AI Structured Summary
Not yet generated for this judgment
Judgment
Swamikkannu, J.—In both these writ petitions, the Tirupattur Cooperative Sugar Mills Limited represented by its Special Officer, K. Shahul
Hameed, is the petitioner and the Deputy Commercial Tax Officer, Tirupattur, North Arcot and the State of Tamil Nadu represented by the
Commissioner and Secretary to Government, Commercial Taxes and Religious Endowments Department, Madras-9 are the respondents. Both
these writ petitions have been filed for calling for the records on the file of the first respondent in his TNGST 230737/82-83 (penalty register No.
38/85-86) dated 1st June, 1985 and TNGST 230737/82-83 (penalty register No. 35/85-86) dated 1st June, 1985 and quashing the impugned
orders of the first respondent.
It is, inter alia, stated in the affidavits sworn to by the Special Officer of the petitioner-sugar mills that the petitioner-sugar mills are the assessees
on the file of the first respondent. The essential raw material for the sugar mills is sugarcane which is taxable at the point of last purchase in the
State under serial No. 62 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959. The rate of tax is 12 per cent and besides there is
a turnover tax levied under the Tamil Nadu Additional Sales Tax Act, 1970. A Division Bench of this Court in Sakthi Sugars Ltd. v. Assistant
Commissioner of Commercial Taxes [1985] 59 STC 52 has held that section 24(3) of the Tamil Nadu General Sales Tax Act, 1959, cannot be
invoked until the assessment order is passed, and that u/s 24(3) interest cannot be demanded merely because of non-payment of tax along with
returns wholly or partly as per rule 18 of the Tamil Nadu General Sales Tax Rules, 1959. In spite of the petitioner having submitted the above, the
first respondent is seeking to recover the penal interest which is against the judgment of the above Division Bench of this Court. The monthly
returns were submitted under rule 18 of the Tamil Nadu General Sales Tax Rules, 1959. Due to financial crisis, the petitioner could not remit
during 1982-83 purchase tax of Rs. 31,00,000 and additional tax of Rs. 1,83,000 along with the monthly returns. The mill itself was started on
21st March, 1977 and the second respondent sanctioned purchase tax subsidy for a period of five years from 21st March, 1977 to 20th March,
1982. The mills faced financial difficulties and incurred heavy losses during the period from August, 1978 to December, 1980 due to fall in sugar
price and lesser cane crushing during the drought affected periods 1979-80, 1980-81 and 1983-84. In view of this, the petitioners were not in a
position to repay the term loan due to financial institutions and the institutions were requested to reschedule the repayments of loans up to 1987.
The ICICI imposed a condition for rescheduling of institutional loan and, therefore, suggested that purchase tax and cane cess subsidy should be
exempted until the loans were repaid in full. The Director of Sugar also sent proposals to the Government for extending the purchase tax subsidy
for a further period of five years. He also recommended the waiver of penal interest. However, the second respondent in G.O. Ms. No. 1047,
Industries Department, dated 6th September, 1984 sanctioned Rs. 50,00,000 as term loan for payment of purchase tax arrears. The purchase tax
itself could not be paid and in fact a petition was pending for getting purchase tax subsidy for five more years after 1982. The first respondent
demanded penal interest at Rs. 14,39,124 for belated payment of purchase tax. During the pendency of the petition before the second respondent,
the petitioner submitted that once the Government refused refused to grant purchase tax subsidy, the petitioners utilised the term loan of Rs.
50,00,000 and completely settled the purchase tax arrears. During the pendency of the petitions before the second respondent, the petitioners
submitted a revised return in form A-1 for the year 1982-83 and thereupon the first respondent made a provisional assessment for 1982-83 under
rule 15(4) demanding Rs. 31.16 lakhs and correspondingly for 1982-83 under rule 4 of the Tamil Nadu Additional Sales Tax Rules. This was also
paid. The first respondent stated that the interest was not levied on the basis of final demand but was based on A-1 return submitted.
The point for consideration in both these writ petitions is, whether there are sufficient grounds for granting the relief prayed for in both these
petitions ?
In the counter-affidavit filed on behalf of the respondents, it is stated that the petitioners have submitted a consolidated return in form A-1
showing their total and taxable turnover for the year 1982-83 in September 1983 in addition to the monthly returns in form A-2 submitted during
the year 1982-83 as some additional cane price was paid to the growers of sugarcane which attracted purchase tax. Deducting all the payments
already made by the mills during 1982-83 along with the monthly returns, there was a balance of Rs. 31,00, 543 due from the mills towards tax
and a balance of Rs. 1,89,017 due towards additional sales tax. Therefore, based on this annual return in form A-1, a statutory demand notice in
form B-1 for the arrears of tax, and a demand notice in form P for the arrears of additional sales tax were issued on 5th June, 1983 and served on
the petitioners on 7th September, 1983. The statutory time-limit of 30 days expired on 7th October, 1983. The petitioners ought to have paid
these amounts before 7th October, 1983. But they have paid these arrears on 24th September, 1984 only, i.e., after a delay of 11 months and 17
days. While calculating the interest due u/s 24(3) of the Act, a sum of Rs. 57,248 credited by book adjustment on 31st March, 1983 and a sum of
Rs. 16,144 being the excess tax paid towards the years 1978-79 and 1980-81 was deducted from the total amount of arrears of tax, and the
interest was calculated on the net amount of arrears of Rs. 30,33,295. So also, in the case of additional sales tax a sum of Rs. 5,861, being the
excess additional sales tax paid towards the years 1978-79 and 1980-81 was deducted from the total amount of arrears and the interest was
calculated on the arrears of additional sales tax of Rs. 1,83,156. The interest for the delay in payment of tax arrears works out to Rs. 7,01,702
and the interest for the delay in payment of additional sales tax works out to Rs. 42,370. Accordingly, demand notice in form 29, was issued on
1st June, 1985 and served on the petitioner on 7th June, 1985. The levy of interest for the belated payment is just and proper in this case. Interest
was rightly calculated for the period of delay on actual number of days only. One day delay is not taken as one month as alleged in para 5(iii) of the
affidavit.
