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M/s. Indian Commerce and v. The Commercial Tax Officer - W.P.No. 18010 of 2000  RD-TN 914 (25 November 2002)
IN THE HIGH COURT OF JUDICATURE AT MADRAS
THE HON'BLE MR.JUSTICE N.V.BALALSUBRAMANIAN
THE HON'BLE MR.JUSTICE K.RAVIRAJA PANDIAN
W.P.No. 18010 of 2000
and W.P.Nos.10194 and 10195 of 2001 and 21624 of 2000 and W.M.P.Nos. 26123, 26124 and 31407 of 2000, 14680 and 14682 of 2001. W.P.No. 18010 of 2000
M/s. Indian Commerce and
Industries Co. Pvt. Limited
29, Prakasam Road, Chennai 108 ... Petitioner -Vs-
1. The Commercial Tax Officer
Mannady (East) Assessment Circle,
2. The Registrar
The Tamilnadu Taxation Special
Chennai. .. Respondents W.P.No. 10194 of 2001
W.P.No.10195 of 2001
M/s. Indian Commerce and
Industries Co. Pvt. Limited
29, Prakasam Road, Chennai 108 ... Petitioner Vs. 1. The Joint Commissioner
of Commercial Taxes (RP)
Office of the Principal
Commissioner and Commissioner
of Commercial Taxes
Chepauk, Chennai 5
2. The Deputy Commissioner (CT)
Chennai (East) Division
Chennai 600 006.
3.The Commercial Tax Officer (DG)
Mannadi (East) Assessment Circle,
191, N.S.C. Bose Road
4. The Tamil Nadu Taxation Special
Tribunal, represented by its
Registrar, Second Floor
Chennai 1. .. Respondents W.P.No. 21624 of 2000
M/s. Larsen & Toubro Limited
ECC Construction Group
Mount Poonamallee Road
Chennai 89. ..Petitioner Vs.
1. The Registrar
Tamil Nadu Taxation
2. The Principal Commissioner &
Commissioner of Commercial Taxes
Govt. Of Tamilnadu
3. The Assistant Commissioner (CT)
Fast Track Assessment Circle II
C.T. Building, Greams Road
Chennai 6 .. Respondents Prayer: Writ Petitions filed under Article 226 of the Constitution of India for the relief of issuance of writ of certiorarified mandamus as stated therein.
For Petitioner : Mr. C. Natarajan, Senior
Counsel for Mr.N.Inbarajan
(W.P.Nos.10194 & 10195 of 2001) Mr.K.Ramagopal(W.P.No.18010 of 2000) Mrs.Aparna Nandakumar
(W.P.No. 21624 of 2000)
For Respondents: Mr.T.Ayyaswamy,Spl.G.P.
(Taxes) R1 in W.P.No.18010/2000
RR1 to 3 in W.P.No.10194/2001 and R2 and R3 in W.P.No.21624/2000
In all the cases, the petitioners challenge the imposition of interest for the belated payment of tax on the turnover of works contract on the ground that even prior to passing of a final assessment order, the petitioners filed revised returns and paid the tax due thereon and inasmuch as the tax amounts were paid prior to the date of passing of final assessment order, the petitioners are not liable to pay interest on the tax payable, as demanded by the assessing officer.
2. The precise facts of the case as culled out from the pleadings are as follows:
In the first three writ petitions, the assessees is one and the same and the assessment years are 1988-89, 1989-90 and 1990-91. In respect of the assessment year 1988-89, which is the subject matter of W.P.No. 18010 of 2000, the facts are as follows:-
3. The petitioner is a Rule 18 assessee opted for self-assessment in accordance with Section 13(2) of the Tamilnadu General Sales Tax Act, 1959 read with Rule 18 of the Tamil General Sales Tax Rules, 1959 (herein after referred to as Act and Rules respectively for brevity). The petitioner undertook steel structural works contracts. For the months of April 1988 to August 1988, the petitioner filed their monthly return, which included the turnover of works contract also in Form A1 and paid the tax. From September 1988 onwards though the turnover relating to structural works contract was disclosed in the monthly return, the petitioner did not pay the tax due thereon by saying in the return that the provisions of the Act in respect of works contract had been stayed by this Court on the the writ petition filed by the petitioner. On 6.12.1989, the petitioner filed a consolidated return for the year 1988-89 accepting the works contract turnover and a sum of Rs.8,86,114.57 was shown as sales tax collection . On 6.1.1 995, the petitioner filed another consolidated return for the same assessment year 1988-89 showing the taxable turnover including the works contract turnover as Rs.1,37,67,111.11 and tax due as Rs.6,79,087 and a sum of Rs.6,98,569 was paid on 17.1.1995 towards tax. The assessing officer demanded interest for the period from 20.4.1989 to 17.1.1995 under Section 24(3) of the Act by notice dated 15.12.1996. The petitioner put in issue the said notice by filing petition in O.P. No. 3946 of 1997 before the Tamil Nadu Taxation Special Tribunal and the petition having been dismissed, the present writ petition in W.P. No. 18010 of 2000 is filed.
4. In respect of the assessment year 1989-90, which is the subject matter of the writ petition in W.P.No. 10194 of 2001, the petitioner filed monthly returns in Form A1 disclosing the turnover of works contract also but did not pay the tax due thereon by saying in the returns that the provisions of the Act relating works contract has been stayed by this Court on its writ petition. However, the petitioner filed a revised return on 6.11.1994 and paid the tax on 22.11.1994. The assessing officer demanded interest for the period from 20.4.1990 to 22.11.1994 under Section 24(3) of the Act by notice dated 18.12.199 6. The petitioner objected for the imposition of interest by their objections dated 30.12.19969. After considering the objections, the assessing officer passed an order on 30.9.1997 confirming the imposition of interest. The order of the assessing officer was taken on revision to the Deputy Commissioner and further revision to the Joint Commissioner. The revisions so filed ended against the petitioner. That order was further agitated before the Special Tribunal in O.P.No. 75 of 2001, which has been dismissed on 24.10.2000. That order is put in issue in W.P.No. 10194 of 2001. For this assessment year, the assessment was completed on 28.3.1995.
