2011 (2) TMI 1321 - HC - VAT and Sales Tax

Court sets aside demand notice for interest on delayed tax payments due to petitioner's compliance with instalment order.

T. Subramanian Versus Deputy Commercial Tax Officer, Ettayapuram

The court set aside the respondent's demand notice for interest on delayed tax payments, ruling that the demand was unjustified as the petitioner had ... Whether the respondent/Deputy Commercial Tax Officer, Ettayapuram, Tuticorin District, is entitled to claim interest for the belated payment so made by the petitioner in respect of Sree Krishna Carbide Industry as per the notice of demand dated August 31, 2005? Held that:- This court is of the considered view that in a case where the court of law has permitted the petitioner to pay the tax liability due amount in instalments, then, the claim/levy of interest by the respondent as per demand notice dated August 31, 2005 for the period 1998-99 amounting to a sum of ₹ 1,41,882 is not warranted in view of the peculiar facts and circumstances of the present case which float on the surface. This court is perforced to interfere with the order passed by the respondent/Deputy Commercial Tax Officer, Ettayapuram, Tuticorin District, dated August 31, 2005 and since the same is not in order and a valid one in the eye of law, this court sets aside the same to promote substantial cause of justice. Viewed in that perspective, the writ petition is allowed. Issues Involved:1. Legality of the demand for interest on belated tax payments.2. Validity of the auction notices issued by the respondent.Detailed Analysis:1. Legality of the Demand for Interest on Belated Tax Payments:The petitioner sought a writ of certiorari to quash the notice issued by the respondent demanding interest for delayed tax payments. The petitioner argued that the entire tax liability for the years 1998-99 and 1999-2000 had been paid in six equal instalments as ordered by the court in W.P.(MD) No. 787 of 2004. The petitioner contended that since the court had permitted the payment in instalments, the demand for interest on delayed payments was illegal and unsustainable.The court noted that the petitioner had complied with the court's order by paying the tax liability in instalments. The court referred to previous judgments, such as in Indian Commerce and Industries Co. Pvt. Limited v. Commercial Tax Officer and Apollo Tubes Limited v. Additional Deputy Commercial Tax Officer, which established that interest on delayed tax payments is automatic and absolute. However, the court distinguished the present case by emphasizing that the instalment payments were made as per a court order, and no plea regarding interest was raised at that time.The court concluded that since the petitioner was allowed to pay the tax liability in instalments by a judicial order, the subsequent demand for interest by the respondent was unjustifiable. The court held that the invocation of section 24(3) of the Tamil Nadu General Sales Tax Act for levying interest in this context was not valid. Consequently, the court set aside the respondent's demand notice dated August 31, 2005, promoting substantial justice.2. Validity of the Auction Notices Issued by the Respondent:The petitioner also challenged the auction notices issued by the respondent to recover the tax dues by auctioning the petitioner's property. The first auction notice dated December 24, 2002, was stayed by the court on October 14, 2003, subject to the petitioner paying a sum of Rs. 1,50,000 in three equal instalments, which the petitioner failed to pay. Subsequently, another auction notice was issued on June 9, 2004, for an auction on September 15, 2004. The petitioner challenged this notice in W.P. (MD) No. 787 of 2004, and the court ordered the petitioner to pay the arrears in six equal instalments, which the petitioner complied with.The court highlighted that the petitioner had fulfilled the tax liability as per the court's instalment order, and no writ appeal was filed against this order, making it final and binding. Therefore, the respondent's subsequent demand for interest on the delayed payment, despite the instalment arrangement, was not warranted.Conclusion:The court allowed the writ petition, setting aside the respondent's demand notice for interest on delayed tax payments, and held that the respondent's actions were not valid in the eye of the law. The court emphasized that the petitioner had complied with the court's order for instalment payments, and thus, the demand for interest was unjustified. The writ petition was allowed, and the connected miscellaneous petition was closed, with no costs awarded to either party.