1993 (1) TMI 262 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the applicant was required to make monthly payment of Central sales tax.
2. Whether the applicant is liable to pay interest under section 47(4A) of the Gujarat Sales Tax Act for delayed payment of Central sales tax.
3. Whether the principles of natural justice were violated due to lack of sufficient opportunity to be heard on the levy of interest.
4. Whether section 47(4A) of the Gujarat Sales Tax Act requires notice for enquiring into reasonable cause for delayed payment.
5. Whether the sales tax authority has discretion to remit interest either wholly or partly.
6. Whether the Tribunal's direction on interest calculation resulted in an impermissible enhancement of penal interest.

Issue-wise Detailed Analysis:

1. Monthly Payment of Central Sales Tax:
The Tribunal held that the applicant was required to make monthly payments of Central sales tax as per rule 31(1A) of the Gujarat Sales Tax Rules, 1970. This conclusion was based on section 9(2) of the Central Sales Tax Act, 1956, which mandates that the collection and payment of Central sales tax should follow the provisions of the general sales tax law of the state. The relevant provisions under the Gujarat Sales Tax Act and Rules, including section 47 and rule 31(1A), prescribe monthly payments for dealers whose previous year's tax liability exceeds twenty-five thousand rupees. The Tribunal rejected the applicant's reliance on rule 5 of the Central Sales Tax (Gujarat) Rules, 1970, which deals only with the submission of quarterly returns and not the payment intervals.

2. Liability to Pay Interest:
The Tribunal confirmed that the applicant is liable to pay interest under section 47(4A) of the Gujarat Sales Tax Act for delayed payment of Central sales tax. The section mandates simple interest at 24% per annum for delayed payments. Since the applicant did not make monthly payments as required, interest accrual was automatic and by operation of law.

3. Principles of Natural Justice:
The Tribunal found no violation of natural justice principles. It held that the accrual of interest on unpaid tax is automatic and does not require a separate notice or hearing. The Supreme Court's decisions in Haji Lal Mohd. Biri Works and Associated Cement Co. Ltd. supported this view, establishing that interest on tax arrears is a matter of arithmetic calculation and does not necessitate an assessment order or demand notice.

4. Requirement of Notice for Interest Levy:
The Tribunal held that section 47(4A) of the Gujarat Sales Tax Act does not contemplate any notice for enquiring into the reasonable cause for delayed payment. The automatic accrual of interest negates the need for such procedural steps.

5. Discretion to Remit Interest:
The Tribunal ruled that the sales tax authority does not have the discretion to remit interest either wholly or partly. The liability to pay interest is statutory and arises automatically upon delayed payment of tax, leaving no room for discretionary remission by the authorities.

6. Enhancement of Penal Interest:
The Tribunal's direction on interest calculation was challenged as it resulted in an enhancement of penal interest. The Tribunal, with the consent of the Revenue, modified the Sales Tax Officer's order to align it with the applicant's submitted figures. However, this led to interest being calculated on a hypothetical amount, which was higher than the actual tax due. The High Court held that the Sales Tax Officer's original calculation based on quarterly returns was correct and that the Tribunal's enhancement was impermissible. Therefore, interest should be calculated on the basis of the actual monthly tax liability as determined by the Sales Tax Officer.

Conclusion:
Questions 1 to 4 were answered in the affirmative, favoring the Revenue and against the assessee. Question 5 was answered in the affirmative, favoring the assessee and against the Revenue. The reference was answered accordingly, with no order as to costs.