1997 (7) TMI 118 - SC - VAT and Sales Tax

Whether an assessee is liable to pay interest under Section 10A of the Bengal Finance (Sales Tax) Act, 1941, on the turnover tax for the period during which recovery of the tax amount was stopped by orders of the High Court? Held that - Here it is admitted that the appellants have not mentioned the amount of turnover or the tax payable thereon in the return filed by them. If that be so the consequence is that they have failed to furnish a return which is referred to in Section 10 . The corollary is that there was failure to furnish the return as envisaged in sub-section (2). Thus, the liability to pay interest commenced under that sub-section at the very moment the assessing authority made the assessment under Section 11. Interest thereon would start accruing from the date prescribed for furnishing the correct return in accordance with Section 10. We are, therefore, not adopting a construction which would upset or even impair the purpose in introducing Section 10A in the Act. The return to be filed by the dealer is the full and correct return as referred to in Section 10 and on failure to furnish such a return the liability to pay interest from the prescribed date would arise when assessment is completed. Appeal dismissed.

Issues Involved:
1. Liability to pay interest under Section 10A of the Bengal Finance (Sales Tax) Act, 1941, on turnover tax during the period of High Court's injunction.
2. Validity of the returns filed by the appellants.
3. Applicability of interest under Section 10A for non-payment of tax due to High Court's injunction.

Detailed Analysis:

1. Liability to Pay Interest Under Section 10A:
The primary issue in these appeals is whether the appellants are liable to pay interest under Section 10A of the Bengal Finance (Sales Tax) Act, 1941, on the turnover tax for the period during which the recovery of the tax amount was stopped by orders of the High Court. The West Bengal Taxation Tribunal answered this question against the appellants, leading to these appeals by special leave.

2. Validity of the Returns Filed by the Appellants:
The appellants argued that since they had furnished returns and paid full tax as per such returns, they were not liable to pay interest under Section 10A. The Tribunal pointed out that the appellants had not mentioned the amount of turnover or the tax payable thereon in the returns filed by them. Consequently, they failed to furnish a return "referred to in Section 10." The Tribunal concluded that this failure triggered the liability to pay interest under sub-section (2) of Section 10A from the date prescribed for furnishing the correct return.

3. Applicability of Interest Under Section 10A for Non-Payment of Tax Due to High Court's Injunction:
The appellants contended that they were not liable to pay interest on the tax amount because its non-recovery was due to the High Court's injunction order. The Tribunal, however, emphasized that the State should not suffer due to the delay caused by the taxpayer in paying the tax. The provision for charging interest was introduced to compensate the State for the loss occasioned due to the delay in paying the tax.

The Tribunal referred to the decision in J.K. Synthetics Ltd. v. Commercial Taxes Officer, where it was held that so long as the assessee pays the tax due based on the information supplied in the return filed by him, there would be no default on his part. However, the Tribunal distinguished the present case from J.K. Synthetics Ltd., noting that here, the appellants never disputed their liability to pay tax on the turnover under Section 6B of the Act, even while they challenged the vires of that provision.

The Tribunal further observed that the tax amount should have been paid as per Section 6B remained with the appellants during the entire period, and they would have earned a profit with that amount. The State was unable to utilize it for public purposes. The Tribunal reiterated the principle that no act of the Court shall cause prejudice to any party, encapsulated in the maxim "actus curiae neminem gravabit."

The Tribunal concluded that the High Court's interim orders restraining the State from recovering the tax amount could not deprive the State of its statutory right to interest under Section 10A. The presumption of the constitutionality of a legislative act was emphasized, and the Tribunal dismissed the appeals, concurring with the view taken by the West Bengal Taxation Tribunal.

Conclusion:
The Supreme Court upheld the West Bengal Taxation Tribunal's decision, confirming that the appellants were liable to pay interest under Section 10A of the Bengal Finance (Sales Tax) Act, 1941, for the period during which the recovery of the tax amount was stopped by the High Court's orders. The appeals were dismissed, affirming the Tribunal's interpretation of the statutory provisions and the principles governing the imposition of interest on delayed tax payments.

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