2025 (12) TMI 1547 - HC - VAT / Sales Tax

VAT on extra-neutral alcohol and spirits collected but not deposited with returns, leading to statutory interest upheld.

The dominant issue was whether statutory interest could be levied when a dealer filed VAT returns for ENA/RS/HBS but did not deposit the admitted VAT ... Levy of Interest - Entitlement of State to impose a condition which is not covered by the statute or the rules - State of Goa has excluded ENA from GST regime, and have agreed to apply CST or VAT regime to ENA - sales of Extra Neutral Alcohol (ENA)/Rectified Spirit (RS)/ High Bouquet Spirit (HBS) - HELD THAT:- As per sub-rule (3) of Rule 24, all payments of tax or any other amount under the Act, shall be made by an e-challan and the dealer shall have the option to effect the payment, either through cash mode or through cyber-treasury or through any electronic system available. Whenever the return is submitted without a copy of e-challan for having paid due or lesser payment of what is due, the Assessing Authority shall issue a notice to the registered dealer for the tax not paid and that is deemed to be a demand notice and within receipt of 30 days, the tax shall be paid along with interest for delayed payment as per the rate provided in clause (a) of sub-section (4) of Section 25. The tax is due on 28th of every month and when return is filed, the Government is not unjustified in saying that the payment of tax must come at the relevant time and if the payment comes after the expiry of the period prescribed, then Government has every right to levy interest. The Petitioner admittedly filed Return/Revised Return, but did not pay the tax and thus, according to us, there is no return in the eyes of law and though the tax has come to the Government belatedly, the interest is leviable. It is not found that because of the uncertainty prevailing, the VAT was not paid, as for the first quarter, the petitioner has paid VAT, but claimed benefit of the uncertainty only for the period in the second tranche. In any case, the petitioner must be conscious of the fact that if it is not paying GST, then the goods must invite VAT and it is specifically informed that the VAT was collected, we see no difficulty why it was not deposited with the Government and in the return, it was shown to be ‘zero’. Thus, as per Section 25 and the sequence of events, the tax was due and payable when the return is filed, and in any case, though he was not liable to pay VAT @ 22%, he was covered by the entry in Section 5(1)(e), where he ought to have paid VAT @ 12% and that is how he is subjected to payment of interest by impugned order which is upheld by the Appellate Authority. The Petition is dismissed. ISSUES PRESENTED AND CONSIDERED 1) Whether interest at 18% under Section 25(4) of the GVAT Act read with Rule 24 of the GVAT Rules was legally leviable on delayed payment of VAT on local sales of HBS/RS/ENA for FY 2019-20, despite the dealer's plea of ambiguity after introduction of GST. 2) Whether omission of the specific Schedule entry for 'Rectified Spirit and High Bouquet Spirit' from Schedule C with effect from 01/07/2017 resulted in such spirits not being liable to VAT, or whether they continued to be taxable under the residuary provision (Section 5(1)(e)) and consequently attracted interest for delayed payment. ISSUE-WISE DETAILED ANALYSIS Issue 1: Levy of interest under Section 25(4) read with Rule 24 for delayed payment, notwithstanding alleged 'uncertainty' Legal framework. The Court examined the statutory mechanism under Chapter V (returns and payment). Section 25(4)(a) fastens liability to pay interest @ 18% per annum where tax is due as per returns or revised returns furnished 'without any payment or part payment', from the date the tax became payable. Section 24(4) treats a return filed 'without proper payment of tax as due' as not a return under the Act. Rule 24(4) mandates that if returns are submitted without proof of full payment (or with lesser payment), the authority issues a demand notice requiring payment within thirty days 'alongwith the interest for delayed payment' at the Section 25(4)(a) rate. Interpretation and reasoning. The Court found the dealer had filed returns but showed VAT liability on HBS/ENA as 'zero', and paid the differential VAT for FY 2019-20 belatedly (paid in 2021 though due in 2019-20). On the Court's reading of Section 25 and Rule 24, once a return is filed, tax becomes payable within the timelines prescribed, and if payment is not made within that prescribed time, the Government is entitled to levy interest. The Court rejected the argument that 'uncertainty' made the tax not 'due', holding that the tax was 'due and payable' within the statutory schedule and delay attracted interest. The Court further reasoned that, on the facts, the dealer was conscious that the commodity remained in the VAT/CST regime in Goa; the dealer had collected VAT yet did not deposit it in time, and therefore the Government 'had to suffer' due to the retained VAT and delay. Conclusions. Interest under Section 25(4)(a) at 18% was held to be validly leviable for late payment of VAT on spirits for FY 2019-20. The plea that ambiguity in the GST/VAT position excused delay was rejected, and the appellate order upholding the interest demand was sustained. Issue 2: Effect of deletion of Schedule C entry for spirits post 01/07/2017-continued VAT liability under residuary entry Legal framework. The Court considered Section 5's scheme of VAT rates, including the residuary rate under Section 5(1)(e) for goods not specified in the schedules. It also considered the State notification dated 30/06/2017 omitting the earlier Schedule C entry for 'Rectified Spirit and High Bouquet Spirit'. Interpretation and reasoning. The Court held that up to 30/06/2017 spirits were taxable under the specific schedule entry; after deletion, they did not become untaxable. Rather, since they were not brought under GST (as per the position accepted/implemented by the State), they continued within the GVAT regime and became taxable under Section 5(1)(e) at 12.5%. The Court expressly reasoned that omission from the schedule 'automatically makes the spirits liable' at the residuary rate and that it could not be that such goods would not be subjected to either VAT or GST. On this basis, the Court treated the dealer's VAT liability for FY 2019-20 on local sales of spirits as established, making the delayed payment squarely attract Section 25(4) interest. Conclusions. The Court conclusively determined that, post 01/07/2017, HBS/RS/ENA remained liable to VAT in Goa under the residuary provision at 12.5%, and therefore the dealer's delayed payment of that VAT validly attracted interest. The challenge to the interest levy and the impugned appellate order failed, and the petition was dismissed.