2022 (4) TMI 65 - HC - VAT and Sales Tax

Levy of interest for the delayed payment of tax - deferral agreement entered between the petitioner and the 1st respondent on 28.06.1996 has not been cancelled till date - Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 - HELD THAT - There is no doubt that there was a delay in repayment of the tax, which was deferred under the Deferral Scheme as per the Eligibility Certificate (EC) issued to the petitioner by SIPCOT on 12.04.1996. Clause 8 of the Eligibility Certificate clearly states that in case of violation of any of the conditions in the Eligibility Certificate and the connected Government Orders will result in cancellation of deferral entirely. Thus, the petitioner having violated the milestone prescribed in condition No.5.1 of the Eligibility Certificate (EC) issued by the SIPCOT is liable to pay interest from the date on which the actual tax would have been paid for the deferral. However, the clarification issued by the Principal Secretary/Commissioner of Commercial Taxes, which has been extracted, indicates that the violation in deferral scheme can take place at two stages ie.,during the first period when a dealer violates any of the conditions prescribed in the Eligibility Certificate and during the second time, when the repayment of the tax was to be made by the petitioner, which has been treated as interest free -loan. The Principal Secretary/Commissioner of Commercial Taxes, vide letter dated 28.02.2014 bearing Letter No.Drafting Cell-I/28518/2012, has clarified that if violation happens during the second tenure, interest will start from the date of violation or from the date of default in payment of dues. If this concession is to be extended, the petitioner will be liable to pay the interest from the actual date of each default. In other words, the petitioner will be liable to pay interest for each of the period as per Clause 5.1 of the Eligibility Certificate - the intention of the Government is evident that though the agreement and the eligibility criteria contemplate a complete recovery of the amount as if there is no deferral at all, the revenue would be satisfied if proportionate interest is paid from the date of each default. The writ petitions are disposed off by remanding the matter to the 2nd respondent to apply the conditions provided in Paragraph No.4 of the circular/clarification of the Principal Secretary/Commissioner of Commercial Taxes, vide letter dated 28.02.2014 bearing Letter No.Drafting Cell-I/28518/2012 to the facts of the case and requantify the interest to be paid by the petitioner and collect the same from the petitioner - petition disposed off.

Issues Involved:
1. Jurisdiction of the impugned demand notice under Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959.
2. Calculation of interest for delayed payment of tax under the deferral scheme.
3. Validity of the deferral agreement and its impact on interest calculation.
4. Availability of alternate remedy for the petitioner.

Detailed Analysis:

1. Jurisdiction of the Impugned Demand Notice:
The petitioner challenged the jurisdiction of the impugned demand notice issued under Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959, arguing that the deferral agreement entered into on 28.06.1996 had not been canceled. The petitioner relied on previous court decisions, such as "M/s.Sun Gas Private Limited Vs Assistant Commissioner (CT)" and "Srinivasa Steel Vs The Joint Commissioner (CT)," which held that interest should be calculated only from the date of repayment and not from the date of violation or cancellation of the agreement.

2. Calculation of Interest for Delayed Payment of Tax:
The petitioner was directed to furnish calculations for interest if calculated from the due date under the deferral scheme up to the actual date of payment. The petitioner provided a detailed table showing the tax due, due date, payment date, number of days delayed, and interest under Section 24(3). The petitioner argued that the department's claim to recover interest from earlier dates was unsustainable based on settled law.

3. Validity of the Deferral Agreement and Its Impact on Interest Calculation:
The petitioner contended that the deferral agreement and the Eligibility Certificate (EC) were not violated, and therefore, interest should not be demanded from the original date of deferral. The petitioner cited a circular/letter from the Principal Secretary/Commissioner of Commercial Taxes, which clarified that penal interest should be calculated only from the due date for repayment of the loan and not from the date of availing the IFST Deferral.

4. Availability of Alternate Remedy:
The respondents argued that the petitioner had an alternate remedy by way of appeal before the Appellate Deputy Commissioner (C.T) under Section 51 of the TNVAT Act, 2006. They cited several court decisions where writ petitions were dismissed, directing petitioners to seek remedy before the appellate authority. The respondents emphasized that the petitioner violated the conditions of the deferral scheme, making them liable for interest from the date of default.

Judgment:
The court acknowledged the delay in repayment of the tax deferred under the Deferral Scheme as per the Eligibility Certificate issued by SIPCOT. It noted that Clause 8 of the Eligibility Certificate stated that any violation would result in the cancellation of deferral entirely. However, the court also considered the clarification issued by the Principal Secretary/Commissioner of Commercial Taxes, which indicated that interest should be calculated from the date of default in payment of dues.

The court decided to remand the matter to the 2nd respondent to apply the conditions provided in Paragraph No.4 of the circular/clarification dated 28.02.2014. The 2nd respondent was directed to requantify the interest to be paid by the petitioner and collect the same within a period of 3 months. The petitioner was ordered to pay the amount within 30 days from the date of receipt of the order, failing which the impugned order would automatically revive.

Conclusion:
The writ petitions were disposed of, with no costs, and the connected miscellaneous petitions were closed. The court provided a detailed analysis of the issues involved, considering the legal precedents and clarifications, and directed the 2nd respondent to reassess the interest based on the clarified conditions.

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