2006 (5) TMI 455 - HC - VAT and Sales Tax

Court Rules Interest Imposition Invalid; Tax on Warranty Parts Irrelevant Due to Prior Supreme Court Ruling.

The HC ruled in favor of the assessee, finding the imposition of interest under section 25(5) of the Haryana General Sales Tax Act, 1973, to be vague and ... Petition u/s 42(2) of the Haryana General Sales Tax Act, 1973 ('the Act') - Liability to pay interest u/s 25(5) of the Act for the period before the demand was raised - sales of tractors - HELD THAT:- In the present case, the revisional authority had levied interest on the petitioner from May, 1985 to January, 1989 vide revisional order dated January 23, 1989. Meaning thereby that interest was levied for the period prior to raising of demand. To the similar effect are the judgments of Delhi and Andhra Pradesh High Courts in CIT v. Maharishi Ved Vigyan Vishwa Vidya Peetham[1997 (11) TMI 75 - DELHI HIGH COURT], City Dry Fish Company v. CIT[1999 (1) TMI 13 - ANDHRA PRADESH HIGH COURT] and Commissioner of Wealth-tax v. Ajay Kumar Sood [1995 (10) TMI 41 - DELHI HIGH COURT]. Respectfully following the above pronunciation of law, we find that since the issue raised in the case is covered by the division Bench judgment of this court, it will not be in the fitness of things to direct the Tribunal to refer the question of law to this court and keep the matter pending. To avoid unnecessary wastage of time, in our view it would be appropriate to answer the question straightaway by converting the case into a reference. Thus, it is held that the assessee is not liable to pay interest u/s 25(5) of the Act for the period before the demand was raised against the assessee. Consequently, question No. (iv) raised above is decided in favour of the assessee and against the Revenue. Issues:1. Interpretation of provisions under the Haryana General Sales Tax Act, 1973 regarding revisional authority's power to revise assessment or address escapement of turnover.2. Taxability of sales tax on material supplied free of cost during warranty period.3. Imposition of additional sales tax on spares supplied/used during warranty due to differing tax rates.4. Charging of interest under section 25(5) of the Act.5. Levying tax on sales with a valid ST-15 declaration where the purchaser is not a dealer.6. Initiation of penalty proceedings by the revisional authority.7. Time limit for initiating penalty proceedings under sections 40 and best judgment assessment.8. Imposition of penalty in the absence of mens rea.9. Imposition of penalty for alleged fault under a bona fide belief.Analysis:1. The petitioner sought clarification on the revisional authority's power to revise assessment or address escapement of turnover under the Haryana General Sales Tax Act, 1973. The petitioner's contention was that services and spare parts provided during the warranty period were part of the consideration for the sale of tractors. The Assessing Authority initially accepted this argument, but the revisional authority later imposed an additional demand. The Tribunal rejected the petitioner's appeal, leading to the current petition. However, the court found that the issue of levy of tax on lubricants and spare parts during warranty was settled by a Supreme Court judgment, rendering it irrelevant for consideration.2. Regarding the imposition of interest under section 25(5) of the Act, the counsel cited various judgments, including those of the Supreme Court and a Full Bench of the High Court, to support the petitioner's case. The court noted that interest had been levied for a period prior to the demand being raised, which was deemed vague, ambiguous, and without legal authority. The court relied on legal precedents to conclude that the petitioner was not liable to pay interest for the period before the demand was raised, ruling in favor of the assessee against the Revenue.3. The court referenced a division Bench judgment to determine that there was no need to direct the Tribunal to refer the question of law to the court, as it would result in unnecessary loss of time and resources without serving public interest. The court highlighted the principle of 'updating construction' to interpret ongoing statutes, emphasizing the need to consider changes in law, technology, and social conditions. Consequently, the court decided to answer the question straightaway, converting the case into a reference and ruling in favor of the assessee against the Revenue.4. The judgment provided a detailed analysis of the legal issues raised by the petitioner, citing relevant legal precedents and highlighting the application of statutory provisions to resolve the questions at hand. The court's decision was based on a thorough examination of the facts, legal principles, and precedents, ensuring a comprehensive and detailed analysis of the issues involved in the case.