5. In respect of the assessment year 1990-91, which is the subject matter of the writ petition in W.P.NO. 10195 of 2001, the petitioner though filed the monthly returns in the prescribed Form in Form A1 disclosing the works contract turnover also did not pay the tax thereon on the ground that the provisions of the Act has been stayed by this Court on its writ petition. The petitioner filed the revised return on 6.11.1994 and paid the tax on 22.11.1994 in a sum of Rs.7,40,3 41 . The assessing officer demanded interest under Section 24(3) of the Act for the period from 20.5.1991 to 22.11.1994 by his notice dated 18.12.1996. After considering the objections of the petitioner dated 30.12.1996, the assessing officer confirmed the imposition of interest by his order dated 30.9.1997. As that of the previous assessment year, the petitioner carried the matter on revision to the Deputy Commissioner and further revision to the Joint Commissioner and having obtained an unfavourable order moved the Special Tribunal by filing petition in O.P.No. 76 of 2001, which was also dismissed on 20.4.2 001. That order is now agitated in the present writ petition in W.P. NO. 10195 of 2001. For this assessment year, the assessment order was passed on 30.3.1995.
6. The petitioner in W.P.No. 21624 of 2000 who is also a Rule 18 assessee, filed returns on self-assessment basis as per the provisions of Section 13(2) of the Tamil Nadu General Sales Tax Act read with Rule 18. The petitioner filed monthly returns in Form A1 disclosing the works contract turnover also among others in respect of the assessment year 1992-93 but did not pay the tax on the turn over of works contract as shown in the return on the ground that the petitioner obtained stay order from this Court in W.P.No.520 of 1985. The petitioner however filed a revised return on 29.10.1993 accepting the liability of the works contract and paid the tax. The notice issued by the assessing officer imposing interest for the belated payment was objected to by the petitioner and on consideration of the objections, the assessing officer passed an order confirming the imposition of interest by his order dated 4.9.2000. Challenging the said order, the petitioner filed O.P.No. 1385 of 2000 and having obtained an order of dismissal the present writ petition is filed.
7. Mr. C. Natarajan, learned Senior Counsel appearing for the petitioners in respect of W.P.No. 10194 and 10195 of 2001 submitted that the petitioner filed the writ petition challenging the constitutional validity of Section 3-B and the relevant machinery provisions i. e Rule 6A AND ^B of the Rules before this Court by filing writ petition in W.P.No.10366 of 1987. Though, the validity of charging Section 3 B has been upheld by this Court on 23.12.1992, this Court however, struck down Rule 6A and 6B of the Rules 1959. While doing so this Court also declared that all the assessments made under Rule 6A and 6B were invalid. Earlier to December 23, 1992, in view of the stay granted by the High Court, there was no liability on the part of the petitioner to pay any tax on the works contract turnover. The amended Section 3(B) was inserted by Act 25 of 1993 on 12.3.1993, by giving retrospective effect from June 26, 1986 onwards by providing that the taxable turnover of the dealer by transfer of property involving any works contract would be arrived at after deducting the amount mentioned in clause (a) to (d) and the amount mentioned in clause (e) . Even the amended provision Section 3B by Act 25 of 1993 is not very clear and it was clarified by this Court in the case of KAMATCHI LAMINAITON (P) LTD. VS. STATE OF TAMIL NADU ( 1994 (95) STC 378). Thus there was uncertainty of liability with reference to works contract till it was settled by this Court in Kamatchi Lamination case on 13.06.1994. Because fo the uncertainty the petitioner filed revised return and paid the tax before the assessments were completed. However, the assessing officer imposed interest for the belated payment, which is not in accordance with law.
8. It is further contended by the learned Senior Counsel that inasmuch as no provisional assessment has been made rejecting the petitioners return filed in the respective months by quantifying the taxable turnover and the tax due thereon, the assessing officer has no jurisdiction to invoke Section 24(3) of the TNGST Act. It is further contended that interest can be imposed only on any amount remaining unpaid after the due date specified for its payment. The tax was quantified only on final assessment. Even prior to final assessment was made the petitioner filed revised returns and paid the tax due thereon and as such the imposition of interest is uncalled for and against the provisions of Section 13(2) read with Section 24(3) of the TNGST Act.
9. Mr.Ramagopal, learned counsel appearing for the petitioner in W. P.No.18010 of 2000 argued that the provision for levy of interest for delayed payment of tax is a substantial provision and required strict construction. It is not adjunctive law or machinery provision. He also filed the legal proposition which in all aspects similar to the contention raised in the affidavit and aruged by Mr.C.Natarajan, the learned Senior counsel, who spearheaded the argument.
10. Mrs. Aparna Nandakumar, learned counsel appearing for the petitioner in W.P.No. 21624 of 2000 has adopted the arguments fo the learned counsel appearing for the other petitioners.
11. Per contra, Mr. T.Ayyasamy, learned Special Government Pleader (Taxes) submitted that there is absolutely no merit whatsoever in the contention of the petitioner. The liability to pay interest under Section 24(3) of the Act is automtic and arises by operation of law from the date on which the tax was required to be paid under the provisions of the Act. The petitioners are all Rule 18 assessees opted and paying the tax by self assessment. The assessees filed their returns including the taxable turnover in respect of the works contract and paid the tax on the works contract turn over upto August, 1998 and though filed returns disclosing the turnover of works contract after September 1988 failed to pay the tax thereon on the simple ground that they had filed writ petition challenging the provisions of Section 3B before this Court. This Court ultimately upheld the validity of Section 3-B though struck down machinery provisions of Rule 6A and 6B. The deficiencies pointed out by this Court have been cured by inserting Section 3B by Act 25 of 1993 with retrospective effect from 26th June 1986. Hence the petitioners are bound to pay the tax from 2 6th June 1986 onwards and in default, they have to pay interest. He further contended that it is not the case of the petitioners that they did not collect the tax and they have collected the tax and retained without paying to the Government. The imposition of interest is only compensatory in nature and not penal in character to compare with the provision of penalty.
