2003 (7) TMI 659 - HC - VAT and Sales Tax

Issues Involved:
1. Entitlement to adjustment of excess tax deposited in previous years against tax liability for subsequent months.
2. Legality of imposing interest for late payment of tax when adjustment was sought.
3. Interpretation and application of Section 29 of the U.P. Sales Tax Act, 1948.

Detailed Analysis:

1. Entitlement to Adjustment of Excess Tax Deposited:
The primary issue revolves around whether the dealer was entitled to adjust the excess amount of tax deposited during the assessment years 1968-69 to 1971-72 against the tax liability for the months of April, May, and August 1977. The applicant had made such adjustments, but the assessing authority refused to grant these adjustments, stating that there is no provision under the U.P. Sales Tax Act, 1948, for such adjustments, and that the dealer cannot self-adjust the outstanding dues payable by the department.

2. Legality of Imposing Interest for Late Payment:
The assessing authority imposed interest amounting to Rs. 48,845.18 for the late payment of the admitted tax liability for the months of April, May, and August 1977, which the dealer had sought to adjust against the excess tax deposited in previous years. This imposition of interest was confirmed by the first appellate authority and the Tribunal.

3. Interpretation and Application of Section 29 of the U.P. Sales Tax Act, 1948:
Section 29 of the U.P. Sales Tax Act, 1948, deals with refunds and adjustments. It states that the assessing authority shall refund any amount of tax paid in excess, but the amount found to be refundable shall first be adjusted towards any outstanding tax or other amounts due from the dealer. The Tribunal held that the dealer was not entitled to claim adjustment as the final assessment orders for the years 1968-69 to 1971-72 had not been passed after the remand.

Analysis of the Judgment:

Entitlement to Adjustment:
The court held that the dealer was entitled to adjust the excess tax deposited in previous years against the tax liability for subsequent months. The court referred to various judgments, including those of the Supreme Court and Division Benches, which established that the State Government is bound to refund excess tax illegally realized, and such refund is a form of restitution to the dealer-assessee. The principle of restitution, as recognized in Section 144 of the Code of Civil Procedure, 1908, was applied, stating that any amount deposited over and above the admitted tax liability is refundable to the dealer once the assessment order is set aside.

Legality of Imposing Interest:
The court found that the imposition of interest for late payment of the admitted tax liability, which the dealer sought to adjust against the refund amount, was not justified. The court observed that the dealer had filed applications for adjustment of the refund amount against the admitted tax liability, and these applications were not disputed by the assessing authority. The Tribunal's interpretation that the refund amount would become due only after passing fresh assessment orders was incorrect. The court held that the dealer was entitled to the adjustment, and therefore, the imposition of interest was not sustainable.

Interpretation of Section 29:
The court interpreted Section 29 of the U.P. Sales Tax Act, 1948, to mean that the dealer is entitled to an automatic adjustment of the refund amount against any outstanding tax liability. The court referred to previous judgments, including Dhingra Mechanical Works v. Commissioner of Sales Tax and Victor Cables Corporation v. Assistant Commissioner (Assessment) Sales Tax, which supported the view that the dealer can ask for an adjustment of the refund amount due to him against his outstanding tax dues. The court concluded that the Tribunal had misinterpreted Section 29 by holding that the refund amount would be due only after fresh assessment orders were passed.

Conclusion:
The court allowed the revision, setting aside the demand of Rs. 48,845.18 towards interest. The court held that the dealer was entitled to adjust the excess tax deposited in previous years against the tax liability for the months of April, May, and August 1977, and the imposition of interest for late payment was not justified. The interpretation of Section 29 of the U.P. Sales Tax Act, 1948, by the Tribunal was found to be incorrect, and the dealer's entitlement to adjustment was upheld.

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