2018 (2) TMI 450 - HC - VAT and Sales Tax

Respondent not liable for interest under Karnataka Sales Tax Act; Tribunal's decision upheld.

The State of Karnataka by the Commissioner of Commercial Taxes, Versus M/s Shree Renuka Sugars Limited,

The State of Karnataka by the Commissioner of Commercial Taxes, Versus M/s Shree Renuka Sugars Limited, - [2018] 1 GSTL ( STC ) 69 (Kar), 2018 49 G S.T.R. ... Issues Involved:1. Liability to pay interest under Section 12-B(2) of the Karnataka Sales Tax Act, 1957.2. Applicability of rectification orders under Section 25-A of the Act.3. Interpretation of 'tax payable' and 'tax due' in the context of monthly returns and final assessments.Detailed Analysis:1. Liability to Pay Interest under Section 12-B(2) of the Karnataka Sales Tax Act, 1957:The primary dispute revolves around whether the respondent-company is liable to pay interest under Section 12-B(2) of the Act. The Revenue contends that interest is due based on rectification orders passed under Section 25-A, which corrected the original assessment orders. According to Section 12-B(2), interest is applicable if there is a default in the payment of advance tax for any month or quarter beyond ten days or if the amount of tax paid is less than the amount of tax payable. The Tribunal, however, ruled in favor of the respondent-company, stating that the interest liability does not arise in this case as there was no provisional assessment rejecting the returns as incorrect or incomplete.2. Applicability of Rectification Orders under Section 25-A of the Act:The Revenue's position is that the rectification orders issued under Section 25-A necessitated additional tax payments, thereby justifying the imposition of interest under Section 12-B(2). However, the respondent-company argued that the rectification orders do not automatically trigger interest liability under Section 12-B(2) unless there is a provisional assessment under Section 12-B(3) determining the tax liability and rejecting the returns as incomplete or incorrect. The Tribunal supported this view, emphasizing that the tax amount paid by the assessee was in line with the returns filed, and there was no short payment of tax as per those returns.3. Interpretation of 'Tax Payable' and 'Tax Due' in the Context of Monthly Returns and Final Assessments:The judgment extensively discusses the interpretation of 'tax payable' and 'tax due' in the context of monthly returns and final assessments. Citing the Constitutional Bench judgment of the Hon’ble Apex Court in J.K. SYNTHETICS LTD. vs. COMMERCIAL TAXES OFFICER and the Division Bench judgment in STATE OF KARNATAKA vs. MANDOVI MOTORS (PRIVATE) LIMITED, the court clarified that 'tax payable' refers to the amount due based on the returns filed by the assessee. If the returns are not rejected as incorrect or incomplete, the assessee cannot be expected to predict the final assessment or rectification outcomes. Consequently, the imposition of interest under Section 12-B(2) based on rectification orders is deemed unjustifiable.Conclusion:The court concluded that no provisional assessment was made under Section 12-B(3) determining the tax liability by rejecting the returns as incorrect or incomplete. Therefore, initiating proceedings under Section 12-B(2) to claim interest based on rectification orders is not justified. The Tribunal's decision to set aside the orders of the assessing authority and the first appellate authority was upheld, and the sales tax revision petitions were dismissed. The court emphasized that no question of law arises for consideration in these revision petitions, reaffirming the Tribunal's interpretation of the relevant statutory provisions.