12. The learned Government Pleader further submitted that even without Rule 6A and 6B in view of the amendment made to expressions dealer, sale, works contract in the State Act in tune with the Constitution 46th amendment, the petitioners are liable to pay tax on works contract and the general charging Section 3 and the rules particularly Rule 6 would be enough after the amendment made to the State Act so as to enable the revenue to collect the tax on the works contract. Section 13(2) read with Section 24(3) makes the position very clear that if the tax payable as actually returned in the returns is not paid within the time stipulated by the statute, the imposition of interest is automatic and thus argued for sustaining the order impugned.
13. We heard the rival contentions of the learned counsel appearing on either side and perused the materials on record.
14. In order to appreciate the controversy, it is appropriate for us to refer the relevant provisions of the TNGST Act and the Rules. "Section 13: Advance payment of tax - (1) The tax for each year payable under any of the provisions of this Act may be collected in advance during the year in monthly or other prescribed instalments and for this purpose a dealer may be required to furnish within the prescribed period such returns as may be prescribed. The assessing authority may provisionally determine the amount of tax payable in advance during any year or in respect of any period and on such determination and intimation to the dealer, he shall pay such tax in such instalments and within such period as may be prescribed. (2) In lieu of the tax provisionally determined under sub-section (1 ), a dealer may, at his option, pay tax in advance during the year on the basis of his actual turnover for each month or for such other periods as may be prescribed. For this purpose, he may be required to furnish returns showing his actual turnover for each month or other periods as may be prescribed and to pay tax on the basis of such returns. The tax under this sub-section shall become due without any notice of demand to the dealer on the date of receipt of the return or on the last due date as prescribed, whichever is later.
(3) If no return is submitted by the dealer under sub-section (1) or sub-section (2) within the prescribed period, or if the return submitted by him appears to the assessing authority to be incomplete or incorrect, the assessing authority may, after making such enquiry as it considers necessary, determine the tax payable by the dealer to the best of its judgment: Provided that, before taking action under this sub-section on the ground that the return submitted by the dealer is incomplete or incorrect, the dealer shall be given a reasonable opportunity of proving the correctness or completeness of the return submitted by him.
15. Section 13(1) contemplates payment of tax in equated instalments with reference to estimated turnover in a return filed under rule 9 and tax determined under rule 10 or 11 as contemplated in rule 13 of the Rules on commencement of business or under rule 15 with reference to annual return filed on or before 1 st May in every year. The assessee who pays provisional tax in equated monthly instalments as per notice in "form B" served on him is called a rule 15 assessee. None of the petitioners before us is a rule 15 assessee and hence this section 13(1) and rules thereunder are not relevant to us.
16. An assessee, who pays tax under section 13(2) is called a rule 18 assessee and the relevant part of 18 are sub-rules (2),(3),(4) and (6) and they read as under:
" Rule 18(2). Subject to the provisions of sub-rule (5), the dealer shall submit a return in form A-1 showing the total and taxable turnover for each month and the amount or amounts actually collected by him by way of tax or taxes during that month. The return for each month shall be submitted so as to reach the assessing authority on or before the 20th of the succeeding month. Along with the return, he shall also submit proof of payment as specified in sub-rule (1) of rule 55 for the full amount of the tax or taxes payable under any of the section 3, 3-A,3-B, 4, 7-A or 7-C for the month to which the return relates after deducting therefrom the amount, if any, claimed as refund due in the month under rule 23.
(3) The return inform A-1 so filed shall, subject to the provisions of sub-rule (4) be provisionally accepted. If the return is submitted without proof of payment as specified in sub-rule (1) of rule 55 for the full amount of tax payable after deducting therefrom the amount, if any, claimed as reimbursement or refund due in the month under rule 23, such amount of tax shall become due on the date of receipt of the return or on the last due date as prescribed in sub-rule (2), whichever, is later, and shall be recovered in accordance with the provisions of the Act without any notice of demand to the dealer.
(4) If no return is submitted in respect of any month on or before the date specified in sub-rule (2) or before the expiry of the period prescribed in sub-rule (5) or if the return submitted appears to be incorrect or incomplete, the assessing authority shall, after making such enquiry as he considers necessary and after giving the dealer notice as prescribed in rule 12, determine the turnover to the best of his judgment and provisionally determine the tax or taxes payable for the month and shall serve upon the dealer a notice in form B-2 and the dealer shall pay the sum demanded at the time and in the manner specified in the notice.
(6) After the close of the year in which the tax due is provisionally determined in accordance with sub-rule (3) or sub-rule (4) or in the course of the year to which a return submitted under sub-rule (5) relates, unless the dealer is eligible for self-assessment specified in the proviso to clause (a) of sub-section (1) of section 12 or the rules relating thereto, the assessing authority shall, subject to the provisions of sub-rule (5-A) of rule 15 after such scrutiny of the accounts, registers, records and other documents and after such enquiry as he considers necessary, satisfy himself that the returns filed are correct and complete, and finally assess under a single order on the basis of the returns, the tax or taxes payable under any of the section 3, 3-A, 3-B, 4 or 5 for the year to which the returns relate: Provided that if no return or returns have been submitted by the dealer as required by sub-rule (2), or if any return or returns submitted by him appear to the assessing authority to be incorrect or incomplete the assessing authority shall after making such enquiry as he considers necessary and after giving the dealer notice as prescribed in rule 12, determine the turnover to the best of his judgment and finally assess under a single order the tax or taxes payable under section 3, 3-A, 3-B or 4."
17. As seen from the above provisions, it is evident that an assessee, who opts for payment of tax every month by filing monthly returns showing actual turnover under section 13(2) of the Act, should file the return for each month on or before 20th of succeeding month and submit proof as specified in sub-rule (1) of rule 55 for payment of the full amount of tax or taxes on or before 20th of the month to which the return relates after deducting therefrom amount, if any claimed as refund due in the month under rule 23. The adjustment of refund as contemplated in rule 23 relates to reimbursement or refund of tax paid in certain cases as contemplated in sections 4-A to 4-E of the Act.
