Self-assessment and protest payments: interest was not chargeable where tax liability was still unsettled

Interest for delayed tax payment was treated as inapplicable where supplementary returns were filed under protest before the taxability of freight charges and transport subsidy had been finally settled. The court reasoned that self-assessment under the Act requires a return admitting liability on the turnover disclosed, and a protested payment with an express reservation to dispute liability is not such an admission. Because the legal position was unsettled when the tax was paid, the later assessment did not retrospectively convert the earlier payment into a self-assessment attracting interest.

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Issues: (i) Whether interest under section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 could be levied on tax paid pursuant to supplementary returns filed under protest before the legal position on includibility of freight charges and transport subsidy had been settled. (ii) Whether a return filed with an express reservation disputing liability can be treated as a self-assessment under section 13(2) so as to attract interest.

Issue (i): Whether interest under section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 could be levied on tax paid pursuant to supplementary returns filed under protest before the legal position on includibility of freight charges and transport subsidy had been settled.

Analysis: Section 24(3) operates in the setting of tax that becomes payable in the manner contemplated by the Act. Section 13(2) permits advance payment on the basis of actual turnover and functions as a self-assessment mechanism. The Court noted that, at the relevant time, the taxability of freight charges and transport subsidy was not finally settled and was resolved only later by the Full Bench decision. The assessee had filed supplementary returns and paid tax even before that settlement, under protest and without admitting liability. In those circumstances, the subsequent assessment did not convert the earlier payment into a self-assessment from an anterior date.

Conclusion: Interest under section 24(3) was not leviable on the tax paid on freight charges and transport subsidy. The issue is decided in favour of the assessee.

Issue (ii): Whether a return filed with an express reservation disputing liability can be treated as a self-assessment under section 13(2) so as to attract interest.

Analysis: Self-assessment under section 13(2) requires a return that admits tax liability on the turnover disclosed. A payment made under protest, coupled with an express reservation to contest liability at assessment, is not an admission of tax payable. The Court held that bona fides must be tested against the objective circumstances, and where the legal position was unsettled and the assessee acted before the issue was authoritatively determined, the reservation was not a mere device to postpone interest.

Conclusion: A supplementary return filed under protest was not a self-assessment for the purpose of section 24(3). The issue is decided in favour of the assessee.

Final Conclusion: The demand of interest on the disputed freight and subsidy amounts could not be sustained, and the writ petitions succeeded.

Ratio Decidendi: Interest for delayed payment cannot be levied under the self-assessment machinery when the return is filed under protest without admitting liability and the legal liability to tax was not yet settled.

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