2022 (2) TMI 1005 - HC - VAT and Sales Tax

Demand of interest on the differential amount arrived pursuant to re-assessment under Section 27 of the TNVAT Act - Attachment of Bank Accounts of petitioner - deemed assessment - Section 42(3) of the TNVAT Act - HELD THAT - In this case, admittedly, the petitioner had disclosed a lower taxable turnover and therefore paid lesser tax. The petitioner was thereafter issued with a notice dated 18.01.2016 under Section 27(1)(a) read with Section 22(3) of the TNVAT Act, 2006. By an order dated 25.02.2016, the proposal contained in the above notice was confirmed and thus the petitioner was held liable to pay a gross amount of ₹ 3,92,633/- as tax due for the Assessment Year 2009-2010 and after adjusting an amount of ₹ 1,76,385/- already paid, the balance tax payable by the petitioner was determined as ₹ 2,16,248/-. The petitioner has also paid the said amount on 24.03.2016. Whether the petitioner can be absolved from payment of interest on the delayed payment of differential tax paid for the period from the date on which the tax was originally to be paid and the actual date of payment of the differential tax on 24.03.2016? - HELD THAT - In this case, there was a deemed assessment in terms of proviso to Section 22(2) of the TNVAT Act, 2006. Therefore, the notice was issued to revise the self assessment made by the petitioner under Section 21 of the TNVAT Act, 2006 - the language in Section 42(3) of the TNVAT Act, 2006 makes it very clear that the interest is payable for the entire period of default. The default period of the petitioner started from the date on which the petitioner was originally required to pay tax on his turnover in the monthly returns under Section 21 of the TNVAT Act, 2006. This is a case where there was a suppression of taxable turnover by the petitioner in the returns filed under Section 21 of the TNVAT Act, 2006 read with Rule 7 of the TNVAT Rules, 2007. Since the petitioner failed to correctly declare the taxable turnover and paid the differential tax only after the proceeding was initiated vide notice dated 18.01.2016 against the petitioner under Section 27(1)(a) read with Section 22(3) of the TNVAT Act, 2006. There can be no premium for such lapse. There can be no waiver of interest for default period as such tax ought to have paid at the time of filing of return. By paying tax pursuant to revision of assessment, the petitioner is not doing a favour to the revenue. The petitioner is merely paying the tax which ought to have been earlier. Thus, there is no merit. Petition dismissed.

Summary

Issues:
1. Challenge to attaching bank account based on re-assessment order under TNVAT Act for AY 2009-2010.
2. Demand for interest on differential tax paid after re-assessment.
3. Question of demanding interest under Section 42(3) of TNVAT Act.
4. Availability of alternate remedy through appeal under Section 51 of TNVAT Act.

Analysis:
1. The petitioner contested the attachment of their bank account following a re-assessment order under the TNVAT Act for AY 2009-2010. Initially, the petitioner disclosed a taxable turnover of ?44,09,617 and paid tax of ?1,76,385. Subsequently, the turnover was revised to ?98,15,837, resulting in a gross tax liability of ?3,92,633, with a net tax of ?2,16,248 demanded after adjustments.

2. The petitioner paid the differential tax of ?2,16,248 within thirty days of the re-assessment order. However, the respondent demanded interest on this amount, initially at ?2,63,823 and later re-quantified to ?3,09,975. This led to a notice for attaching the petitioner's bank account.

3. The petitioner argued against the interest demand, citing Section 42(3) of the TNVAT Act, contending that interest on the differential amount post-reassessment should not apply as the tax was paid within the specified period. Conversely, the respondent maintained that interest under Section 42(3) was applicable from the original tax payment due date.

4. The respondent contended that the petitioner had an alternative remedy through appeal under Section 51 of the TNVAT Act and should pursue the appellate route. The court noted that the petitioner's failure to declare the correct taxable turnover resulted in a delayed tax payment, leading to the interest demand as per statutory provisions.

5. The court analyzed the provisions of Section 42 of the TNVAT Act, emphasizing that interest is levied for the entire default period. The petitioner's failure to accurately report the taxable turnover in the returns necessitated the subsequent tax payment, with no grounds for waiving the interest on the delayed payment.

6. Ultimately, the court dismissed the writ petition, ruling against the petitioner's plea to absolve them from interest payment on the delayed tax amount. The court highlighted that the petitioner's actions did not warrant leniency, as the tax should have been paid on time, and the subsequent payment post-reassessment did not exempt them from the interest liability.