2020 (2) TMI 1112 - HC - VAT and Sales Tax

Court holds petitioner liable for interest on tax deferral, allows reconsideration for interest waiver

Metafilms India Limited Versus The Assistant Commissioner (CT) (Addl.), The Assistant Commissioner (CT), The State of Tamil Nadu

Metafilms India Limited Versus The Assistant Commissioner (CT) (Addl.), The Assistant Commissioner (CT), The State of Tamil Nadu - [2021] 89 G S.T.R. 214 ... Issues Involved:1. Entitlement for waiver of interest on the Interest Free Sales Tax Deferral Amount.2. Impact of the petitioner becoming a sick industrial unit on tax and interest liability.3. Validity of the distraint order and recovery proceedings.4. Applicability of various legal provisions and precedents.Issue-wise Detailed Analysis:1. Entitlement for Waiver of Interest:The petitioner challenged the impugned letter dated 03.11.2004 and sought a waiver of interest on the Interest Free Sales Tax (IFST) Deferral Amount under Section 17-A (2) of the Tamil Nadu General Sales Tax Act, 1959. The court noted that the petitioner had breached the conditions of the deferral agreement by not paying the tax on time. Section 17-A (2) stipulates that no interest is attracted during the deferral period provided the conditions for payment of deferred tax are satisfied. Since the petitioner did not meet these conditions, they were liable to pay interest after the specified date.2. Impact of Becoming a Sick Industrial Unit:The petitioner argued that it became a sick company on 31.03.2002 and was thus protected under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). They contended that during this period, the respondents could neither demand tax nor charge interest. The court referenced several Supreme Court decisions, including TATA Davy Ltd Vs. State of Orissa and Gram Panchayat Vs. Shree Vallabh Glass works Ltd, which supported the suspension of recovery of dues during BIFR proceedings. However, the court concluded that the petitioner’s failure to discharge tax liability justified the respondents' demand for tax and interest as if there was no IFST Deferral.3. Validity of the Distraint Order and Recovery Proceedings:The distraint order dated 20.11.2014 demanded a total of Rs. 1,45,49,116/-, including interest. The court observed that the petitioner had not complied with the deferral agreement and was therefore liable to pay the deferred tax and interest. The court also noted that the petitioner had failed to provide proof of payment of the principal tax amount by the stipulated date. Consequently, the distraint order was deemed justified, but the court allowed for reconsideration by a special committee.4. Applicability of Legal Provisions and Precedents:The court examined various legal provisions and precedents, including Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959, which mandates interest on unpaid amounts after the specified date. The court also referenced decisions like E.I.D. Parry (India) Ltd. Vs. Asst. Commissioner of Commercial Taxes and Krishna Smelters Ltd. Vs. The Joint Commissioner (CT), which clarified the conditions under which interest could be levied. The court concluded that the petitioner was bound by the deferral agreement and the statutory provisions governing tax and interest liability.Conclusion:The court acknowledged the petitioner’s breach of the deferral agreement and the consequent liability to pay interest. However, considering the petitioner’s status as a sick company and the lack of a copy of the IFST deferral agreement, the court referred the case back for reconsideration by a special committee. The committee was directed to consider any applicable government orders or guidelines that might allow partial or complete waiver of interest. Pending the committee's decision, the distraint order was kept in abeyance. The writ petition was disposed of with these observations, and no costs were awarded.