2018 (3) TMI 1271 - HC - VAT and Sales Tax

Court rules in favor of petitioner on interest dispute in deferral agreement case, sets aside impugned order.

M/s. Sun Gas Pvt. Ltd. Versus The Assistant Commissioner (CT), The Principal Secretary & Commissioner of Commercial Taxes, The General Manager, District Industries Centre

The court set aside the impugned order demanding interest on the cancellation of a deferral agreement, ruling in favor of the petitioner. The court held ... Demand of Interest - cancellation of the deferral agreement entered into the petitioner with the 3rd respondent - Held that: - the first payment of ₹ 15,00,000/- has been paid well before the cancellation of the agreement and the second instalment has been paid on 13.04.2007 well before the pre-emptive date viz., 22.09.2008, had the deferral agreement been in force - the interest payable by the petitioner shall be only from the date of cancellation of the agreement viz., 24.01.2007 till the date of payment viz., 13.04.2007. The matter is remanded to the 1st respondent to levy interest for the period from 24.01.2007 to 13.04.2007 - petition allowed by way of remand. Issues:Impugned order demanding interest on cancellation of deferral agreement.Analysis:The petitioner challenged an order by the 1st respondent demanding interest on the cancellation of a deferral agreement with the 3rd respondent. The petitioner availed deferral of &8377; 28.67 lakhs, but the agreement was canceled due to violation of conditions. The petitioner made partial payment of sales tax dues before the cancellation and cleared the remaining balance within the original deferral period. The 1st respondent demanded interest for the entire period, which was objected by the petitioner. The petitioner relied on a decision of the Tamil Nadu Taxation Special Tribunal, where it was held that interest is payable from the date of cancellation till full payment. However, the 1st respondent refused to follow this decision, stating a difference in circumstances.The court found the 1st respondent's reasoning incorrect and held that the legal principle laid down by the Tribunal should have been considered. As the Tribunal's decision was final and unchallenged, the petitioner was entitled to the benefit of paying interest only from the date of cancellation till the date of full payment. Therefore, the impugned order was set aside, and the matter was remanded to the 1st respondent to levy interest for the specified period. The petitioner was directed to settle the demanded amount within 15 days from receipt.In conclusion, the writ petition was allowed with no costs, and the connected miscellaneous petition was closed.