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TMI Blog2014 (11) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... e of tax for the transaction which is not covered by the 'C' forms. The Assessing Authority also levied interest on the period from April 2005 to March 2006. The assessee paid taxes and interest as per the demand notice issued by the Assessing Authority. However, being not satisfied with the order passed by the Assessing Authority, the assessee filed an appeal before the Joint Commissioner of Commercial Taxes. The appeal was partly allowed. Not being satisfied with the said order, the assessee filed STA Nos.2512 to 2514/2010 before the Karnataka Appellate Tribunal. The Tribunal following the judgment of the Supreme Court allowed the appeal quashing the levy of interest and transactions which are not covered by 'C' forms. Aggrieved by the same, the revenue is in revision before this court. 4. Keeping in mind the facts of this case along with the other connected cases two questions of law do arise for considerations in these batch of revisions: 1. When 'C' form is not at all furnished and the assessee admits the liability to pay tax, from what date the interest on the delay in payment of tax has to be levied?; 2. If 'C' form furnished is found to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Central Government may, by notification in the Official Gazette, reduce the rate of tax under this sub-section. (2) The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of inter-State trade or commerce not falling within sub-section (1), shall be at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State. Explanation- For the purpose of this sub-section, a dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of appropriate State, notwithstanding that he, in fact, may not be so liable under that law. (3) The goods referred to in sub-section (1)- ** ** ** (b)[****] are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods ' as being intended for re-sale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or [in the tel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale is in the inter-State trade or Commerce, the dealer could avail the benefit of this lower tax by furnishing such declaration. If the said declaration is not forthcoming even if it is an inter-State trade or commerce, he is liable to pay tax as prescribed by the appropriate State Government. 7. Rule 12(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957 (for short 'the CST Rules') declares that the declaration and the certificate referred to in sub-section (4) of section 8 of the CST Act shall be in Forms-C and D respectively. Sub-Rule(7) of Rule 12 provides that the declaration in Form-C or Form-F or the certificate in Form-E-I or Form-E-II shall be furnished to the prescribed Authority within three months after the end of the period to which the declaration or the certificate relates. The proviso to the said sub-Rule states, if the prescribed Authority is satisfied that the person concerned was prevented by sufficient cause from furnishing such declaration or certificate within the aforesaid time, that authority may allow such declaration or certificate to be furnished within such further time as that Authority may permit. Therefore, the dealer who wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellate power is found in section 20(5). The appellate-authority may confirm, reduce, enhance or annul the assessment, or direct the assessing authority to make further enquiry, or pass such order as it may think fit. The power necessarily includes the power of setting aside the assessment and remand the matter. The power is quite wide. There is absolutely no limitation as to exercise of the power by the appellate authority and if so, there is no reason to deny him the power to entertain an application of the assessee to consider the prayer to produce 'C' form (declaration) provided the assessee is able to satisfy the authority that due to reasons beyond his control he could not produce them before the assessing authority. It is true that the assessee cannot, as a matter of course, produce these documents before the appellate authority. He will have to show sufficient cause as to why he could not produce them earlier. The power of Appellate Tribunal has to be traced to section 22 of the Act. As per section 22(4) the Appellate Tribunal shall after giving both the parties to the appeal reasonable opportunity of being heard, pass such orders thereon as it thinks fit. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal Regulations provides for such a procedure and recognises the power in the Appellate Tribunal to entertain additional evidence. This apart, second appeal before the Appellate Tribunal is nothing but continuation of the assessment proceedings, because, normally the appeal is nothing but the continuation of the original proceedings. There is no restriction against the application of this fundamental principle as not applicable to the case of an appeal before the Appellate Tribunal." 8. From the aforesaid judgment, it is clear that if 'C' form declarations are not filed before the Assessing Authority and if the dealer-assessee is able to satisfy the Assessing Authority that due to reasons beyond his control, he could not produce them before the Assessing Authority, the Appellate Authority can entertain the said 'C' form and either grant the relief or remand the matter to the Assessing Authority to take note of the said 'C' forms and grant the relief to which the assessee-dealer is entitled to. 9. In the background of the statutory provisions the question that arises for our consideration in these revision petitions is, if the assessee having claimed the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... once 'C' form is not furnished as promised in the return and when once the liability to pay tax under VAT Act is accepted, the payment of interest being compensative in nature, the interest is liable to be, paid from the date the tax under the VAT Act is liable to be paid. The Tribunal, was not justified in holding that it is liable to be paid only from the date of assessment order or from the date prescribed in the demand for tax made in pursuance of the assessment order. 