Sales tax deferment under rehabilitation scheme protected only to the permitted extent; excess dues attracted interest.

Deferment of sales tax granted under a rehabilitation scheme was treated as part of the sick industrial company's sanctioned assistance, and the related notification under section 17-A had to match the revised scheme. The Court explained that section 17-A(2) protected deferred tax from interest only to the extent the deferment satisfied the statutory and scheme conditions. Tax liability beyond the permissible rehabilitation deferment did not enjoy that protection and attracted interest under section 24(3). Accordingly, the assessee could not claim exemption from interest on the entire balance sales tax dues, and interest remained payable on the excess amount.

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Issues: Whether the appellant was liable to pay interest on the balance sales tax dues for the relevant period under section 24(3) of the Tamil Nadu General Sales Tax Act, 1959, or whether the amount was protected from interest under section 17-A(2) of that Act by reason of the deferment granted under the rehabilitation scheme.

Analysis: The deferment of sales tax formed part of the rehabilitation assistance sanctioned under the scheme framed for the sick industrial company. The Court accepted the concurrent finding that the scheme, as originally sanctioned, fixed the deferment component at Rs. 623 lakhs, later enhanced to Rs. 1,246 lakhs when the rehabilitation cost was revised. The first notification issued under section 17-A reflected that scheme-based deferment, and the amendment notification merely aligned the notification with the revised sanction. The Court held that section 17-A(2) exempted interest only to the extent the deferred payment satisfied the statutory and scheme conditions. Any tax liability beyond the deferment needed for rehabilitation did not fall within section 17-A(2) and would attract the normal consequence of interest under section 24(3). The appellant had already availed the benefit corresponding to the rehabilitation requirement, and the remaining dues were payable with interest.

Conclusion: The appellant was not entitled to exemption from interest on the entire balance sales tax dues. Interest under section 24(3) was payable on the amount beyond the permissible deferment, and the challenge failed.

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