The Commissioner of Commercial Taxes vs Imperial Spirits and Wine Pvt. Ltd.

Mr. Satish K. Agnihotri and Mr. K.K. Sasidharan, JJ.—This intra-Court appeal is directed against the order dated 28.05.2014 in W.P. No.14030 of 2014, whereby and where under, the learned Single Judge quashed the coercive proceedings initiated against the first respondent for recovery of tax arrears to the tune of Rs.25,25,40,568/- and permitted the assessee to pay the amount in instalments.

Brief facts:

The first respondent (in short "the assessee") is a manufacturer of Indian Made Foreign Liquor. The assessee is registered under the Tamil Nadu Value Added Tax Act, 2006 (in short "the Act").

The assessee is selling Indian Made Foreign Liquor through Tamil Nadu State Marketing Corporation (in short "TASMAC"). The assessee is in arrears to the Commercial Taxes Department, originally, to the tune of Rs.20,18,42,722/-. The fourth appellant initially issued a demand notice in Form U dated 02.05.2014, which contained a demand for a sum of Rs.26,77,03,167/-. Since the fourth appellant initiated coercive proceedings, the assessee filed writ petition in W.P. No.14030 of 2014, challenging the notices dated 16.05.2014 and 02.05.2014, with a request to pay the amount in instalments.

The learned Single Judge, after hearing the learned Additional Government Pleader (Taxes), set aside the notices and directed the first respondent to pay initially, a sum of Rs.5 crore''s within a period of six weeks and the remaining amount in eight equal monthly instalments. Feeling aggrieved by the said order, the Revenue is before this Court.

Submission on behalf of appellants:

The learned Additional Government Pleader (Taxes) contended that the assessee has already collected Value Added Tax and as such, they are liable to deposit the same within the period prescribed under the Act. According to the learned Additional Government Pleader, the fourth appellant issued a distraint order on 16.05.2014 and even thereafter, no genuine effort was taken by the assessee to clear tax arrears. The learned Additional Government Pleader, therefore, wanted the impugned order to be set aside so as to enable the Commercial Taxes Department to recover the arrears, forthwith.

Analysis:

The first respondent is an assessee on the file of Commercial Taxes Department, Coimbatore. The assessee is supplying Indian Made Foreign Liquor to TASMAC. While supplying products, the assessee is also collecting tax payable on such sales. The learned Additional Government Pleader (Taxes) is perfectly correct in his contention that the assessee is bound to pay Value Added Tax within the period prescribed under the Act and the Rules made thereunder. The assessee failed to pay tax in spite of giving reasonable opportunity by the Commercial Taxes Department. The failure on the part of the assessee to pay tax in spite of keeping the collected tax amount for months together, made the fourth appellant to initiate coercive proceedings. The fourth appellant appears to have issued notices under the Revenue Recovery Act, besides attachment proceedings to the bankers and TASMAC. The appellants were fully justified in taking such recovery proceedings to realise the value added tax arrears. The coercive proceedings taken to realise the tax arrears made the assessee to file the writ petition in W.P. No.14030 of 2014. The learned Single Judge, taking into account, the facts and circumstances of the case, permitted the assessee to pay the amount in instalments.

The Act is a comprehensive legislation dealing with registration of dealers, making assessment on the basis of returns and collection and recovery of tax.

Section 42 of the Act deals with payment and recovery of tax, penalty, etc. Sub-clause 2 of Section 42 permits the tax authorities to realise the arrears treating it as land revenue. Sub-clause 3 of Section 42 mandates that in case, the amount is not paid within the time prescribed in the order or in instalments as permitted, in addition to the amount due, interest at the rate of 2% per month on such amount for the entire period of default should also be paid. Section 43 of the Act provides that transfers to defraud revenue is void.

The Act, therefore, contains detailed provisions with respect to payment and recovery of tax and to ensure that tax amount is paid, without there being any attempt to defraud revenue. There is a charge created on the property of the dealer and prohibition to make transfers by sale, mortgage, exchange etc. during the pendency of the proceedings under the Act or after completion thereof.

The core question is as to whether the learned Single Judge was correct in permitting the assessee to pay the amount in instalments.

Section 42 of the Act gives a clear indication that it is open to the assessing authority to permit the assessee to pay the amount in instalments. The section provides that the amount due under the Act shall be paid in such manner, meaning thereby, tax amount should be paid within the time indicated in the order or in such instalments permitted by the assessing authority. Sub-clause 3 of Section 42 of the Act mandates payment of statutory interest at the rate of 2% per month for the entire period of default. The Act, therefore, gives the authorities, power to permit the assessee to pay the amount in instalments. The appellants are given discretion to fix the period of payment and instalments. It was only on the strength of the said provision, the learned Single Judge passed a discretionary order permitting the assessee to pay the tax amount in instalments. When there is a provision permitting payment of tax amount in instalments, subject to payment of statutory interest, the appellants cannot be heard to say that the learned Single Judge erred in quashing the coercive action taken by the fourth appellant and permitting the assessee to pay the amount in instalments.

The appellants are primarily concerned with collection of commercial tax. Coercive proceedings were all taken to compel the assessee to pay the tax. The proceedings relating to sale of attached property for realisation of tax arrears would consume time. The learned Single Judge, by passing a conditional order, made the first respondent to pay a sum of Rs.5 crores within a period of six weeks and the balance amount in eight equal monthly instalments. The said order is subject to the provisions of the Act. Sub-clause 1 of Section 42 of the Act is very clear that in default of payment, the whole of the amount outstanding on the date of the default, shall become immediately due. The order passed by the learned Single Judge should be read in the light of sub-clause (1) and sub-clause (3) of Section 42 of the Act, meaning thereby unless extension is given, the entire amount in arrears shall become due immediately, in case of default. We are of the view that no interference is necessary in the order passed by the learned Single Judge, in the light of Section 42 of the Act.

Disposition:

In the upshot, we dismiss the intra-Court appeal. Connected Miscellaneous Petition is closed.