Delhi State Civil Supplies Cor. vs The State Trading Corpn. Of Ind.
2012 Latest Caselaw 3953 Del

$~13

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                      Judgment delivered on 06.07.2012

+      RFA 642/2004


DELHI STATE CIVIL SUPPLIES COR.                                    ...    Appellant

                                    Versus

THE STATE TRADING CORPN. OF IND.                                   ...Respondent


Advocates who appeared in this case:
For the Appellant    :      Mr. Kamal Mehta
For the Respondent   :      None.

CORAM:
HON'BLE MR. JUSTICE V.K.JAIN

                          JUDGMENT

HON'BLE MR. JUSTICE V.K.JAIN(ORAL)

1. This appeal is directed against the judgment and decree dated 27.08.2004,

whereby a decree for Rs.2,63,673/- along with interest on that amount @ 12% per

annum was passed in favour of the respondent and against the appellant. The facts

giving rise to filing of this appeal can be summarized as under.

The respondent is a public sector company, engaged in various trading

activities, including import and sale of canalized items such as Refined Bleached

Deorderised (RBD) Palm Oil and other commodities, whereas the appellant is an

undertaking of the Government of NCT of Delhi which is engaged in supply of

foodgrains and other essential commodities under Public Distribution System in

Delhi. Prior to 19.03.1984, palm oil was subjected to sales tax at the last point and,

therefore, the appellant, instead of paying sales tax, had been furnishing

Declaration Form-ST-I or an undertaking to furnish the declaration to the

respondent. With effect from 19.03.1984, the point at which the sales tax was to be

levied on palm oil, was changed from 'last point' to 'first point' and accordingly

the sales tax became payable @ 5% on the sale of RBD palm oil made by the

respondent to the appellant. It appears that this change in the point at which sales

tax was to be levied, did not come to the notice of the parties for some time, as a

result of which, even after 19.03.1984, the appellant continued to furnish ST-I

Declaration in lieu of payment of sales tax and the respondent kept on accepting

the said declaration. On coming to know of the change in point at which sales tax

was to be levied, the respondent asked the appellant to make payment of the sales

tax on the purchases made after 19.03.1984. This amount came to be

Rs.11,85,937/-. The appellant paid a sum of Rs.6,41,250/- to the respondent,

leaving a balance of Rs.5,44,687.50. The plea taken by the appellant/ defendant for

not paying the said amount to the respondent was that it had already deposited sales

tax with the sales tax authorities and, therefore, could not be made to pay the sales

tax again on the same purchases made by it from the respondent. On account of

delayed payment of sales tax, the sales tax authorities levied interest by way of

interest, amounting to Rs.2,83,540/- for the year 1983-84 and Rs.2,63,673/- for the

year 1984-85. The respondent initially filed a suit for recovery of Rs.5,44,687.50

being the amount of sales tax which it had deposited with the sales tax authorities

but later on amended the plaint, so as to include the claim for recovery of

Rs.5,27,084/- towards interest which it had deposited with the sales tax department.

Interest @ 18% per annum was also claimed by the respondent from the appellant.

2. The appellant filed written statement contesting the suit and took a

preliminary objection that the suit was barred by limitation. On merits, it was

alleged that the plaintiff/ respondent had no right to claim interest for the year

1983-84 and 1984-85. Regarding the principal sum of Rs.5,44,687.50, it was stated

that the appellant/ defendant had paid the same vide demand draft dated 6.12.1993.

4. On the pleadings of the parties, following issues were framed:

1. Whether the claim with regard to interest is barred by limitation? OPD

2. Whether the plaintiff is entitled to the interest claimed? OPD

3. Relief.

Issue No.1: Admittedly, the principal sum of Rs.5,44,687.50, which the

respondent had deposited with the sales tax department, was paid by the appellant

to the respondent, during pendency of this suit, vide demand draft dated 6.12.1993.

