M. Abdul Azeez vs Commercial Tax Officer and Others

Antony Dominic, J.—The petitioner is an assessee on the rolls of the first respondent. He also has a branch at Kottayam. He filed his monthly returns before the first respondent and paid tax by way of account payee cheques. In respect of the tax due in relation to his Kottayam Branch, petitioner gave cheques of ICICI Bank, Kottayam. Those cheques were accepted by the first respondent and were encashed belatedly. Subsequently, first respondent passed exhibit P1 order, in which, for the belated realisation of the tax due from the petitioner, interest of Rs. 12,40,468 was levied. It is this order which is under challenge in this writ petition. Counter-affidavit has been filed by the first respondent. In the counter-affidavit, details regarding the dates of receipt of the cheques, dates of its presentation for encashment, dates of encashment and number of days delay have been furnished. It is stated that there was no delay on the part of the first respondent in presenting the cheques for encashment. According to the first respondent, immediately on receipt of the cheques, first respondent send the cheques to the State Bank of Travancore, Manjeri for encashment. State Bank of Travancore, Manjeri send the cheques for encashment to ICICI Bank, Kottayam Branch and on that basis got the cheques encashed. In the process, there occurred delay and according to the respondents, the petitioner is liable to make good the loss sustained due to the delayed encashment of cheques by way of interest. It is therefore contended that exhibit P1 order levying interest is valid and proper.

Various contentions have been raised by the learned senior counsel for the petitioner and the learned Government Pleader appearing for the respondents.

Section 20(1) of the Kerala Value Added Tax Act, 2003 occurring in Chapter V provides that, every registered dealer and every dealer liable to be registered under the Act shall submit to the assessing authority such return or returns before such dates and in such manner and accompanied by such documents as may be prescribed. Rule 22 provides for submission of monthly and annual returns. Rule 22(6) provides that every dealer liable to submit a return and any dealer filing a fresh return shall submit along with the return a receipt from a Government Treasury or any designated bank or self attested copy of the receipt from the Government treasury or any designated bank or crossed cheque or crossed demand draft in favour of the assessing authority for the full amount of tax or taxes due for the return period on the basis of the return and, in the case of a fresh return under sub-rule (5), in addition to the tax so payable, the interest payable u/s 31(5). Rule further provides that, on failure of the assessee in complying with the above requirement, the assessing authority shall serve upon the dealer, a demand notice in form No. 12 and the dealer shall pay the sum demanded within the time and in the manner specified therein. Sub-rule (7) also provides that, if the return is submitted without a treasury receipt, crossed cheque or crossed demand draft for the full amount of the tax payable in favour of the assessing authority, the assessing authority shall serve upon the dealer a nonce in form No. 12 and the dealer shall pay the sum demanded along with the interest, if any, within the time and in the manner specified.

Section 31 provides for payment and recovery of tax. Sub-section (5) provides that if the tax or any other amount assessed or due under the Act is not paid by any dealer or any other person within the time prescribed in the Act or in the rule and in other cases within the time specified in the notice of demand, the dealer or the other person, shall pay simple interest at the rate of twelve per cent per annum on the tax or other amount defaulted. Rule 98(1), as it stood during the assessment year 2005-06, when the dispute in question arose, provided that where any payment by cheque or demand draft is permitted by the Rules, the cheque or demand draft shall be of a bank or branch of a bank which is a member of the clearing house situated within the jurisdiction of the authority before whom it is presented, crossed and drawn in favour of such authority.

In so far as this case is concerned, the assessment year relevant is 2005-06 and admittedly the returns were filed before the first respondent at Manjeri along with the cheques drawn at ICICI Bank, Kottayam. From exhibit P3 endorsement made by the authorised signatory of ICICI Bank, it is seen that the cheques presented by the petitioner could have been collected in any location of ICICI Bank including at Manjeri. Therefore, when the cheque was presented by the first respondent to SBT, Manjeri, its bank, the SBT could have locally collected the cheque and avoided any delay in realising the amount. On the other hand, they chose to send it to Kottayam for encashment and it was in that process the delay has occurred.

In my view, such a delay caused was for reasons which were not attributable to the petitioner and the question is whether the petitioner should be made liable for interest for the delay so occurred. To make the petitioner liable for interest, provisions of section 31(5) should be applicable and to apply section 31(5), there should have been default on the part of the petitioner in paying the tax within the time prescribed in the Act.

Even according to the respondents, tax could be paid along with the return by a crossed cheque. By this method, the petitioner has paid the tax in time, along with the return. If that be so, once payment has been made as above, for reasons beyond the control of the petitioner, if realisation has been delayed, either for reasons which are attributable to the respondents or the bank, the dealer cannot be made liable on the basis that on account of the delay in realising the tax due, delay has occurred.

The learned Government Pleader contended that the headquarters of the assessing officer is at Manjeri and under rule 98(1), the petitioner had obligation to make payment by cheque of a bank or branch of a bank, which is a member of the clearing house situated within the jurisdiction of the first respondent. In other words, according to the learned Government Pleader, the cheque furnished by the petitioner should have been drawn on a bank situated at Manjeri and he having furnished a cheque drawn at a bank at Kottayam, did not comply with rule 98.

First of all, if the payment made by the petitioner was in any manner defective, the first respondent had an obligation to issue demand notice, which is the purport of rule 22(7). That requirement has not been complied with. Secondly, rule 98 at the relevant time provided that the cheques shall be of a bank which is a member of the clearing house situated within the jurisdiction of the authority before whom it is presented. Learned senior counsel for the petitioner has made available SRO No. 318/05 issued u/s 3(3) of the Kerala Value Added Tax Act, which shows that while the headquarters of the first respondent is at Malappuram, his functional jurisdiction extended to functions assigned by the Commissioner. In other words, the functional jurisdiction of the first respondent is not confined to Manjeri alone, going by the terms of the SRO. It is apparently on account of the above vagueness in the matter that the expression "within the jurisdiction" occurring in rule 98 was substituted with the expression "in the headquarters" by SRO No. 7/08 dated December 31, 2007. In this factual situation, I am unable to accept the case of the learned Government Pleader that there was non-compliance of rule 98(1) on the part of the petitioner rendering him liable for interest on the ground of belated payment. Therefore, I dispose of this writ petition quashing exhibit P1 to the extent interest is levied on the petitioner.