18. The tax payable under sub-section (2) of section 13 for every month shall become due without notice of demand to the dealer on the succeeding month. When a monthly return filed is accepted provisionally under rule 18(3) any tax payable for which there is no proof as on the 20th of the month shall be recovered in accordance with provisions of the Act without any notice of demand to the assessee. While charging sections create tax liability, the machinery provisions quantify the liability and provide for recovery. Section 13(3) of the Act and rule 18(4) contemplate best judgment assessment when no return is filed within the prescribed period or if the return submitted by an assessee appears to the assessing authority to be incomplete or incorrect. When a best judgment provisional assessment is made a reasonable opportunity is to be given to the assessee before making assessment and the demand notice in form "B2" which gives 30 days time to make payment shall be served on the dealer. Unless the return submitted on the face of it appears incomplete or incorrect there is no duty cast on the assessing officer to make enquiry and resort to best judgment assessment. Thus, where classification, name of the commodity, etc., have been given correctly and there is mistake in the rate of tax or in the calculation of amount there is duty cast on the assessing authority to verify and determine the tax correctly. If any omission or incorrectness of statement in the return is not visible on the face of it, then no duty is cast on the assessing authority to redetermine the tax liability.
19. While rule 18(4) contemplates best judgment provisional assessment before close of the year, rule 18(6) contemplates final assessment with reference to returns as well as no returns. So long as final assessment if not contemplated, any return filed - original return after expiry of prescribed date, revised or supplementary return, will date back to the liability to tax contemplated in section 13(2) of the Act read with rule 18(2). When final assessment is made on the basis of returns or no returns for any additional demand raised, demand notice inform B3 is served on the assessee giving 30 days to make payment. When no returns are filed and final assessment in addition to tax assessed will attract maximum penalty and the incorrect or incomplete returns will attract penalty at slab rates.
20. As regard to the liability as indicated above, section 24 of the Act provides for payment and recovery of tax. The material subsections(1)(3)(3-A) and (4) of section 24 read as follows: "Section 24(1): Save as otherwise provided for in sub-section (2) of section 13, the tax assessed or has become payable under this Act from a dealer or person and any other amount due from him under this Act shall be paid in such manner and in such instalments, if any, and within such time as may be specified in the notice of assessment, not being less than twenty-one days from the date of service of the notice. The tax under sub-section (2) of section 13 shall be paid without any notice of demand. In default of such payments the whole of the amount outstanding on the date of default shall become immediately due and shall be a charge on the properties of the person or persons liable to pay the tax or interest under this Act. Section 24(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 additional 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 revision against any order of assessment under this Act, the interest payable under this sub-section, in respect of the amount in dispute in the appeal or revision, shall be postponed till the disposal of the appeal or revision, as the case may e, and shall be calculated on the amount that becomes due in accordance with the final order passed on the appeal or revision as if such amount had been the subject matter of the appeal or revision.
Section 24(3-A): Where a dealer submits the prescribed return within ten days after the expiry of the prescribed period, he shall also pay, in addition to the amount of tax due as per his return, interest at two per cent of the tax payable for every month or part thereof. Section 24(4): Where the tax paid under this Act is found to be in excess on final assessment or revision of assessment, or as a result of an order passed in appeal, revision or review, the excess amount shall be refunded to the dealer after adjustment of arrears of tax, if any, due from him. Where the excess amount is not refunded to the dealer within a period of ninety days from the date of the order of assessment or revision of assessment or order passed in appeal, revision or review, the Government shall pay by way of interest, where the amount refundable is not less than one hundred rupees, a sum equal to a sum calculated at the rate of one per cent or part thereof or such amount for each month or part thereof after the expiry of the said period of ninety days."
21. Thus, as per sub-section (1) of section 24, an assessee who opted to pay tax by filing monthly return is liable to pay the tax without any notice of demand. Where the tax is assessed to best judgment provisionally because no return is filed or due to incorrect or incomplete return, the due date is the date specified in the notice which shall not be less than 21 days from the date of service of the notice.
22. Section 24(3) speaks of interest. All the disputes in the writ petitions before us relate to levy of interest under this subsection and this sub-section has to be considered carefully. According to this sub-section, any amount that remains unpaid after the date specified for its payment as referred to in sub-section (1) of Section 24 of the Act warrants levy of interest in addition to taxes due and the interest shall be paid at the rate of 2 per cent per month on such amount for the entire period of default, i.e., till the taxes are fully paid or recovered. The first proviso to section 24(3) waives interest where the unpaid amount is less than one hundred rupees and the period of default is also not more than a month. The second proviso says that if any appeal or revision is preferred against an order of assessment levying tax, the payment of interest is postponed till final order is passed in appeal or revision, as the case may be, and the quantum of interest also will vary depending on the outcome in appeal or revision.
23. Section 24(3-A) which was inserted by Act 25 of 1993 with effect from May 28, 1993 provides that where a dealer submits the prescribed return within 10 days of prescribed period he shall also pay in addition to tax due as per return, interest at two per cent of the tax payable for every month or part thereof. In short, where action is initiated to assess to best judgment for the reason that no return was filed, a return filed within 10 days of the date prescribed for filing the return should be accepted and in such cases the dealer in addition to tax due should pay penal interest as contemplated in section 2 4(3)of the Act. In other cases, best judgment provisional assessment demand created will stand notwithstanding filing of the prescribed return after a delay of more than 10 days.
24. Section 24(4) of the Act contemplates refund of the excess amount on final assessment or revision of assessment after adjustment of arrears of tax, if any, due from the dealer and payment of interest on refund due where there is a delay of more than 90 days from the date of order of assessment or revision of assessment, etc.
