Interest on reassessed VAT demand not leviable where payment was made before expiry of the statutory payment period.

Interest under section 42(3) of the Tamil Nadu VAT Act was payable only on tax remaining unpaid after the period allowed for payment of an assessment demand. Where reassessed amounts arising from reversal of input tax credit had already been paid before the assessment orders, or were paid within 30 days of the orders, no interest could be charged. The assessment order itself functioned as the demand notice for assessed tax, and the dealer retained the statutory 30-day period to pay. The incorrectness of the input tax credit claim did not alter the timing rule for interest. Interest was therefore not leviable on the disputed reassessments.

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Issues: Whether interest under section 42(3) of the Tamil Nadu Value Added Tax Act, 2006 was leviable when the reassessed demand arising from reversal of input tax credit had been paid before the expiry of the statutory period, or within 30 days of the assessment order, as the case may be.

Analysis: The statutory scheme under section 42 distinguishes between tax payable on self-assessment under section 21 and tax demanded pursuant to an assessment order. Where tax is demanded by assessment, the order itself operates as the demand notice and the dealer is entitled to 30 days for payment under section 42(1). Interest under section 42(3) arises only on amounts remaining unpaid after the time specified for payment. On the facts, the amounts for the first two periods had already been remitted before the assessment orders were made, and the amount for the third period was paid within 30 days from the assessment order. The objection that the input tax credit claim was wrong did not alter the character of the levy for purposes of interest.

Conclusion: Interest under section 42(3) was not leviable. The challenge to the impugned assessments on that score succeeded in favour of the assessee.

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