2014 (5) TMI 99 - HC - VAT and Sales Tax

Court instructs final computation of deposits and bank guarantees per Supreme Court orders

The High Court directed the petitioner to the assessing authority for a final computation of deposits and bank guarantees in compliance with the Supreme ... Stay application – 50% accrued tax liability - Interest, penalty and furnishing bank guarantees under U.P. Tax on Entry of Goods into Local Areas Act, 2007 – Held that:- Both the parties have produced their computations with accruals and details of deposits and bank guarantees furnished by them of the admitted and disputed liability of entry tax - The deposits made are in compliance with the orders by SC - The matter is remitted back to the AA for final computation of deposits – Decided in favour of assessee. Issues Involved:1. Compliance with the interim order of the Supreme Court dated 18.1.2012.2. Computation of tax liability and deposits.3. Legality of demand notices and bank account attachment.4. Adjustment of excess deposits against future tax liabilities.5. Interest on disputed tax liability.6. Final computation of deposits and bank guarantees.Issue-wise Detailed Analysis:1. Compliance with the interim order of the Supreme Court dated 18.1.2012:The petitioner raised the issue of compliance with the Supreme Court's interim order, which stayed 50% of the accrued tax liability/arrears under the U.P. Tax on Entry of Goods into Local Areas Act, 2007. The order required the petitioner to deposit 50% of the tax liability/arrears, including interest and penalty, and furnish bank guarantees for the balance amount as and when demand notices are issued. For the future period, the petitioner was directed to continue to pay tax at the prescribed rates.2. Computation of tax liability and deposits:The petitioner submitted a computation showing an excess deposit of Rs.19,17,36,676/- for the period from May 2007 to September 2008. The respondents, however, issued a demand notice for Rs.13,50,09,000/- and attached the petitioner's bank account. The court directed the respondents to present their computation to verify if the demand was in excess of the required deposit. The department's computation indicated that the entire amount recovered related to interest for the year 2007-08.3. Legality of demand notices and bank account attachment:The petitioner argued that the demand notices and the attachment of the bank account were not in compliance with the Supreme Court's interim order. The court directed that the HDFC Bank maintain a balance of Rs.13,50,09,000/- in the petitioner's account to meet any demand raised by the respondents. However, the department recovered the said amount on the same day the interim order was passed, leading to the petitioner's request for the amount to be adjusted against future tax liabilities.4. Adjustment of excess deposits against future tax liabilities:The petitioner sought the court's direction to adjust the excess amount recovered from the bank account against the liability of value-added tax/commercial tax for future periods. The court allowed the amendment application to include this prayer and directed the petitioner to furnish a bank guarantee of Rs.52 crores. The court agreed to consider the adjustment of Rs.13,50,09,000/- in the current and future demand of the Entry Tax.5. Interest on disputed tax liability:The petitioner requested that the interest on the entry tax liability be treated as disputed tax liability and not admitted tax liability. This would affect the amount of bank guarantees furnished and the excess amount to be released. The court allowed the amendment application to include this prayer.6. Final computation of deposits and bank guarantees:The court noted that both parties submitted their computations, which required confirmation from records. The court did not adjudicate the details of the computations under Article 226 of the Constitution of India. Instead, the court directed the petitioner to approach the assessing authority for a final computation of deposits and bank guarantees furnished in compliance with the Supreme Court's orders. The assessing authority was instructed to make the computation after giving the petitioner an opportunity to be heard and to pass necessary orders within six weeks.Conclusion:The High Court disposed of the writ petition by directing the petitioner to the assessing authority for a final computation of deposits and bank guarantees. The court instructed that the necessary orders be passed within six weeks and allowed the parties to seek remedies against the orders of the Assessing Officer.