Bar hotels' foreign liquor turnover tax liability depends on 2022 notification timing and filing deadlines

Kerala HC ruled on turnover tax liability for bar hotels' foreign liquor sales during specified periods in 2020-2021. Court held that since turnover tax rate of 5% was prescribed only through notification dated 26.03.2022, no valid tax demand could be made before this date. FL3/FL11 licensees who filed returns by 31.03.2022 and paid tax by 30.04.2022 are not liable for interest on delayed payment for the specified periods. However, licensees failing to comply with these deadlines remain liable for interest from 01.05.2022. Cases remitted to Assessing Authority for fresh assessment orders.

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Issues Involved:
1. Interest liability on delayed remittance of turnover tax (ToT) for Financial Years 2020-21 and 2021-22.
2. Validity of the rate of ToT for parcel sales of Indian Made Foreign Liquor (IMFL) by FL3/FL11 licensees.
3. Applicability of interest and penalty for delayed tax payments.

Summary:
Interest Liability on Delayed Remittance of Turnover Tax (ToT):
The petitioners, FL3/FL11 licensees, challenged the interest liability for delayed remittance of ToT for the Financial Years 2020-21 and 2021-22. The petitioners argued that due to the COVID-19 pandemic, they were permitted to sell IMFL in sealed bottles, but the rate of ToT was not prescribed until the notification SRO No. 297/2022 dated 26.03.2022. Consequently, they could not file returns or remit ToT timely.

Validity of the Rate of ToT for Parcel Sales:
The Government Order G.O.(MS) No. 41/2020/TD dated 18.05.2020 allowed FL3/FL11 licensees to sell IMFL in sealed bottles due to COVID-19 restrictions. However, the rate of ToT was not specified until the notification SRO No. 297/2022, which fixed the ToT rate at 5% for parcel sales for the periods 22.05.2020 to 21.12.2020 and 15.06.2021 to 25.09.2021. The petitioners contended that they could not file returns or remit ToT at 5% due to the lack of clarity and the tax portal's inability to accept such returns.

Applicability of Interest and Penalty:
The State Government argued that interest is a statutory liability under Section 23(3) of the KGST Act and cannot be waived without explicit statutory provision. The petitioners were liable to pay interest for delayed payment of ToT. However, the court noted that the notification SRO No. 297/2022 should be given a purposive interpretation, and the petitioners should not be penalized for the period before the rate was prescribed.

Judgment:
1. No Interest for Timely Compliance: If returns were filed by 31.03.2022, and ToT was cleared by 30.04.2022, the FL3/FL11 licensees are not liable to pay interest for the delayed payment of ToT for the periods 22.05.2020 to 21.12.2020 and 15.06.2021 to 25.09.2021.

2. Interest for Delayed Compliance: FL3/FL11 licensees who did not file returns by 31.03.2022 or did not pay ToT by 30.04.2022 are liable to pay interest for delayed payment from 01.05.2022 till the date of payment and for delay in filing returns.

3. Remittance for Fresh Assessment: The impugned orders are quashed, and cases are remitted back to the Assessing Authority to pass fresh Assessment Orders based on the above observations.

All interlocutory applications regarding interim matters stand closed.

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