2010 (12) TMI 1274 - HC - VAT and Sales Tax

Tribunal upholds constitutionality of 'late fee' amendment under State VAT Act

The Tribunal upheld the constitutional validity of the amendment introducing a 'late fee' under Section 32(2) of the West Bengal Value Added Tax Act, ... Imposition of 'late fee' for filing of returns under West Bengal VAT - Constitutional validity of Sub-section (2) of Section 32 of the West Bengal Value Added Tax Act, 2003 - provisions for imposition of late fee for filing of returns - Respondent contended that by introducing 'late fee' in furnishing return under Section 32(2) of the VAT Act beyond the due date, a dealer is practically benefited and/or saved from any penal consequences provided in Section 45(2)(a) or Section 46(2)(a) of the Act - existence of quid pro quo in imposing late fee - Competency of the 'State Legislature' to impose fee in any matter in the List-II of the schedule VII - Retrospective effect of present Section 32(2) of the VAT Act. HELD THAT:- The relevant provisions set out above altogether makes it abundantly clear that under Section 32(2) of the Vat Act, a dealer is under legal obligation to furnish return within the prescribed period. In case of failure to do so, he may or may not opt for filing the return together with the total Net Tax and interest upon payment of 'late fee' under the amended provision of Section 32(2) of the Act. Before amendment of the Sub-section (2) by Act-I of 2008. such a dealer could furnish return upon payment penalty and prior to that no such scope was available. The impugned amendment has introduced 'late fee' in place of 'penalty' which is entirely optional to such a dealer who has failed to furnish return within prescribed period. The dealer is under no compulsion or obligation to furnish return upon payment of 'late fee'. A dealer is still free to choose not to file return after the prescribed period upon payment of 'late fee' and to suffer penal consequences either under Section 45(2) or under Section 46(1) or under Section 46(2) of the Act. There can not be any room of doubt that the amended Sub-section (2) of Section 32 of the Act affords a benefit rather special beneficial right to the dealer to submit return upon payment of 'late fee' even after the prescribed period - Payment of 'late fee' as introduced by the Act I of 2008 can not be a characterized as Tax as choice is left with the dealer concerned to be attractable by the levy. Needless to mention a fee is payment levied by the state in respect of services performed by it for the benefit of the individuals. Existence of quid pro quo in imposing late fee - HELD THAT:- In case of levying tax there is no quid pro quo between the Tax payer and the State. But element of quid pro quo is a must in case of imposing Fee. By virtue of impugned amendment, a dealer is entitled to get service indirectly from the authority upon payment of late fee. His irregular filing of return is regularised upon payment of late fee without being suffered from penal consequences which can not be categorised as nothing but special service. Thus, there exists quid pro quo in imposing late fee. On careful scrutiny of the scheme and system of assessment of VAT liability of the dealers, it is satisfied that late fee' as introducing by Act-I of 2008 is not at all 'tax' - the learned Tribunal has not at all erred in coming to the conclusion that there is no basis for raising the plea of double jeopardy by the Petitioners. Competency of the 'State Legislature' to impose fee in any matter in the List-II of the schedule VII - HELD THAT:- The imposition of impugned late fee by the State Legislature is well within its competency under Entry No. -66 of List II of VII Schedule. Retrospective effect of present Section 32(2) of the VAT Act - HELD THAT:- The retrospective effect of present Section 32(2) of the VAT Act, by no way, is prejudicial to the dealers because if they pay the 'late fee' they cannot be treated as defaulters and no penalty would be imposed for want of filing return which is due between 01.4.07 to 31.3.2008. Thus, the prayer of the Petitioners has no merit and the petition is liable to be dismissed - The learned Tribunal has made no mistake in dismissing the petitions of the Petitioners. The appeal, thus, fails. Petition disposed off. Issues Involved:1. Constitutional validity of the imposition of 'late fee' under Section 32(2) of the West Bengal Value Added Tax Act, 2003.2. Distinction between 'tax' and 'fee'.3. Legislative competency of the State Legislature to impose 'late fee'.4. Allegation of double jeopardy due to the imposition of 'late fee'.5. Retrospective effect of the amendment to Section 32(2).Issue-wise Detailed Analysis:1. Constitutional Validity of 'Late Fee':The petitioners challenged the constitutional validity of the provisions for the imposition of 'late fee' for filing returns under Section 32(2) of the West Bengal Value Added Tax Act, 2003. They argued that the amendment by the Finance Act 2008 was ultra vires the Constitution of India, unreasonable, and lacked legal sanctity. The Tribunal, however, dismissed these contentions, stating that the amendment provided a special beneficial right to dealers to submit returns even after the prescribed dates upon payment of 'late fee', thus avoiding penal consequences.2. Distinction Between 'Tax' and 'Fee':The petitioners argued that the Tribunal failed to distinguish between 'tax' and 'fee', contending that Section 32(2) is a 'machinery provision' and not a 'charging provision'. The Tribunal, however, found that the 'late fee' introduced by the amendment was not a 'tax' but a 'fee' as it provided a special service to dealers. The Tribunal emphasized that the essential characteristic of a tax is compulsion, while a fee is a charge for a service rendered by the State, thus establishing an element of quid pro quo in levying 'late fee'.3. Legislative Competency of the State Legislature:The petitioners contended that the State Legislature lacked the competency to levy the 'late fee' under Entry 66 of List II of the VIIth Schedule. The Tribunal, however, upheld the legislative competency, stating that Entry 66 empowers the State Legislature to levy fees in respect of all matters enumerated in the State List. The Tribunal concluded that the 'late fee' was within the legislative competency as it provided a special service to dealers, thus satisfying the conditions of a fee.4. Allegation of Double Jeopardy:The petitioners argued that the imposition of 'late fee' amounted to double jeopardy. The Tribunal rejected this contention, stating that the scheme of the VAT Act allows a dealer to avoid penal consequences by opting to pay the 'late fee' and regularize the delay in filing returns. The Tribunal clarified that the right under Article 20 or 21 of the Constitution cannot be stretched to this extent, and a dealer is not required to pay both 'late fee' and penalty for non-filing of returns.5. Retrospective Effect of the Amendment:The petitioners challenged the retrospective effect of the amendment to Section 32(2), arguing that it was prejudicial to dealers. The Tribunal, however, held that the retrospective effect was not prejudicial as it provided dealers with the opportunity to avoid being treated as defaulters and subjected to penalties by paying the 'late fee' for returns due between April 1, 2007, and March 31, 2008.Conclusion:The Tribunal concluded that the amendment introducing 'late fee' was constitutionally valid, distinguishing it from a 'tax' and affirming the legislative competency of the State Legislature. The Tribunal also rejected the allegation of double jeopardy and upheld the retrospective effect of the amendment. Consequently, the petition was dismissed, and the appeal failed.