M/S. Abirami Agencies vs The Assistant Commissioner (St) on 15 November, 2024

1. Outcome

The High Court dismissed the Writ Petition filed by M/S. Abirami Agencies, upholding the impugned rectification order dated 21.04.2022. The Court found no merit in the challenge to the rectification of the earlier assessment order which had erroneously granted a refund without accounting for interest on delayed tax payment.

2. Core Issue

The core issue was whether the respondent tax authority was justified in rectifying an assessment order to impose interest under Section 24(3) of the TNGST Act, 1959, for delayed payment of resale tax and surcharge, especially when the initial liability was disputed and only settled after a Supreme Court ruling. The petitioner contended the rectification was without jurisdiction as the "correct" tax liability was only determined later, while the revenue argued for automatic interest on belated payments.

3. Key Facts

• Petitioner's Business: M/S. Abirami Agencies was a dealer in Superior Kerosene Oil (SKO) subject to sales tax, resale tax, and surcharge under the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act).
• Tax Dispute: The petitioner, along with other dealers, challenged the levy of surcharge and resale tax.
• Supreme Court Decision: The Hon'ble Supreme Court, vide judgment dated 01.09.2014 (in SLP (C) Nos.34076 to 34078 of 2013), ruled against the dealers, confirming the legality of the levies.
• Belated Payment: Pursuant to the Supreme Court's order, the petitioner voluntarily paid the surcharge and resale tax on 20.03.2015.
• Earlier Assessments & High Court Directives: The petitioner had challenged provisional assessment orders in various forums. In W.P.No.15183 of 2004, the High Court directed the respondent to finalize the assessment for the Assessment Year 2003-2004 by issuing a fresh pre-assessment notice.
• Original Assessment Order: This led to a pre-assessment notice dated 26.08.2021 and a subsequent assessment order dated 01.09.2021, which issued a refund of Rs.4,12,492/- to the petitioner after adjusting excess amounts.
• Impugned Rectification Order: The respondent issued a notice dated 25.03.2022, followed by the impugned order dated 21.04.2022, rectifying the 01.09.2021 assessment order. This rectification sought to revise the refund granted, effectively accounting for the interest on the belated payment of resale tax and surcharge.

4. Arguments (Taxpayer vs Revenue)

• Taxpayer (M/S. Abirami Agencies):
  • The assessment order dated 01.09.2021, granting the refund, was valid.
  • The rectification proceedings initiated under Section 84 of the TNVAT Act, 2006, read with Section 55 of the TNGST Act, 1959, were without jurisdiction.
  • Interest under Section 24(3) of the TNGST Act, 1959, could not be imposed as there was no delay in payment of tax after the Supreme Court's order dated 01.09.2014.
  • The correct tax liability was determined for the first time only on 01.09.2021, and the tax was paid promptly on 20.03.2015 after the Supreme Court finalized the liability.
  • Under Rule 16 of the TNGST Rules, 1959, refunds are issued after final assessment, leaving no scope for levying interest.
• Revenue (The Assistant Commissioner (ST)):
  • Interest was payable because the petitioner failed to pay the tax in time.
  • Under Sections 13(1) and 13(2) of the TNGST Act, 1959, tax becomes due upon submission of monthly returns, even without a specific notice of demand.
  • Interest gets triggered automatically under Section 24(3) of the TNGST Act, 1959, in case of delayed payment of tax.
  • Relied on the Supreme Court's decision in E.I.D Parry (India) Ltd. Vs. Assistant Commissioner of Commercial Taxes, Chennai, which clarified that interest liability is automatic as a consequence of delayed payment.

5. Court’s Reasoning

• The Court noted that the petitioner failed to pay resale tax and surcharge at the time of filing returns, choosing to challenge them in court.
• Upon the Supreme Court's adverse ruling on 01.09.2014, the petitioner made the belated payment on 20.03.2015.
• The Court affirmed that the petitioner was indeed liable to pay interest on these delayed payments under Section 24(3) of the TNGST Act, 1959.
• Referring to Section 13(2) of the TNGST Act, 1959, the Court reiterated that tax is due without any notice of demand on the date of receipt of the return or on the last prescribed due date, whichever is later, based on the actual turnover declared.
• The Court heavily relied on the Supreme Court's judgment in E.I.D Parry (India) Ltd. Vs. Assistant Commissioner of Commercial Taxes, Chennai [(2005) 4 SCC 779]. It extracted relevant portions emphasizing that the levy of interest is a statutory consequence for failure to pay tax.
• The E.I.D Parry case established that if a return shows the actual turnover and tax is not paid as per that return, then interest is automatically payable under Section 24(3) of the TNGST Act, 1959, as the amount remained unpaid after its specified due date. This applies even if the monthly return does not initially indicate the full actual turnover, as long as the underlying liability existed.
• The Court distinguished between automatic interest levy (for non-payment of admitted/declared liability) and interest dependent on adjudication for incomplete/incorrect returns, concluding that the petitioner's situation fell under the former, attracting automatic interest.
• Therefore, the Assessment Order dated 01.09.2021, which ordered a refund without accounting for this automatic interest liability, contained an error apparent on the face of the record and was correctly rectified by invoking Section 84 of the TNVAT Act, 2006, read with Section 55 of the TNGST Act, 1959.

6. Statutory References

• Article 226 of the Constitution of India
• Tamil Nadu General Sales Tax Act, 1959 (TNGST Act, 1959):
  • Section 2(r) (definition of "turnover")
  • Section 13(1), 13(2) (time of supply of services, provisional assessment, advance tax payment)
  • Section 24(1), 24(3) (payment and recovery of tax, interest/penalty for non-payment)
  • Section 55(1), 55(1)(3) (power of rectification)
• Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act, 2006):
  • Section 84 (power of rectification)
• Tamil Nadu General Sales Tax Rules, 1959 (TNGST Rules, 1959):
  • Rule 16 (refunds)
  • Rule 18(3), 18(4) (references from the cited precedent, dealing with interest/best judgment assessment)

7. Precedents Cited

• Hon'ble Supreme Court Judgment in SLP (C) Nos.34076 to 34078 of 2013 dated 01.09.2014: Ruled against dealers regarding the levy of surcharge and resale tax (cited as factual background for belated payment).
• E.I.D Parry (India) Ltd. Vs. Assistant Commissioner of Commercial Taxes, Chennai [(2005) 4 SCC 779]: Heavily relied upon to establish that interest liability for delayed tax payment is automatic and statutory.
• J.K.Synthetics Ltd.'s case: Mentioned within the E.I.D Parry judgment as a case where similar principles regarding interest levy were laid down.