25. Now let us consider what is the implication of the judgment of this Court in the case of LARSEN AND TOUBRO LIMITED VS. STATE OF TAMIL NADU ( 1993 (88) STC 289), which struck down rules 6A and 6B of the Rules and the scope of the retrospective insertion of Section 3-B by Act 25 of 1993 as regards the liability of works contract. This Court in Larsen and Toubro case, while upholding the validity of Tamilnadu Act 42 of 1986 struck down Rules 6A and 6B of the Rules and summarised the findings as follows: "38. For all the reasons stated above, we summarise our conclusions and findings as follows:
(a) The provisions of the Tamil Nadu General Sales Tax (Fourth Amendment) Act, 1984 (Tamil Nadu Act 28 of 1984)in so far as it amended section 2(g) (j), (n),(r) and (u) pursuant to the Constitution (Fortysixth Amendment) Act, 1982 are intra vires and valid and quite in accordance with law;
(b) The provisions of the Tamil Nadu General Sales Tax (Fourth Amendment) Act, 1986 (Tamil Nadu Act 42 of 1986) are intra vires and valid and quite in accordance with law;
(c) The provisions of rules 6-A and 6-B of the Tamil Nadu General Sales Tax Rules, 1959, are unconstitutional, illegal and are struck down as unenforceable in law; consequently any orders passed and any action initiated on the basis of such rules shall also be invalid in law; (d) The liability or otherwise of the dealers/assessees under the Tamil Nadu General Sales Tax Act, 1959 and the rules made thereunder, de hors our decision striking down rules 6-A and 6-B shall not stand in any manner affected or undermined by this decision;
(e) The State shall be at liberty to bring to life, force and effect section 3-B by appropriate legislation, including subordinate legislation in accordance with the principles and dicta laid down by the Supreme Court of India in the decisions in (i) Gannon Dunkerley and Co. V . State of Rajasthan (1993) 88 STC 204; (1992) 2 MTCR 474 and (ii) Builders Association of India V. State of Karnataka (1993) 88 STC 24 8; (1992) 2 MTCR 542. (f) Nothing in this order shall affect the right of the Revenue to initiate or continue or pursue and proceed to decide or pass orders or assess and recover the tax due as and when the law is validly made and in accordance with law;
(g) These writ petitions, shall stand ordered and finally disposed of in the above terms."
26. As could be seen from the above findings, only the orders passed on any action initiated on the basis of rules 6-A and 6-B have been held invalid in law. Otherwise, the liability of the dealers to pay tax has not been altered and after making valid law by removing the infirmity the Revenue was authorised to collect taxes in accordance with law. Thus, Act 25 of 1993 was enacted on March 25, 1993 with retrospective effect from June 26, 1986 by removing the deficiencies pointed out in the Larsen and Toubro case. Thus, the works contractors are liable from June 26, 1986 with reference to this retrospective legislation, not only for tax, but also for interest.
27. The learned counsel for the petitioner relied on the decision of the Supreme Court in J.K.SYNTHETICS LTD. Vs. COMMERCIAL TAX OFFICER ( 1994) 94 STC 422(SC) to contend that even in a case where the dealer who has opted for self assessment under Section 13(2) files a return which may latter be found to be incorrect or incomplete such dealer would not be liable to pay interest for any amount in excess of what it had admitted to be the turnover exigible to tax. In J.K. Synthetics case, the majority decision of the Supreme Court in the case of Associated Cement Co. Ltd. vs. Commercial Tax Officer (1981) 48 STC 466 was overruled and the minority judgment of Bhagwati, J was approved. The minority decision was to the effect that one must look at the return actually filed by the assessee in order to see what is the full amount of tax due on the basis of such return. It is not the assessed tax nor is it the tax due on the basis of a return which ought to have been filed by the assessee but it is the tax due according to the return actually filed that is payable under sub-section (2) of Section 7.
28. The Apex Court in J.K. Synthetics case was concerned with the interpretation of Sections 7(2) and 7(2-A) and 11-B of the Rajasthan Act, which are not in pari materia with Sections 13(2) 24(1) and 24(3 ) of the Tamil Nadu Act and Rule 18(2) of the Rules thereunder. It is seen from the discussion at page 437 in J.K. Synthetics case that section 7(1) of the Rajasthan Sales Tax Act enjoins on every dealer that he shall furnish prescribed returns for the prescribed period within the prescribed time to the assessing authorities. By proviso to section 7(1), the time can be extended by the assessing authority by not more than 15 days. The corresponding provision in the Tamil Nadu General Sales Tax Rules is rule 18(2), which says that the dealer shall submit the return so as to reach the assessing authority on or before the 20th of the succeeding month and along with the return the dealer should also submit proof of payment for the full amount of tax payable for the month to which the return relates. There is no provision in rule 18(2) of the Rules for extending the time for submission of the returns as provided in section 7(1) of the Rajasthan Act. Hence the Rajasthan Act cannot be compared with the Tamil Nadu Act.
29. This was the precise reason given by the Division Bench of this Court while rejecting the argument as the one now raised before this Court by the learned Counsel for the petitioner in the case of GODREJ & BOYCE MANUFACTURING CO. LTD. VS. JOINT COMMISSIONER OF COMMERCIAL TAXES (1995) 97 STC 44. Another Bench of the Supreme Court in the case of CALCUTTA JUTE MANUFACTURING CO. VS. COMMERCIAL TAX OFFICER (1997 ) 106 STC 433 distinguished the case in J.K. Synthetics and held that the assessee before it was liable for interest as it had not disputed that it is liable to pay tax on the turn over under the relevant statutory provisions, even though the constitutional validity of the provision has been challenged. In the present case also the constitutional validity of Section 3B was unsuccessfully challenged. We are of the view that the following portion of the decision of the Supreme Court is appropriate to the point in issue in the present case which reads as follows.
" But the position here is explicitly distinguishable from the factual situation in J.K.Synthetics Ltd. (1994) 94 STC 422 (SC) . Here, nobody had doubt that if section 6B of the Act was valid the tax was payable on the turnover. It was the constitutional validity of section 6B which was challenged by the appellants in the earlier writ petitions before the Calcutta High Court and which finally ended up in upholding of its validity. Hence, there was no question of the assessee waiting for the determination and the turnover as there was no dispute on that aspect. The fact that appellants questioned the constitutional validity of the charging provision cannot be equated with a dispute whether the freight paid would also form part of the sale amount. It was a highly debated dispute whether price amount would envelope the freight charges paid by the dealer and until the controversy was resolved by the court in Hindustan Sugar Mills Ltd. Vs. State of Rajasthan (1979) 43 STC 13 (SC); (1978) 4 SCC 271 the dealers were justified in excluding the freight charges from sale price. It was for that reason the Constitution Bench refrained from mulcting the taxpayer with liability to pay interest additionally. Appellants in these cases have never disputed that they are liable to pay tax on the turnover under section 6B of the Act even while they focussed on the vires of that provision."
