2016 (8) TMI 1364 - HC - VAT and Sales Tax

Supreme Court Quashes Interest Levy on Tax Assessment, Emphasizes Importance of Provisional Assessment

The Supreme Court allowed the Writ Petition, quashing the proceedings that levied interest under Section 24(3) of the TNGST Act. The court ruled in favor ... Interest u/s 24 (3) of the TNGST Act - taxation on REP - Held that:- An identical issue came in the case of Dharmapuri District Co-operative Milk Producers Union Ltd., Vs. State of Tamil Nadu and others [2016 (8) TMI 1124 - MADRAS HIGH COURT], where it was held that there is no provision under the TNGST Act, which permits charging of interest unless and until there has been provisional assessment and notice of demand prescribing the period within which tax was to be paid - levying interest u/s 24 (3) of the Act are quashed - petition allowed - decided in favor of petitioner. Issues involved:Challenge to order passed by Joint Commissioner under revisional powers rejecting Revision Petition filed by dealerQuestion of payment of interest under Section 24(3) of TNGST ActAnalysis:The petitioner, a registered dealer, challenged the order passed by the Joint Commissioner under revisional powers, rejecting the Revision Petition filed by the dealer. The order confirmed the assessment order passed by the Assessing Officer for the year 1992-93. The challenge in the proceedings was specifically related to the payment of interest under Section 24(3) of the TNGST Act. The petitioner had filed returns, claimed exemption, and paid the tax after the legal issue on taxation was resolved by the Supreme Court. The key issue was whether interest could be demanded under Section 24(3) of the Act.The Hon'ble Supreme Court had previously ruled in favor of the assessee/dealer in a similar case, providing guidance on the matter. The judge referred to a specific case where a similar issue was considered, and the court allowed the Writ Petition based on the decision in the aforementioned Supreme Court case. The court highlighted the importance of provisional assessment and the crystallization of tax liability based on return admission. In the case under review, the petitioner did not admit the return, and the assessment was completed years later, leading to the payment of the differential tax amount. The court concluded that the demand for interest was not valid based on the legal principles established by the Supreme Court.Considering the precedents and legal principles outlined in previous cases, the court allowed the Writ Petition, quashed the proceedings levying interest under Section 24(3) of the Act, and closed the connected Miscellaneous Petition. No costs were awarded in this judgment.