The dispute between the parties is, therefore, confined to payment of interest

recovered by the department from the respondent, by way of penalty, on account of

late deposit of sales tax. The respondent could not have claimed the amount of

interest from the appellant, without first depositing the said amount with sales tax

department. A perusal of the written statement itself shows that the appeal

preferred by the respondent against levy of interest was rejected by Additional

Commissioner of Sales Tax only on 4.5.1992. The order passed by Additional

Commissioner of Sales Tax also indicates that the amount of interest had not been

deposited during the pendency of the appeal before him and only the security of

Rs.60,000/- was taken from the respondent. The amount of interest was thus

deposited only after 4.5.1992. The suit have been filed on 3.8.1987 and even the

amended plaint have been filed on 17.10.1992, it cannot be said that the suit with

respect to claim of interest deposited by the respondent with sales tax department

was barred by limitation. This issue has, therefore, been rightly decided against the

appellant by the learned trial court.

Issue No.2 & 3: The contention of the learned counsel for the appellant is that it

was the duty of the respondent to charge sales tax at the first point with effect from

19.03.1984 and the appellant cannot be made to pay interest by way of a penalty on

account of failure of the respondent to levy charges/ sales tax at the time of sale to

the appellant. I, however, find no merits in this contention. Admittedly, the sales

tax was actually payable at the first point on the sales made with effect from

19.03.1984. Primarily, it was the obligation of the purchaser to pay sales tax on

prescribed rate, though a duty was also casts upon the seller to recover the sales tax

at the time the sale is made. Ignorance of law being no excuse, not only the

respondent but also the appellant was supposed to know that the sales tax was

payable at the time when purchase was made by it from the respondent. Therefore,

instead of issuing SD-Declaration Form, the appellant ought to have paid the sales

tax to the respondent. Had the appellant paid the sales tax at the time of purchase of

goods, instead of submitting SD-Declaration Forms, which it was not supposed to

submit, on account of sales tax being chargeable at the first point of sale, no

interest by way of penalty would have been recovered by the Sales Tax Department

from the respondent. More importantly, the amount which was payable by the

appellant towards sales tax was retained and utilized by it till its payment to the

respondent. There is no reason why the respondent should pay interest for non-

payment of the amount of sales tax which was utilized by the appellant, before it

was deposited with sales tax department. If the appellant had recovered the sales

tax from its customers at the time of sale to them and had deposited that amount

with sales tax department, it can claim interest on that amount from the department,

but, it must pay the amount which the department has recovered from the

respondent by way of penalty on account of late deposit of the sales tax. The

appellant, in a way, admitted its liability to pay the sales tax by making payment of

Rs.6,41,250/- before filing of the suit and Rs.5,44,687/- during pendency of the

suit. The amount of Rs.5,44,687/- was deposited by the respondent with sales tax

department in March-April, 1987. The respondent paid that amount to the appellant

as late as 6.12.1993. This amount ought to have been paid by the appellant to the

respondent, as soon as it was deposited with the sales tax department. By not

making payment of this amount immediately after it was deposited with the sales

tax department, the respondent utilized the said amount for more than six and a half

years. The learned trial court has not awarded any interest to the respondent on this

amount despite the fact that interest @ 18% per annum was claimed by the

respondent on this amount. The equities, therefore, do not lie in favour of the

appellant, it already having delayed payment of Rs.5,44,687/- by more than six and

a half years. In fact, the interest payable on the said amount of Rs.5,44,687/- for

more than six and a half years @ 18% per annum or even @ 12% per annum would

be more than the amount of interest recovered by the sales tax department from the

respondent by way of penalty on account of late deposit of the sales tax. From

whatever angle I may see, there is absolutely no ground to interfere with the

decision of the learned trial court as far as decree for principal sum of Rs.2,63,673/-

is concerned.

However, as far as interest is concerned, considering the fact that the

appellant is a public sector corporation, which was engaged in social service by

distributing palm oil under Public Distribution System, I am of the view that

pendent lite and future interest should be awarded @ 6% per annum as against 12%

per annum as awarded by the learned trial court.

5. For the reasons stated hereinabove the judgment and decree dated

27.08.2004 is modified to the extent that decree for recovery of Rs.2,63,673/- with

costs and pendente lite and future interest @ 6% per annum is passed in favour of

the respondent and against the appellant. Decree sheet be drawn accordingly. The

appeal stands disposed of. TCR be sent back.

V.K.JAIN, J JULY 06, 2012 rd