30. Further on the facts of the case as summarised in the preamble portion of this order, the petitioner filed returns disclosing the turn over of the works contract but did not pay the tax for the reason that the provision authorising the levy of tax on works contract has been stayed by this Court though ultimately the said provision was upheld. What was held by this Court in Larsen and Toubro case was that order passed or action initiated on the basis of Rule 6A and 6 B was invalid. However it protected the liability or otherwise of the dealer under the TNGST Act and the rules made thereunder to pay tax on works contract dehors the struck down rules 6A and 6B. On the facts of the case, the test as stated by Bhagwati,J in Associated Cements case and confirmed by the Constitution Bench of the Supreme Court in J.K. Synthetics case if applied to the facts of the present case, that would go against the petitioner since the return filed by the petitioner has not been tortured but accepted by the authority in the sense that the petitioner filed the return disclosing the turn over on works contract but failed to pay the tax.
31. Hence the position is very clear that the charging provision is very much in the statute book all along and the liability is also fastened on the assessees like the petitioner by Act 25 of 1993 which retrospectively introduced Section 3B with effect from 26.6.1986 and as such the assessees like the petitioner have to pay the tax as provided under Section 13(2) read with rule 18 of the Rules, in default of the same, the assessees are liable to pay interest as provided under Section 24(3) of the Act.
32. Learned Senior Counsel for the petitioner relied on the decision reported in E.I.D. PARRY (INDIA) LIMITED VS. ASSISTANT COMMISSIONER (CT) (2002) 126 STC 449. In that case, the issue was whether interest could be levied on the delayed payment of tax on the turnover of freight charges. Whether freight charges is includible in the sale price came up before this court on more than one occasion and was subject matter of decisions rendered by this Court starting from the year 1976 in the case STATE OF TAMILNADU VS. MADURANTAKAM CO-OPERATIVE SUGAR MILLS (1976) 38 STC 238; KALLAKURICHI CO-OPERATIVE SUGAR MILLS LIMITED VS. STATE OF TAMILNADU (1985) 60 STC 113; PERAMBALUR SUGAR MILLS LIMITED VS. STATE OF TAMIL NADU (1992) 86 STC 17 and finally CHENGALVARAYAN CO-OPEATIVE SUGAR MILLS LTD VS. STATE OF TAMIL NADU (1997) 105 STC 497 and ultimately the decision of Chengalvarayan Cooperative Sugar Mills was affirmed by the Supreme Court in E.I.D. PARRY (I) LTD. vs. ASSISTANT COMMISSIONER FO COMMERCIAL TAXES (2000) 117 STC 4 57. In the case of STATE OF TAMIL NADU VS. MADURANTAKAM CO-OPERATIVE SUGAR MILLS (1976) 38 STC 238, this court made a distinction between the amount paid for transportation when paid to the grower and when paid to the third party transporter and held that when payment was made to the grower it did not form part of the turnover,
33. In Kallakurichi Co-operative Sugar Mills Limited Vs. State of Tamilnadu ( (1985) 60 STC 113) and as also in Perambalur Sugar Mills Ltd. vs. State of Tamil Nadu ((1992) 86 STC 17), it was held that the whole of the transport charges whether to be paid to the grower or to a third party transporter was includible in the turnover.
34. A Division Bench of this Court in the year 1995 confronted with a conflict among the rulings and this Court in the above case referred the matter to the Full Bench and ultimately the Full Bench delivered its judgment on July 24, 1996 approving the decisions of Kallakurichi Cooperative Sugar Mills. The decision rendered in the case of Madurantakam Sugar Mills was overruled. The assessees therein filed revised return and under protest paid the amount subsequently. In those factual matrix of the case, the Division Bench has held that for the applicability of Section 13(2) of the Act, what is required to be scrutinised is a return filed by the assessee admitting it's liability to pay tax by treating certain transactions as forming part of its turnover. The fact that in the assessments made subsequently certain other transactions are also found to form part of the turnover does not on that score alone make the assessee liable for payment of interest for that larger turnover with effect from the date on which the assessee filed returns under Section 13(2). So far as the present case is concerned as already stated in all these cases the turnover were admitted and the reason for non-payment of tax was the interim order granted by this Court. As already stated, the challenge has failed.
35. It is well established principle that no act of court causes prejudice to any party. The pristine doctrine couched in the maxim " actus curiae neminem gravabit" has ever remained a salutary and guiding principle. Hence the filing of the writ petition and the interim order granted in favour of the petitioners by this Court would not in any way save the petitioners from paying the amount legally due to the Government in time. We gain support for this view from the judgment of the Supreme Court in CALCUTTA JUTE MANUFACTURING CO. VS. COMMERCIAL TAX OFFICER (1997) 106 STC 433 (SC), wherein it was held as follows:
"The tax amount which they should have paid as per section 6B remained with the appellant during the entire period and they would have earned good profit with that amount. The State, to which the tax amount should necessarily have gone, was not able to utilise it for public purposes. When appellants had the advantage of keeping the amount of tax without paying it to the State exchequer only because the High Court granted orders restraining the State from recovering that amount from the assessee, no act of the court shall cause prejudice to any party. The pristine doctrine couched in the maxim 'actus curiae neminem gravabit' has ever remained a salutary and guiding principle.
The contention that as the courts granted injunction restraining the State from recovering the tax amount as per section 6B would raise a presumption that the court was then satisfied of the bona fides of the contention is too fragile for depriving the State of the statutory right of interest incorporated in section 10-A of the Act. Interim orders are passed by the High Court on a variety of considerations, one among being the strained financial position of the person approaching the court. Merely because the court granted interim orders it cannot be inferred that court was then satisfied of a strong prima facie case for the appellants. On the contrary, it is well nigh settled that there is always a presumption in favour of constitutionality of a legislative act. The presumption cannot be the other way around."
