TaxTMI 
TaxTMI 
2009 (10) TMI 866
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....hose orders, the petitioner filed applications under section 16D before the Special Committee, in 2007, but the Special Committee rejected the applications, by orders dated October 30, 2007 passed in SCP Nos. 117, 115 and 116 of 2007 in respect of the assessment years 1992-93, 1993-94 and 1994-95, respectively. Thereafter, the petitioner filed writ petitions in W.P. Nos. 902, 907 and 963 of 2008. Those writ petitions were allowed by this court, by a common order dated February 4, 2008, subject to the condition that the petitioner pays the entire tax and penalty within 12 weeks. In the meantime, the petitioner was directed to produce necessary records and also peruse the relevant records as permitted by the respondent and after such perusal, the assessing officer was directed to pass fresh orders of assessment. In accordance with the said order of this court, the assessing officer summoned the petitioner and the petitioner appeared before him on January 28, 2009 and February 3, 2009 and produced the records. Finding that there was no variation, the assessing officer issued a final notice inviting objections to be filed on or before February 12, 2009 and February 18, 2009. Sinc....
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....223 of 2009. Since all the writ petitions raise a common question as to the liability of the petitioner to pay interest, all of them were taken up together for disposal. The assessment orders, relating to the five assessment years, viz., 1992-93, 1993-94, 1994-95, 1995-96 and 1996-97, have now attained finality, in the sense that the time-limit for filing statutory appeals have expired and the petitioner has not filed any statutory appeal against any of them. The assessment orders relating to the years 1992-93, 1993-94 and 1994-95, were challenged directly in W. P. Nos. 15040 to 15042 of 2009, but by a separate order passed today, I have dismissed the writ petitions. Admittedly, the petitioner has also paid the entire amount of tax as on date in respect of all these assessment years. Therefore, there is no dispute as on date, about two essential factors, viz., (i) the quantum of tax liability and (ii) the dates on which the petitioner discharged the liability by making payments. For determining a dealer's liability to pay interest under section 24(3), there are three essential factors, viz., (i) the quantum of tax liability, (ii) the date on which the liability aros....
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....ny times courts were confronted either with the question of penalty (not interest) or with genuine disputes which led to non-payment/belated payment of tax. In State of Rajasthan v. Ghasilal [1965] 16 STC 318; AIR 1965 SC 1454, a Constitution Bench of the Supreme Court, while considering the liability to pay penalty, held that "till the tax payable is ascertained by the assessing authority under section 10 or by the assessee under section 7(2) (of the Rajasthan Act) no tax can be said to be due within section 16(1)(b) of the Act, for till then there is only a liability to be assessed to tax". It was held therein that there must be a tax due and there must be a failure to pay the tax due within the time allowed, so as to attract penalty. When the above observations of the Constitution Bench in Ghasilal [1965] 16 STC 318 (SC); AIR 1965 SC 1454 were sought to be relied upon by an assessee, in a subsequent case, Associated Cement Co. Ltd. v. Commercial Tax Officer [1981] 48 STC 466 (SC); [1981] 4 SCC 578, a three-judge Bench made a distinction between penalty and interest. On the question of penalty, the judges were of the unanimous opinion that no penalty can be levied fo....
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....rest would be leviable on the tax further payable by him in the revised returns on account of freight charges being included. In so far as the Tamil Nadu General Sales Tax Act, 1959 is concerned, section 12(3) imposes penalty and section 24(3) levies interest. In Sakthi Sugars Ltd. v. Assistant Commissioner of Commercial Taxes [1985] 59 STC 52, a Division Bench of this court considered the constitutional validity of section 24(3) and held that the payment stipulated by section 24(3) is compensatory and not penal in character. Though it was held in Sakthi Sugars [1985] 59 STC 52 (Mad) that a provisional assessment under rule 18(3) of the Tamil Nadu General Sales Tax Rules, would not be covered by section 24(3), the Act was amended thereafter by Act 78 of 1986 with effect from January 1, 1986. It is only by the said amendment that sub-section (3) of section 24 and the two provisos thereunder, as they stand on date, replaced the then existing provision. After the amendment to section 24(3), a Division Bench of this court held in Apollo Tubes Limited v. Additional Deputy Commercial Tax Officer [1994] 93 STC 339, that the liability to pay interest is not only automatic but that....