Mr. K. Jayachandran, learned counsel appearing for the petitioner, refers to the decision in Sakthi Sugars Ltd. Vs. The Assistant Commissioner
of Commercial Taxes, Central Assessment Circle I, Coimbatore and Others, and submits that the taxing authorities are not justified in construing
section 24(3) of the Act as authorising them to recover interest for the entire period of the month during which payment has not been made. In this
regard, the following observation at page 53 is relied on :
Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 is constitutionally valid.
On a true construction of section 24(3) of the Act, though the word `penalty'' has been used therein, what has been provided for, is nothing more
than interest, which is claimed by the State, because the amount of arrears of taxes which should have gone to the coffers of the State is being
retained by the dealer, and it is only by way of compensation for use of such of the moneys, which rightly belongs to the State, by the assessee that
a payment to the State which has been described as penalty, has been provided for in section 24(3) of the Act.
A statutory provision enacted by way of recovery procedure providing for payment of interest on tax remaining unpaid from the date on which the
tax was due till the date of payment, is within the legislative competence of the legislature.
Section 24(3) of the Act is not a penal provision at all. The penal liability u/s 45(2) of the Act for wilful default is entirely different from a civil
liability which arises out of a compensatory measure by way of payment of interest. Therefore it cannot be said that two penalties for the same act
have been prescribed.
Section 24(3) of the Act provides only for payment of interest by the defaulting assessee. The legislature has statutorily fixed the rate of interest as
well as the period for which, in a given case, the defaulting assessee will be required to pay the interest. The legislature has left no discretion with
the assessing authority with regard to any of these matters.
The liability to pay interest u/s 24(3) of the Act is automatic and no enquiry or hearing is necessary before the liability under that section is
enforced.
Where the liability is absolute and tax is not paid from the date on which it becomes due, no notice is further necessary to the dealer because the
statutory provision itself fastens the liability; section 24(3) of the Act determines the quantum of interest and the rate at which interest is to be paid
and no discretion is left to the authority to relieve the defaulting dealer of the liability u/s 24(3). Consequently, the requirement of natural justice is
expressly excluded by the provision u/s 24(3) of the Act.
Following the above observations of the first Bench of this Court, learned counsel for the petitioner in both the writ petitions submits that there
cannot he any penal interest levied when rule 18 has been followed by the assessing authority. Rule 18(3) reads as follows :
The return in form A-1 so filed shall, subject to the provisions of sub-rule (4), be provisionally accepted. If the return is submitted without proof of
payment as specified in sub-rule (1) of rule 55 for the full amount of tax payable after deducting therefrom the amount, if any, claimed as
reimbursement or refund due in the month under rule 23, such amount of tax shall become due on the date of receipt of the return or on the last due
date as prescribed in sub-rule (2), whichever is later, and shall be recovered in accordance with the provisions of the Act without any notice of
demand to the dealer.
Section 24(3) reads as follows :
If the tax assessed or has become payable under this Act, or any instalment thereof is not paid by any dealer or person within the time specified
therefore in the notice of assessment or in the order permitting payment in instalments, the dealer or person shall pay by way of interest, in addition
to the amount due, a sum equal to a sum calculated at the rate of two per cent of such amount for each month or part thereof after the date
specified for its payment.
This Court is of the opinion that there is substance in what has been submitted on behalf of the petitioner by Mr. K. Jayachandran. It is seen
from a perusal of the proceedings now sought to be quashed that the authorities concerned have not properly followed section 24(3) and rule
18(3) before resorting to the proceedings which are now sought to be quashed. A clear application of mind to the ratio decidendi of the above
decision, viz., Sakthi Sugars Ltd. Vs. The Assistant Commissioner of Commercial Taxes, Central Assessment Circle I, Coimbatore and Others, is
certainly called for in the present cases. Therefore, by setting aside the notices, this Court remands the matter back to the first respondent to be
disposed of in the light of the observations made above following the ratio in Sakthi Sugars Ltd. Vs. The Assistant Commissioner of Commercial
Taxes, Central Assessment Circle I, Coimbatore and Others, and with specific reference to the provisions of section 24(3) and rule 18(3) and
come to a decision after giving an opportunity to the petitioner. The impugned notices in both the writ petitions are, therefore, quashed and the
authorities are at liberty to proceed after following the provisions of section 24(3) and rule 18(3) as well as the ratio decidendi in Sakthi Sugars
Ltd. Vs. The Assistant Commissioner of Commercial Taxes, Central Assessment Circle I, Coimbatore and Others, . With the above observations,
both the writ petitions are allowed and the matters are remitted back to the first respondent for disposal in accordance with law. The first
respondent is directed to dispose of the matters within two months from today. No costs.
Writ petitions allowed.