2008 (4) TMI 681 - HC - VAT and Sales Tax

Court Upholds Interest Liability for Assessee Under Kerala Sales Tax Act

Chandramani Traders Versus State of Kerala

The court upheld the Tribunal's decision, ruling that the assessee was liable to pay interest under Section 23(3) of the Kerala General Sales Tax Act from ... Whether, on the facts and circumstances of the case, interest is chargeable under section 23(3) of the Kerala General Sales Tax Act, 1963 from the date of filing of the return admitting the tax liability, but claiming concessional rate of tax or from the date of assessment and issuance of demand notice in pursuance thereof? Held that:- In the present case, the assessee has filed his return conceding a particular turnover by way of self-assessment and in that had claimed concessional rate of tax. The assessee was fully aware, unless he produces declaration form No. 18 from the purchasing dealer, that he would be disentitled to claim concessional rate of tax, in view of the language employed in the section itself and in spite of it, he had paid lesser rate of tax than what is specified in the Schedule to the Act. Since the assessee had not paid tax on the admitted turnover at the specified rate of tax, this is a case where tax due under the Act is not paid and therefore, the petitioner cannot escape the rigour of the penal provision under the Act. Tax revision petition requires to be rejected and accordingly rejected Issues Involved:1. Liability of interest with reference to the due date of filing returns.2. Applicability of the Supreme Court decision in Maruti Wire Industries Pvt. Ltd. v. Sales Tax Officer.Issue-Wise Detailed Analysis:1. Liability of Interest with Reference to the Due Date of Filing Returns:The core issue is whether interest under Section 23(3) of the Kerala General Sales Tax Act, 1963, is chargeable from the date of filing the return admitting the tax liability but claiming a concessional rate of tax or from the date of assessment and issuance of the demand notice. The assessee, a dealer in chemicals and drugs, filed returns for the assessment year 1997-98, disclosing a turnover of Rs. 18,38,419.50. While the assessee collected and remitted tax at a concessional rate of three percent on the turnover, it failed to produce Form No. 18 declarations for a portion of the turnover, leading the assessing authority to levy tax at the higher rate specified in the Schedule for the balance turnover and impose interest under Section 23(3).The court examined the statutory provisions, including Sections 5, 16, 17, and 23 of the Act, along with relevant rules. Section 23(3) mandates that if the tax assessed or any amount due under the Act is not paid within the prescribed time, interest is levied. The court emphasized that the liability to pay interest is automatic and arises by operation of law when the tax due is not paid within the time specified. The court concluded that the assessee, by filing returns and paying tax at a concessional rate without the requisite Form No. 18, failed to comply with the statutory requirements, thereby attracting interest under Section 23(3).2. Applicability of the Supreme Court Decision in Maruti Wire Industries Pvt. Ltd. v. Sales Tax Officer:The assessee contended that the order of the Tribunal was against the Supreme Court's decision in Maruti Wire Industries Pvt. Ltd. v. Sales Tax Officer, where it was held that interest under Section 23(3) could only be levied after the tax liability is quantified by the assessing authority and a demand notice is issued. The court, however, distinguished the facts of the present case from Maruti Wire Industries, noting that in Maruti Wire Industries, the issue was non-filing of returns, whereas in the present case, the assessee had filed returns but paid tax at a concessional rate without the necessary declarations.The court referred to other judgments, including J.K. Synthetics Ltd. v. Commercial Taxes Officer, to elucidate the meaning of 'tax payable' and 'tax due.' It reiterated that tax becomes due based on the turnover shown in the returns filed by the dealer, and failure to pay the tax at the specified rate attracts interest. The court concluded that the Tribunal correctly interpreted the law, and the assessee's reliance on Maruti Wire Industries was misplaced.Conclusion:The court upheld the Tribunal's decision, affirming that the assessee was liable to pay interest under Section 23(3) from the due date of filing the returns, as the concessional rate of tax was claimed without the requisite declarations. The court rejected the tax revision petition, directing both parties to bear their own costs.