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TMI Blog2010 (8) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners under section 5A of the Kerala General Sales Tax Act, 1963 on the purchases of products in Kerala stock transferred outside Kerala for storage in petitioners' bonded warehouses. However for the assessment years, that is from 1987-88 to 1995-96, the petitioners did not include excise duty along with purchase price as part of taxable turnover for payment of tax at last purchase point under section 5A of the KGST Act, even though tax under the said provision was paid along with monthly returns on the purchase value without inclusion of excise duty. Even though liability for payment of sales tax on deferred payment of excise duty was covered by the decision of the Supreme Court in McDowell & Company Limited v. Commercial Tax Officer [1985] 59 STC 277, the petitioners took the stand that excise duty later paid was not part of taxable turnover. Therefore they started filing monthly sales tax returns paying tax under section 5A only on the purchase value without including excise duty thereon. Later, in petitioners' own case, a Full Bench of this court vide judgment dated December 16, 1992, reported in Hindustan Petroleum Corporation Ltd. v. State of Kerala [1993] 89 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Mohammed Raffiq appearing for the respondents. The first question we propose to consider is petitioners' challenge against interest levied under section 23(3) of the Act. This issue is raised in one O.P. filed by Indian Oil Corporation Ltd., and one O.P. filed by Bharath Petroleum Corporation Ltd., and one O.P. and S. T. Rev. case filed by Hindustan Petroleum Corporation Ltd. The challenge against levy of interest by the three companies is for the assessment years 1987-88 to 1995-96 and in the above ST Rev. case Hindustan Petroleum Corporation Ltd. is challenging levy of interest confirmed by the Tribunal for the assessment year 1996-97. Since the facts and circumstances of the case that led to levy of interest are the same, it is enough if we state the facts which are common for all the companies. The issue has to be decided with reference to the specific factual position stated below: (1) The judgment of the Supreme Court declaring sales tax liability on deferred payment of excise duty was pronounced in McDowell Company Limited v. Commercial Tax Officer and the decision is [1985] 59 STC 277 (SC). (2) A Full Bench judgment of this court in the petitioners' own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore in some earlier decisions of this court and the Supreme Court it was held that in order to attract liability for payment of interest for default, notice of demand should be served and default happens only if there was failure to pay the tax or other amount after service of notice. In order to get over these judgments, section 23(3) was amended in 1988 dispensing with the requirement of service of demand notice for levy of interest for nonpayment of tax on due dates in accordance with statutory provisions. Section 23(3) after the amendment vide Act 6 of 1988 provides for interest in the case of following defaults: (1) If the tax assessed is not paid within the time prescribed. (2) If any other amount assessed is not paid within the time prescribed. (3) If the tax due under the Act is not paid within the time prescribed. (4) If any other amount due under the Act is not paid within the time prescribed. Under the scheme of the KGST Rules tax is payable along with monthly returns as provided under rule 21(7) and along with final returns as provided under rule 18(3) of the KGST Rules. Assessees are required to declare in the returns filed in the prescribed form, the tax pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-payment of tax admitted in the returns or when there is non-payment of tax assessed and demanded by the officer. The Government Pleader, on the other hand, contended that tax due under the Act means tax payable in accordance with law and when the Supreme Court in McDowell's case [1985] 59 STC 277 declared the law on the subject in 1985 vide judgment referred above, it was the duty of the petitioners to return excise duty as taxable turnover along with monthly and final returns and remit the tax and any delay in payment is default in payment of "tax due under the Act" and so much so interest is rightly levied on the petitioners. He further contended that at least after the Full Bench judgment dated December 16, 1992 of this court(1) in the petitioners' own cases, (1)Reported as Hindustan Petroleum Corporation Ltd. v. State of Kerala [1993] 89 STC 106. the petitioners were bound to pay tax on excise duty along with monthly and final returns and such default attracts interest, irrespective of whether excise duty was returned as taxable turnover in the returns or not. The Government Pleader has relied on two recent judgments of this court, both rendered by different Divisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision [1981] 48 STC 37 is no longer good law after the Supreme Court judgment in McDowell's case [1985] 59 STC 277, we still feel until the Full Bench decision of this court in the petitioners' own cases, the petitioners were not strictly bound to pay tax voluntarily on excise duty because Burmah Shell's case [1981] 48 STC 37 specifically got overruled only by the Full Bench judgment. Strangely Department also did not make any provisional or regular assessment demanding tax based on McDowell's case [1985] 59 STC 277 which they could have done. However, we find no justification for the petitioners not to have returned the excise duty as taxable turnover after the declaration of law by the Full Bench of this court in the petitioners' own cases. We are therefore of the view that the tax on excise duty became due from the petitioners "as tax due under the Act " after the pronouncement of law by the Full Bench of this court on December 16, 1992(1). We, therefore, hold that the petitioners are defaulters in payment of sales tax on excise duty from the monthly returns for January, 1993 onwards. There was delay in payment in some cases up to December, 1996 and in som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Supreme Court almost directly on the point and the chance of getting favourable orders from the Supreme Court was remote, if not nil. Therefore, in our view, if the managements of these companies were prudent they should have started paying tax based on the Full Bench decision of this court, even though they could simultaneously contest the liability in the Supreme Court and claim refund if they succeed in the appeal. Therefore we are not convinced that there is any bona fides on the part of the petitioners in non-payment of tax after the Full Bench decision of this court and so much so default is deliberate and the consequence is penalty. However, since all the petitioners are public sector companies, and considering the high rate of interest payable under section 23(3) which we have upheld for the periods commencing from the period after the Full Bench judgment, we feel if the petitioners clear the entire arrears of interest within one month from the date of receipt of a copy of this judgment, they should be exonerated from payment of penalty under section 45A of the Act for the assessment years 1988-89 to 1992-93 for the Indian Oil Corporation Ltd. , 1987-88 to 1990-91 for th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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