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....t the Bench also made a small distinction, between other machinery provisions and the provision relating to levy of interest, in the following words (at page 437 of 94 STC): ". . . But it must also be realised that provision by which the authority is empowered to levy and collect interest, even if construed as forming part of the machinery provisions, is substantive law for the simple reason that in the absence of contract or usage, interest can be levied under law and it cannot be recovered by way of damages for wrongful detention of the amount. . ." After referring to two earlier decisions, which held that the provision for charging interest was to compensate for the loss occasioned to the Revenue due to delay, the Bench opined that even then the provision has to be given only its plain meaning. In the later part of paragraph 16, the Bench held in J.K. Synthetics [1994] 94 STC 422 (SC); [1994] 4 SCC 276 as follows (at page 438 of STC): ". . . But then interest was charged on the strength of a statutory provision, may be its objective was to compensate the Revenue for delay in payment of tax. But regardless of the reason which impelled the Legislature to provide for charg....
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....than Sales Tax Act, are not in pari materia with the provisions of sections 13(2), 24(1) and 24(3) of the Tamil Nadu Act and rule 18(2) of the Tamil Nadu Rules. The Division Bench, after distinguishing J. K. Synthetics [1994] 94 STC 422 (SC); [1994] 4 SCC 276, chose to follow the earlier Division Bench in Apollo Tubes [1994] 93 STC 339 (Mad) and held that there need not be an order of assessment, before interest is levied under section 24(3) of the Act. Again in Calcutta Jute Manufacturing Co. v. Commercial Tax Officer [1997] 106 STC 433, a two-judge Bench of the apex court was concerned with the question whether an assessee was liable to pay interest on the turnover tax for the period during which, the recovery of tax was stopped by orders of the court. After distinguishing J. K. Synthetics [1994] 94 STC 422 (SC); [1994] 4 SCC 276 on facts, the Supreme Court held that the challenge to the constitutional validity of a charging provision (which resulted in a stay order and subsequent belated payment), cannot be equated to a dispute whether the freight charges would form part of the sale price or not. Thereafter, the Bench held in paragraph 16 as follows (at page 441 of 106 STC): ....
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....C): "Thus, the language employed in the Tamil Nadu provision as 'actual turnover for each month' and the requirement of the provision that the dealer has to furnish the return showing his 'actual turnover for each month' and pay tax on the basis of such return is in contradistinction to the expression employed the 'tax payable' under section 11B of the Rajasthan Act, which only mean the full amount of tax becomes due under sub-sections (2) and (2A) of the Act make clear that the provisions of the Rajasthan Act and the Tamil Nadu Act are not comparable provisions." The distinction so made as above, was also reiterated by another Division Bench of this court in Indian Commerce and Industries Co. Pvt. Limited v. Commercial Tax Officer [2003] 129 STC 509, on the ground that the provisions of the Rajasthan Act are not in pari materia with the provisions of the Tamil Nadu Act. Thus, almost all the Division Benches of this court, right from Apollo Tubes Limited [1994] 93 STC 339, Godrej Boyce Manufacturing Co. Ltd. [1995] 97 STC 44 (Mad) and E.I.D. Parry (India) Limited [2002] 126 STC 399 (Mad), up to Indian Commerce and Industries Co. Pvt. Limited [2003] 129....
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.... though the provisions of the Tamil Nadu General Sales Tax Act and the Rajasthan Act may not be identical. It requires a deeper examination to find out if this opinion of the apex court, by implication, overrules the consistent view taken by the various Division Benches of this court right from Apollo Tubes [1994] 93 STC 339 up to E.I.D. Parry (India) Limited [2002] 126 STC 399 (Mad), on the basis that both Acts are not in pari materia. Since that question does not arise here, I do not wish to stray into that area. After holding that the principles in J.K. Synthetics [1994] 94 STC 422 (SC); [1994] 4 SCC 276 would squarely apply even if the Acts are not identical, the Supreme Court went on to hold as follows (at page 25 of 141 STC): ". . . The default arising on non-payment of tax on an admitted liability in the case of self-assessment falls under section 24(3) read with rule 18(3) which attracts automatic levy of interest whereas the default in filing incomplete and incorrect return falls under rule 18(4) which attracts best judgment assessment in which the levy of interest is based on the adjudication by the assessing officer. . ." Thus, from Ghasilal [1965] 16 STC 318 (S....
