2002 (3) TMI 899 - HC - VAT and Sales Tax

Court dismisses writ petitions, upholds interest liability under Section 24(3) of Sales Tax Act

The court dismissed the writ petitions, holding that the petitioner was liable to pay interest under Section 24(3) of the Tamil Nadu General Sales Tax Act ... Levy of tax on the right to use goods - Effect of interim stay on statutory liability - Interest under section 24(3) of the TNGST Act is compensatory and automatic - Mala fide invocation of jurisdiction to postpone tax payment and actus curiae neminem gravabit - Distinction between charging provisions of different State Sales Tax Acts (non pari materia with Rajasthan provisions) - Return-based advance payment regime under section 13(2) and rule 18(2) of the TNGST RulesEffect of interim stay on statutory liability - Interest under section 24(3) of the TNGST Act is compensatory and automatic - Mala fide invocation of jurisdiction to postpone tax payment and actus curiae neminem gravabit - Whether interest under section 24(3) is payable for the period of delay notwithstanding an interim stay of the charging provision and where the writ petition was ultimately dismissed. - HELD THAT: - The Court held that an interim stay renders the provision inoperative only for the period of the stay but does not erase the statutory provision; on dismissal of the writ petition the parties are restored to the original position and the obligation to pay tax and compensatory interest remains. The liability under section 24(3) is compensatory, not penal, and operates automatically on any amount remaining unpaid after the specified date. Where the stay was obtained in circumstances found to be mala fide or where the petitioner retained tax amounts and benefited from their use, the doctrine that a court act shall not prejudice the State does not excuse payment of statutorily prescribed interest. The Court relied on the principle that interim orders do not wipe out statutory rights of the revenue and on authority holding that retention of tax funds during stay may attract interest to prevent prejudice to the State. [Paras 11, 12, 13, 14]Interest under section 24(3) is payable for the period of default notwithstanding the interim stay; the petitioner's challenge to escape interest fails and the demand is sustainable.Return-based advance payment regime under section 13(2) and rule 18(2) of the TNGST Rules - Distinction between charging provisions of different State Sales Tax Acts (non pari materia with Rajasthan provisions) - Levy of interest need not await final assessment where statute prescribes payment on filing returns - Whether interest under section 24(3) could be levied only after final assessment (as held in J.K. Synthetics under Rajasthan law) or arises earlier under the TNGST Act and Rules when tax shown in returns was not paid on due date. - HELD THAT: - The Court distinguished the Rajasthan provisions considered in J.K. Synthetics (where interest attached only after final assessment) from the Tamil Nadu scheme. Under section 13(2) and rule 18(2) the dealer had to furnish monthly returns of actual turnover and accompany them with proof of payment; if tax remained unpaid after the prescribed date the liability to pay interest at 2% per month accrues automatically. The Court further relied on a Division Bench decision (Godrej & Boyce) holding that under the TNGST Act there need not be a final assessment order before interest under section 24(3) can be levied, because the TNGST provisions are not in pari materia with the Rajasthan provisions relied upon by the petitioner. [Paras 18, 19, 20, 23, 24]Section 24(3) liability arises on failure to pay the return-determined tax by the prescribed date and does not await final assessment; the petitioner's contention based on J.K. Synthetics is inapplicable.Final Conclusion: Writ petitions dismissed; the Tribunal's confirmation of the demand for interest under section 24(3) in respect of AYs 1991-92 and 1993-94 is upheld because the statutory liability to interest under the TNGST Act and Rules arose on non-payment after the prescribed dates, and the interim stay did not extinguish that liability. Issues Involved:1. Legality of the demand for interest on belated payment of tax under Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959.2. Effect of interim stay order on the obligation to pay tax and interest.3. Applicability of precedents cited by the petitioner.Issue-wise Detailed Analysis:1. Legality of the demand for interest on belated payment of tax under Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959:The petitioner, an incorporated company, received lease rentals and challenged the imposition of tax on these transactions under Section 3-A of the TNGST Act. The court initially granted an interim stay on the operation of Section 3-A. However, the provision was later amended with retrospective effect, rendering the petition infructuous. Despite this, the petitioner paid the tax belatedly and was subsequently demanded to pay interest for the delay under Section 24(3) of the TNGST Act. The court held that the petitioner had no bona fide cause of action to challenge Section 3-A and that the transaction was taxable under both the unamended and amended provisions. The court emphasized that the liability to pay interest is compensatory, not penal, and arises automatically for any unpaid tax after the due date.2. Effect of interim stay order on the obligation to pay tax and interest:The court clarified that the interim stay order did not wipe out the provision of Section 3-A but merely rendered it inoperative temporarily. Upon the dismissal of the writ petition as infructuous, the petitioner was required to pay the tax along with interest for the period of delay. The court cited the principle that no act of the court should cause prejudice to any party (actus curiae neminem gravabit). The interim stay did not relieve the petitioner of the obligation to pay interest, as the stay was only a temporary relief and did not nullify the statutory liability.3. Applicability of precedents cited by the petitioner:The petitioner cited several Supreme Court decisions to argue against the imposition of interest. However, the court found these precedents inapplicable. In Kanoria Chemicals and Industries Ltd. v. U.P. State Electricity Board, the Supreme Court held that a stay order does not wipe out the obligation to pay dues, which supports the Revenue's case. In Consolidated Coffee Ltd. v. Agricultural Income-tax Officer, the Supreme Court distinguished between penalty and interest, holding that interest is compensatory, which aligns with the present case. The court also rejected the applicability of Food Corporation of India v. State of Haryana, as the facts were different. The court concluded that the petitioner's reliance on J.K. Synthetics Ltd. v. Commercial Taxes Officer was misplaced, as the provisions of the Rajasthan Sales Tax Act considered in that case were not comparable to the TNGST Act.Conclusion:The court dismissed the writ petitions, holding that the petitioner was liable to pay interest under Section 24(3) of the TNGST Act for the belated payment of tax. The interim stay did not absolve the petitioner of this liability, and the cited precedents did not support the petitioner's case. The court's decision emphasized the automatic and compensatory nature of the interest liability under the TNGST Act.