1999 (5) TMI 584 - HC - VAT and Sales Tax

Court quashes premature penalty and interest demands under Gujarat Sales Tax Act.

ONGC Ltd. Versus Sales Tax Officer 1, Division 14 and Others

ONGC Ltd. Versus Sales Tax Officer 1, Division 14 and Others - [1999] 115 STC 580 (Guj) Issues Involved:1. Validity of the penalty demand notice dated February 15, 1999.2. Validity of the interest demand notice dated December 17, 1998.Issue-wise Detailed Analysis:1. Validity of the Penalty Demand Notice Dated February 15, 1999:The petitioner challenged the penalty demand notice issued by the Sales Tax Officer under sections 45 or 46 of the Gujarat Sales Tax Act, 1969. The petitioner contended that no assessment had been made to provide a foundation for any penalty demand, and no hearing was given before raising this demand. The Revenue conceded that no assessment order had been made so far and admitted that until the liability of the assessee to pay tax is determined, no demand by way of penalty could have been raised. Thus, the notice dated February 15, 1999, raising a demand of Rs. 2,92,47,252 by way of penalty was deemed premature and invalid.2. Validity of the Interest Demand Notice Dated December 17, 1998:The petitioner also challenged the interest demand notice issued under section 47 of the Gujarat Sales Tax Act, 1969. The petitioner argued that no assessment had been made to justify the demand for interest, and he was entitled to claim a refund for the tax paid under a mistake. The Revenue contended that under section 47(4A), the liability to pay interest on delayed payment of tax is automatic. However, the ultimate liability of interest can only relate to the ultimate assessment of tax in regular assessment proceedings.The court examined the provisions of section 47, particularly sub-section (4A), which provides for charging interest for delayed payment of tax. It was noted that the petitioner had paid tax as per the declarations made under sub-sections (1), (2), and (3) of section 47. The court found that no liability to pay interest on the additional sum of tax required to be paid under sub-section (3) of section 47 is envisaged at that stage. Sub-clause (b) of sub-section (4A) applies only after the amount of tax has been assessed or reassessed, which had not occurred in this case. Sub-clause (c) of sub-section (4A) also could not be applied as it requires a previous demand of tax raised by the competent officer, which was not present.The first proviso to section 47(4A) indicates that no interest shall be payable if the difference between the amount of tax assessed or reassessed and the amount of tax paid does not exceed ten percent. The court concluded that the liability of payment of interest could not arise except after framing of assessment and determining whether the assessed tax exceeds the prescribed limit from the tax paid. Therefore, the notice dated December 17, 1998, was found to be arbitrary and contrary to law.Conclusion:The court quashed the impugned notices dated December 17, 1998, and February 15, 1999, as they were found to be premature and not in accordance with the provisions of the Gujarat Sales Tax Act, 1969. The petition was allowed with no order as to costs.