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....Act 10 of 1934), have priority over all other claims against the property of the said dealer or person and the same may without prejudice to any other mode of collection be recovered,- (a) as land revenue; or (b) on application to any magistrate, by such magistrate as if it were a fine imposed by him: Provided that no proceedings for such recovery shall be taken or continued as long as he has, in regard to the payment of such tax, other amount or fee, as the case may be, complied with an order by any of the authorities to whom the dealer or person has appealed or applied for revision, under section 31, 31A, 33, 35, 36, 37 or 38. (3) On any amount remaining unpaid after the date specified for its payment as referred to in sub-section (1) or in the order permitting payment in instalments, the dealer or person shall pay, in addition to the amount due, interest at two per cent per month of such amount for the entire period of default: Provided that if the amount remaining unpaid is less than one hundred rupees and the period of default is not more than a month, no interest shall be paid: Provided further that where a dealer or person has preferred an appeal or ....
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.... other words, the liability arises even at the first instance, but its payment stands postponed till the disposal of the appeal or revision. (ii) What is postponed is only the interest component on the disputed amount alone. The liability to pay tax is not postponed (unless there was stay). The liability to pay interest if any, on the amount which is not the subject-matter of the appeal or revision is also not postponed. In other words, the admitted tax should have been paid and the interest arising out of any belated remittance of such admitted liability is also not postponed. (iii) After the disposal of the appeal or revision, the amount determined in such appeal or revision, will be taken to be the amount specified in the original order of assessment. In simple terms, the liability determined in the appeal or revision, relates back to the date of the original order of assessment. What is incorporated in the last part of the second proviso to sub-section (3) of section 24, is "the doctrine of relation back". Black's Law Dictionary defines it as "the doctrine that an act done at a later time is, under certain circumstances, treated as though it occurred at an earlier ....
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....ny period by the prescribed date or thereafter, but fails to make full payment of tax payable in respect of such period by such prescribed date, he shall pay a simple interest at the rate of two per centum for each English calendar month of default from the first day of such month next following the prescribed date up to the month preceding the month of full payment of such tax or up to the month prior to the month of assessment under section 11 in respect of such period, whichever is earlier, upon so much of the amount of tax payable by him according to such return as remains unpaid at the commencement of each such month: Provided that where such dealer admits in writing that the amount of tax payable in respect of such period is an amount which is either more or less than what has been originally shown as payable in the return and where the Commissioner is satisfied on the point of such admission, the interest shall be payable upon so much of the amount of tax payable according to such admission as remains unpaid at the commencement of each such month. (2) Where a registered or certified dealer fails to furnish a return referred to in section 10 in respect of any period by ....
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....the TNGST Act, 1959. Section 10A(4) of the Bengal Act, states in simple terms that if the amount of tax payable is reduced on appeal or revision, the interest should be re-determined on the basis of the reduced amount of tax. On the contrary, the second proviso to section 24(3), as pointed out earlier, makes three things very clear, viz., (i) that the liability to pay interest is just postponed, (ii) that what is postponed is only the interest component of the disputed tax and not the interest component of the admitted tax, and (iii) that once an appeal or revision is disposed of, the determination made would relate back to the order of assessment. In view of such a fiction created by the second proviso, I am of the considered view that the decision in Philips India [2004] 136 STC 636 (SC) may not be of any assistance to the petitioner. The second proviso to section 24(3) may operate to exclude the general principles stated in paragraph 9 of the decision in Philips India Ltd. [2004] 136 STC 636 (SC), that once the original assessment is set aside and the matter remitted for re-computation, the original orders ceased to exist and that the liability arises only thereafter. ....
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.... 1996. For a period of more than 10 years, the petitioner did not challenge these orders. It was only in the year 2007 that the petitioner filed applications before the Special Committee under section 16D. These applications were rejected by orders dated October 30, 2007. The orders of the Special Committee alone were set aside by this court and the matter remitted back to the assessing officer, on condition that the petitioner pays the entire amount of tax. The orders of assessment dated February 20, 1995, February 20, 1995 and June 5, 1996 were not set aside by this court. Similarly, in respect of the assessment years 1995-96 and 1996-97, the orders of assessment were dated March 24, 2000. Without challenging these orders for about seven years, the petitioner approached the Special Committee under section 16D only in the year 2007 and the Special Committee gave a small reprieve. Thereafter fresh orders were passed. Therefore, the first contention that the fresh orders of assessment passed in the year 2009 provided the crucial date for determining whether the petitioner was a defaulter or not, cannot be accepted, as these fresh orders related back to the date of the original order....