1980 (10) TMI 193 - HC - VAT and Sales Tax

Issues Involved:
1. Interpretation of "tax admittedly payable under the Act" in Section 8(1) of the Sales Tax Act.
2. Liability to pay interest before and after assessment.
3. Determination of tax payable under retrospective legislation or judicial interpretation.
4. Bona fide calculation of tax by the dealer.
5. Impact of assessment orders on liability to pay interest.
6. Specific cases and their individual arguments.

Detailed Analysis:

1. Interpretation of "tax admittedly payable under the Act" in Section 8(1):
The primary issue revolves around the interpretation of "tax admittedly payable under the Act" as introduced in Section 8(1) in 1975. The court observed that the term "tax admittedly payable" means the tax which is payable under the Act on the turnover of sales or purchases as disclosed in the accounts maintained by the dealer or admitted by him in any return or proceeding under the Act, whichever is greater. The court emphasized that this term is distinct from "tax admitted" as used in Section 9(1).

2. Liability to Pay Interest Before and After Assessment:
Interest is payable both before and after assessment. Before assessment, liability accrues if the dealer fails to deposit the tax admittedly payable within the specified time. After assessment, if the tax assessed, reassessed, or enhanced is not paid within three months of the notice of demand, the dealer becomes liable to pay interest on the unpaid amount.

3. Determination of Tax Payable Under Retrospective Legislation or Judicial Interpretation:
The court examined scenarios where tax payable under the Act is varied due to retrospective legislation or judicial interpretation. It was held that a dealer cannot be penalized for calculating tax in accordance with the law as it stood at the time of filing the return. If the calculation was bona fide and in accordance with the prevailing interpretation, it would not attract interest liability even if later changes in law or its interpretation rendered the calculation incorrect.

4. Bona Fide Calculation of Tax by the Dealer:
The court stated that a dealer cannot escape liability by wrongly calculating the tax payable. However, if the dealer calculated the tax in accordance with the prevailing interpretation of the law at the time, it would be considered bona fide. The dealer is not expected to anticipate future changes in law or its interpretation.

5. Impact of Assessment Orders on Liability to Pay Interest:
The court clarified that the liability to pay interest under Section 8(1) does not vanish upon assessment. The assessment order results in the ceasure of liability under Section 8(1) and the merger of tax admittedly payable in tax assessed. The grant of three months for the payment of tax assessed is a concession, not a fresh opportunity to pay tax admittedly payable.

6. Specific Cases and Their Individual Arguments:
- Writ Petition No. 318 of 1979: The petitioner, a biscuit manufacturer, filed returns and paid tax at 2% as biscuits were considered cooked food. Later, a court decision reclassified biscuits, resulting in a higher tax rate. The court held that the petitioner could not be held liable for interest as the tax calculation was bona fide at the time of filing the return.
- Writ Petition No. 235 of 1980: The petitioner sold welding electrodes and paid tax based on the department's classification. A later court decision reclassified electrodes, resulting in additional tax. The court held that no interest could be demanded for periods before the reclassification was known.
- Writ Petition No. 163 of 1979: The petitioner claimed exemption for sales to registered dealers but failed to file the necessary forms. The court held that the petitioner was liable for interest as the calculation of tax payable was not in accordance with the Act.
- Writ Petition No. 503 of 1979: The petitioner claimed exemption for sales in the course of export. Retrospective legislation imposed tax on such sales. The court held that the petitioner could not be held liable for interest as the tax calculation was bona fide at the time of filing the return.

Conclusion:
The court allowed Writ Petitions Nos. 318 and 503 of 1979, quashing the demands for interest. Writ Petition No. 235 of 1980 was allowed in part, with the assessing authority to decide on the remaining quarters based on the law laid down. Writ Petition No. 163 of 1979 was dismissed. The court emphasized the importance of bona fide calculation of tax and the need to avoid undue harassment of honest dealers while safeguarding revenue interests.

← Previous Next →