicable government orders or guidelines that might allow partial or complete waiver of interest. Pending the committee's decision, the distraint order was kept in abeyance. The writ petition was disposed of with these observations, and no costs were awarded.