36. The other decision relied on by the counsel for the petitioner is in the case of FOOD CORPORATION OF INDIA VS. STATE OF HARYANA & ANOTHER (2000)119 STC 1. In that case, the imposition of sales tax by the State of Haryana on levy transaction undertaken by the assessee in the year 1973 was declared to be beyond the constitutional authority of the State by the High Court and consequently quashed the assessment order and demand notice issued by the Revenue by its order dated 17.5.1975. Subsequently in the year 1982, though judgment of the High Court declaring that the State did not have the constitutional authority to impose sales tax on levy transaction was in force, the Revenue again issued a demand notice to the appellant levying sales tax on the turnover involving levy transaction. The challenge of the above said demand before the High Court was rejected on the ground of alternative remedy. The appellant carried the matter to the Supreme Court. When the matter was pending before the Supreme Court, the Revenue again issued a demand notice in the year 1986, which again came to be challenged and the challenge was upheld following the earlier judgment of the High Court dated 17th May 1975. Against the said judgment of the High Court, State preferred an appeal before the Supreme Court. Both the cases were heard together and ultimately the Supreme Court had upheld the imposition of sales tax on levy transaction by its judgment dated 6th January 1997. After the judgment of the Supreme Court the Revenue issued another demand notice for the assessment years 1975-76 1982-83, and 1983-84 dated 20th February 1997 and the demand has been duly discharged. However, on 25th April 1997, the Revenue issued a further notice purported to be under Section 59 of the Haryana General Sales Tax Act, demanding a sum of Rs. 2,26,01,400 towards interest payable on the belated payment of the tax due in respect of the assessment year 1975-76. The assessee challenged that levy of interest. The question raised before the Supreme Court was whether the Revenue was justified in demanding interest from the appellant on the tax due by it for the assessment year 1975-76 on the basis of the demand made during the year 1982.
37. In that factual situation, the Supreme Court has held that during the period between 17th May 1975 to 6th January 1997 the law declared by the High Court was that the State of Haryana did not have the constitutional authority to impose sales tax on the levy transactions. Such position was continued till 6th January 1997 when the Supreme Court upheld the imposition of tax on levy transaction. The demand made in the year 1982 fell within the period, when the law did not permit the State of Haryana to impose sales tax on the levy transaction and the demand cannot be said to be a valid demand and consequently, the interest claimed based on the invalid demand cannot be sustained. The facts of the above case are totally different from the facts of the present case. Section 3-B was never struck down and was in the statute book all along. The Court never declared that the Revenue is incompetent to levy tax on works contract at any point of time rather this Court saved the levy in Larsen and Toubro case. Hence we are of the view that the said case also would not advance the case of the petitioner herein.
38. The learned counsel relied on the decision of the Supreme Court in the case of COMMISSIONER OF INCOME TAX, BHOPAL VS. HINDUSTAN ELECTOR GRAPHITES LTD., INDORE (2000 (3) SCC 595). In that case the assessee filed its return of income under Section 139 of the IT Act, 196 1 on 29.12.1989. In the relevant previous year it had received certain sum by way of cash compensatory support. Since the law as it was then in force, the said amount was not taxable the same was not included in the return. Subsequently the Finance Act 1990 introduced Section 28(iii)(b) in the IT Act and made cash assistance received from the Government of India taxable. On 5.5.1990l when the said return was taken up, the Assessing Officer treated the income from cash compensatory support as additional income under Section 143(1-A) of the Act and levied the amount of tax at higher rate on this additional income and also charged interest under Section 234 of the Act. At the instance of Revenue, the High Court held that the Assessing Officer must determine the question of assessment by applying the law prevailing, when the return was filed. The view of the High Court was affirmed by the Supreme Court. We are at a loss to understand how this decision is applicable to the facts of the present case, which is altogether based on facts not similar to the one considered by the Supreme Court.
39. The other case relied on behalf of the petitioner is MARUTI WIRE INDUSTRIES PVT. LTD., VS. SALES TAX OFFICER, FIRST CIRCLE, MATTANCHERRY & OTHERS reported in 2001 (122) STC 410, a case arose from Kerala General Sales Tax Act. Though the provisions of Kerala General Sales Tax Act and Tamil Nadu General Sales Tax Act are comparable the facts are at total variance. In that case, the assessee a dealer imported inedible tallow and supplied the same in April 1983, to a factory. The assessee did not collect any amount of sales tax thereon; nor did it file a return of turnover relating to the transaction. The Assessing Officer completed the assessment on 10.10.1984 and served demand notices on 4.3.1985 for payment of penal interest under Section 23(3) of the K.G.S.T.Act for the period from 20.5.1983 the date on which the return ought to have been filed with proof of payment of tax according to the return, to 25.2.1985. In that facts of the case, the Supreme Court following J.K.Synthetics case, has observed that failure to file return of taxable turn over may render the assessee liable for any other consequences or penal ac tion as provided by law but cannot attract the liability for payment of interest under subsection (3) of Section 23 on the parity of reasoning that if a return of turnover would have been filed on the due date then the tax as per return would have become due and payable on that date. The facts are not similar but are at variance with the present case and hence this decision is also not advancing the case of the petitioner.
40. The Supreme Court while considering a comparable provision of the Jammu and Kashmir General Sales Tax Act has held in the case of ROYAL BOOT HOUSE VS. STATE OF J & K AND OTHERS reported in (1984) 56 STC 213 that sub-section (3) of Section 8 of the J & K GST Act provides that tax due on the basis of quarterly return shall be paid before the expiry of the last date of filing of such return and the amount of tax thus becomes payable at the latest from the expiry of the last date of filing quarterly return. Hence under sub-section (2) the dealer would be liable to pay interest on the amount of tax from the date when it was payable i.e from the expiry of the last date of filing quarterly return of the Act. Sub-section (2) refers to the notice of demand but that obviously relates to sub-section (1) where notice of demand is required to be issued after the assessment of tax is completed and the amount of tax assessed becomes due only after the issue of notice of demand as provided under in sub-section (1) but there is no such requirement in the case of payment of tax on the basis of quarterly return to be filed by the dealer.
