2013 (5) TMI 59 - HC - VAT and Sales Tax

Enforcement of Interest on Delayed Tax Payments: Legal Ruling on Penalty and Natural Justice

Mahendra Pratap Singh Versus District Magistrate, Raibareli and another

The court upheld the interest demand on delayed entertainment tax payments, citing relevant rules and precedents. It rejected claims of penalty imposition ... Delayed payment of entertainment tax - Petitioner is the proprietor and owner of the Cable T.V. Network - whether interest can be demanded on delayed payments of entertainment tax? - assessee contested against penalty levy as violation of the principles of natural justice - Held that:- From perusal Rule 16 of Rules, 1997, it reflects that installment of entertainment tax, if not paid within the time specified for such payment, the proprietor is liable to pay interest calculated at such rate as may be prescribed in additional to such tax or penalty or installment. Thus, it is clear that there is a liability to pay interest on belated payment of installment. Rule 11 says that the interest can be levied at the rate specified therein from the date the instalment became due but was not paid accordingly. Thus the liability to pay interest existed even earlier to the impugned demand. The quantification of interest was provided under the rule by prescribing the rate of interest in Rule 11 which was made after period in question. But the rule read in that context provides that the interest would be payable from the date the tax became due but was not paid. Thus, it is clear that the impugned demand levying interest on delayed payment is valid. As the appellants had given incorrect information with regard to total number of connections given by them & requisite information was not provided in spite of issuance of notices and requests made to the petitioner before imposition of penalty but in spite of grant of sufficient opportunities, the petitioner did not give correct information - willful mis-statements and suppression of facts thus the imposition of penalty is not in violation of the principles of natural justice. Issues:Challenge to order for payment of entertainment tax from 2004-2005 to 2008-2009.Detailed Analysis:The petitioner, operating a Cable T.V. Network, challenged an order by the District Magistrate, directing payment of Rs.39,400 as delayed entertainment tax from 2004-2005 to 2008-2009. An earlier assessment in 2008 required payment of Rs.2,45,970 with a penalty. The State Government partially allowed the appeal, reducing the penalty to Rs.5,000. The District Magistrate was instructed to reassess based on information provided by the petitioner in 2006. The petitioner claimed to have paid penalties and taxes as per the assessment but faced a new demand after an audit objection.The petitioner argued financial constraints and cessation of business in 2008 due to losses. Payments were made in installments post the appellate order, totaling Rs.80,600 by August 2009. The petitioner contended that no prior notice of interest demand was served before the impugned order of September 2010.The Additional Chief Standing Counsel argued that interest on the defaulted amount of Rs.39,400 was unpaid as per Rule 11 of the Uttar Pradesh Cable Television Network (Exhibition) Rules, 1997. The District Magistrate's order demanded Rs.75,600 for 90 cable connections from 2006 to 2008, with additional penalty and interest. The counsel defended the order, stating no prior payments were considered in the demand notice.The central question was whether interest could be levied on delayed entertainment tax payments. Rule 11 mandated tax deposit within a week from the last day of every month, with 2% monthly interest on unpaid amounts. The petitioner failed to pay as per the rule, justifying the interest demand.Rule 16 required a notice of demand before recovery as arrears of land revenue. The court cited Nagarathinam Ammal v. Deputy Commercial Tax Officer, emphasizing liability for interest on belated payments. The principle from Baidyanath Ayurved Bhawan (P) Ltd. v. Excise Commissioner, U.P. & Ors. was invoked, highlighting strict interpretation of taxing provisions.The judgment upheld the interest demand, rejecting claims of penalty imposition violating natural justice. The petitioner's incorrect information and evasion of tax obligations justified penalties. The writ petition was dismissed without costs, considering the case's circumstances.This detailed analysis of the judgment encapsulates the legal intricacies and arguments presented, leading to the court's decision on the issues raised regarding the entertainment tax payment dispute.