13. Per contra, the learned counsel appearing for the assessee contended, unless the assessment order was passed, there was no liability on the part of the assessee to make the said payment. Therefore, only after the determination of the tax payable and after the issue of a demand notice calling upon the assessee to make payment, if the payment is not made, then the liability to pay interest commences and rightly the Tribunal has held so and therefore, he submits that no case for interference is made out. He further submits there is no provision in CST Act or VAT Act prescribing the time from which the interest is payable and also the rate at which interest is payable in case of non-furnishing 'C' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y clarificatory because the turnover omitted in the return that attracts liability for interest is taxable turnover or otherwise the section before its amendment becomes meaningless. Interest payable under Section 23(3A) is from the date on which tax would have been payable, had the dealer included the turnover at the correct rate of tax in the return filed. Interest under the Section is attracted if there is omission on the part of the dealer to include any taxable turnover in the return filed or wrong claim of exemption made on taxable turnover and further on account of misclassification of goods at lower rate of tax than the actual rate of tax that is payable on the turnover of goods. Further, even if the assessment is made based on the return filed, and such assessment happens to be incorrect later and the demand of tax is increased through revision of assessment under Section 19(1) pursuant to orders under Section 35(1), still the assessee will be liable to pay interest under Section 23(3A) on the differential tax that is between assessed tax and tax paid based on the return." 15. The learned counsel for the assessee placed reliance on the judgment of the Constitution Bench o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even if construed as forming part of the machinery provisions, is substantive law for the simple reason that in the absence of contract or usage interest can be levied under law and it cannot be recovered by way of damages for wrongful detention of the amount. Provision for charging interest was, it seems, introduced in order to compensate for the loss occasioned to the Revenue due to delay. But then interest was charged on the strength of a statutory provision, may be its objective was to compensate the Revenue for delay in payment of tax. But regardless of the reason which impelled the Legislature to provide for charging interest, the Court must give that meaning to it as is conveyed by the language used and the purpose to be achieved. Therefore, any provision made in a statute for charging or levying interest on delayed payment of tax must be construed as a substantive law and not adjectival law. Let us look at the question from a slightly different angle. Section 7(1) enjoins on every dealer that he shall furnish prescribed returns for the prescribed period within the prescribed time to the assessing authority. By the proviso the time can be extended by not more than 15 days ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be asking him to do the near impossible." 16. From the aforesaid judgment of the Apex Court it is clear, provision for charging interest is introduced in order to compensate for the loss occasioned to the revenue due to delay in payment of tax. The provision for charging of interest can only be on the basis of a statutory provision. It is a substantive law. The object is to compensate the revenue for delay in payment of tax. Therefore, effect has to be given to the said provision strictly in accordance with law. So long as the assessee pays the tax which according to him is due on the basis of information supplied in the return filed by him, there would be no default on his part to meet his statutory obligation under the Act. Therefore, it cannot be said that the assessee has not paid the tax which is payable. It is only after the determination of the questions of fact the assessing officer passes the order holding that the assessee is liable to pay tax which he has not paid. Then an opportunity has to be given to the assessee to pay such tax determined after adjudication within the time by raising a demand. If the assessee commits a default in payment of tax within that time, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayable by any dealer under the CST Act is not paid in time, the dealer shall be liable to pay interest for delayed payment of such tax. Therefore, the CST Act provides for payment of interest on delayed payment of such tax under the VAT Act. Section 36 reads as under: "36. Interest in case of failure to furnish returns or to pay tax declared on returns or other amounts payable- (1) Every dealer shall be liable to pay simple interest on any amount of tax which should have been declared on a return, but which has been omitted from it, unless that omission is corrected within three months of the omission subject to sub-section(2) of Section 72, and such interest is payable from the date the tax should have been declared, and the dealer shall declare his liability to pay that interest in such form and manner as may be prescribed. (2) If a dealer required to furnish a return under this Act- a. fails to pay any amount of tax or additional tax declared on the return; or b. furnishes a revised return more that three months after tax became payable, declaring additional tax, but fails to pay any interest declared to be payable under sub-section(1); or c. fails to declare any tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s liable to pay tax. Then the liability to pay interest on that tax would flow after determination of the said disputed fact and not from the date on which the return was filed either enclosing those defective forms or the date those defective forms are furnished in support of the claim made in the said returns. 21. It is also submitted, in some cases though declarations in Form-C was not furnished before the Assessing Authority they have been produced at the appellate stage. As set out above, the assessee cannot produce these forms as a matter of right but if sufficient cause is shown for not producing them within the stipulated time, the Appellate Authority has the jurisdiction if it is satisfied by the cause shown to entertain the said declaration in Form-C and either grant the relief in the appeal itself or remand the matter back to the Assessing Authority to consider those declarations and pass appropriate orders. Therefore, in those cases where Form-C is produced the assessee would be entitled to the benefit as aforesaid and there would be no liability to interest. 22. For the aforesaid reasons, we pass the following order: 1. The first question of law is answered in favou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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