41. The Division Bench of this Court in the case of APOLLO TUBES LIMITED VS. ADDITIONAL DEPUTY COMMERCIAL TAX OFFICER, RANIPET & ANOTHER (1994) 93 STC 339, while considering the very provisions of the TNGST Act has held as follows:
".... We are of the view that sub-rule (4) will come into play only if the return is not filed within the date specified or if the return is incorrect or incomplete. Sub-rule (4) will not cover a case where complete return is filed and the only default on the part of the dealer is non-payment of tax or failure to attach proof of payment of tax. In such cases, sub-rule (3)will itself govern. Sub-rule (3) is very clear, inasmuch as it says that in all such cases, tax shall be recovered in accordance with the provisions of the Act without any notice or demand to the dealer. Hence, in the absence of proof of payment of tax, it is open to the department to recover the tax due as per the provisions of the Act. Automatically, the provisions for payment of interest will also come into play and the department is entitled to recover interest as provided under Section 24(3)."
42. Another Division Bench of this Court, while construing Section 1 3(2) and Rule 18 has held as follows in the case of CEAT LTD., VS. STATE OF TAMIL NADU AND ANOTHER 1995 (96) STC 26).
" It is clear from sub-rule (2) of rule 18 that in the case of self-assessment, the return for each month shall have to be submitted so as to reach the authority on or before the 20th of the succeeding month and along with the return, the tax-paid receipt has also to be enclosed. Thus, it is open to the dealer to pay the tax on any date from 1st of the succeeding month till the 20th and file the return either on the 20th of the succeeding month or on any date before that date, that is to say, from the 1st to 20th of the succeeding month. What is necessary is that along with the return, the proof of payment of the tax as specified in sub-rule (1) of rule 55, has also to be enclosed. As such, the last date prescribed for payment of tax due as well as for filing of the return is 20th only. Hence it is not possible to hold that either sub-rule (2) of rule 18 is in any way contrary to sub-section (2) of Section 13 of the Act, or that the return can be filed by the dealer on any date subsequent to 20th of the succeeding month without incurring penalty. The expression, "whichever is later" found in sub-section (2) of section 13 of the Act is only to give latitude to the dealer to pay the tax on any date from 1st to 20th of the succeeding month along with a tax-paid receipt. Hence, it does not mean that the return can be filed later than 20th of the succeeding month. The tax can be paid earlier to the filing of the return, but in either case it shall not be later than 20th of the succeeding month." The very same Division Bench while construing the very provision i.e Section 13(2) and Rule 18 of the TNGST Act and Rules respectively has held that the liability to pay interest under Section 24(3) is automatic and absolute from the date on which it becomes due and the question of bonafide on the part of the dealer or the dealer voluntarily filing a revised return after the due date showing the actual turnover is not at all relevant for deciding the liability of defaulting dealer to pay interest under Section 234(3) of the Act in the case of GODREJ & BOYCE MANUFACTURING CO. LTD., VS. JOINT COMMISSIONER OF COMMERCIAL TAXES IV AND OTHERS reported in (1995) 97 STC 44.
43. In a similar factual situation a Division Bench of this Court in which one of us (KRP,J.) was a party in ASHOK LEYLAND LIMITED VS. ASSISTANT COMMISSIONER (CT) AND ANOTHER (2002) 127 STC 73) though the case was concerned with reference to Section 3A of the TNGST ACT in all factual matrix with regard to the filing of the return, disclosing the turnover and non-payment of the tax on the cover of interim orders obtained from this Court are identical to the present case has held that the assessee therein was liable to pay interest from the date on which the tax amount become due under Section 13(2) of the TNGST Act.
44. The contention raised by the Special Government Pleader (Taxes ) as to even dehors Section 3B of the Act, the levy is sustainable under the general charging Section 3 read with rule 6 of the Rules is also in our view well founded on the face of the amendment brought under the TNGST (4th Amendment) Act 1984 (Act 28/84) amending among other things clauses (g) (i), (n) and (u) of Section 2 of the Principal Act with effect from 1.10.1984 dehors the Fourth Amendment Act, 19 86 (Act 42/86) inserting Section 3B and the rules 6A & 6B and Fourth Schedule. It was so observed by the Supreme Court at para 7 in the case of
K.DAMODARASAMY NAIDU & BROS VS. STATE OF TAMIL NADU & ANOTHER (2000) 117 STC 1, which is as follows:-
7. Learned counsel for such restaurant owners from Tamil Nadu ( appellants in C.A.Nos.1415 and 1416 of 1990) contended that the Tamil Nadu State Legislature had evinced no intention of taxing the supply of food and drink until section 3D was introduced in 1997, while it had evinced the intention to tax the transfer of the right to use goods and the transfer of goods involved in work contracts by the introduction of sections 3A and 3b in the said Tamil Nadu Act. In his submission the mere amendment of the definition section as afore stated was not enough to entitle the State to levy the tax prior to 1997. We find it is difficult to accept the contention. Once the definition of " sale" in the said Tamil Nadu Act was amended to include the supply of food and drink, the supply of food and drink, the supply of food and drink fell within the purview of the charging section thereof and became exigible to tax thereunder. That the State Legislature had earlier chosen specifically to incorporate sections 3A and 3B to tax the transfer of the right to use goods and the transfer of goods involved in work contracts respectively does not lead to the conclusion that, therefore, it had not intended to tax the supply of food and drink until section 3D was inserted in 1997. The incorporation of sections 3 A and 3B can only be said to be measures of abundant caution."
45. On the facts and in the circumstances of the case and in view of the discussion above made and in the light of overwhelming decisions of the Apex Court and of this Court in favour of the Revenue, we are of the considered view that there is absolutely no irregularity or illegality in the order passed by the authority imposing the interest from the date on which the tax has become payable, which has been approved by the Special Tribunal. All the writ petitions are dismissed and the connected miscellaneous petitions are closed.
1. The Commercial Tax Officer
Mannady (East) Assessment Circle,
2. The Registrar
The Tamilnadu Taxation Special
3. The Joint Commissioner
of Commercial Taxes (RP)
Office of the Principal
Commissioner and Commissioner
of Commercial Taxes
Chepauk, Chennai 5
4. The Deputy Commissioner (CT)
Chennai (East) Division
Chennai 600 006.
2. The Principal Commissioner &
Commissioner of Commercial Taxes
Govt. Of Tamilnadu
3. The Assistant Commissioner (CT)
Fast Track Assessment Circle II
C.T. Building, Greams Road
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