Madras High Court
Sri Shanmugha Solvent Extracts ... vs The Joint Commissioner (Ct) on 29 September, 2021
W.P.(MD)Nos.5419 to 5426, 4261 & of 2015
Sri Shanmugha Solvent Extracts (P) Ltd., v. The Joint Commissioner (CT), Trichy
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 29.09.2021
CORAM:
THE HON'BLE MR.JUSTICE R.SURESH KUMAR
W.P.(MD)Nos.5419 to 5426, 4261 & of 2015
and
W.M.P(MD) Nos.5129 to 5135 of 2016,
M.P.(MD)Nos.1, 1, 1, 1, 1, 1, 1, 1, 1 of 2015
W.P.(MD)Nos.5419 of 2015:
Sri Shanmugha Solvent Extracts (p) Ltd.,
Represented by its Managing Director,
S.PR.Palaniappan. ...Petitioner
Vs.
1.The Joint Commissioner (CT),
Trichy Division,
Court Campus, Trichy.
2.The Assistant Commissioner (CT),
Pudukkottai. ... Respondents
PRAYER: Petition filed under Article 226 of the Constitution of India, to issue a
Writ of Certiorarified Mandamus, calling for the records on the file of the 1 st
respondent in Na.Ka.5056/2009/A8 dated 16.02.2015, quash the same as illegal,
invalid and arbitrary and direct the 1st respondent to grant samadhan certificate
under the Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2008 by considering
afresh the petitioner's application for settlement of disputes dated 30.03.2009.
For Petitioner : Mr.A.Chandrasekaran
https://www.mhc.tn.gov.in/judis
W.P.(MD)Nos.5419 to 5426, 4261 & of 2015
Sri Shanmugha Solvent Extracts (P) Ltd., v. The Joint Commissioner (CT), Trichy
For Respondents : Mr.R.Sureshkumar
Government Advocate
COMMON ORDER
Since the issue raised in all these writ petitions in this batch of cases is one
and the same, with consent of the learned Counsel appearing for both sides, these
writ petitions were heard together and are being disposed of by this common order.
2.For the sake of convenience and to understand the case, the fact relates to
the writ petition in W.P.(MD)No.5419 of 2015 is traversed hereunder:
2.1.The petitioner is a Company established in the year 1989 for
manufacturing edible grade rice bran oil. It is located in a declared industrially
backward area in the State of Tamil Nadu. Therefore, the State Government had
come forward to provide certain incentives and concessions. The petitioner was
granted deferral of sales tax for their unit for a sum of Rs.90,00,000/- to be availed
in the period from 01.10.1990 to 30.09.1996.
2.2.Based on the benefit of such deferral sales tax scheme, the petitioner filed
monthly returns and paid the relevant taxes, wherever payable and claimed deferral
in accordance with the provisions of then existing Tamil Nadu General Sales Tax
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W.P.(MD)Nos.5419 to 5426, 4261 & of 2015
Sri Shanmugha Solvent Extracts (P) Ltd., v. The Joint Commissioner (CT), Trichy
Act, 1959 as well as Central Sales Tax Act, 1956 [in short to be referred to as
“TNGST Act” and “CST Act” respectively].
2.3.During the course of the business, the petitioner claimed to have availed
only Rs.31,90,000/- approximately, out of the total deferral amount of Rs.90,00,00/-
from the year 1990-91 till 1995-96. Thereafter, due to various reasons, the
petitioner was forced to close their production activity with effect from 04.07.1996.
Therefore, a portion of the sanctioned deferral amount alone with great difficulty
was able to be paid by the petitioner.
2.4.Due to the financial crisis, the balance of deferral amount and the interest
was not paid and in the meanwhile, the second respondent seems to have taken
various recovery proceedings against the petitioner and in fact, one of the
properties of the petitioner was subjected to attachment.
3.At that time, the Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2008
[Tamil Nadu Act No.60 to 2008] [in short it would be called as “Settlement Act,
2008”] was introduced. The salient features of the Settlement Act, 2008 is that,
the settlement scheme has been introduced under the Settlement Act, 2008, under
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W.P.(MD)Nos.5419 to 5426, 4261 & of 2015
Sri Shanmugha Solvent Extracts (P) Ltd., v. The Joint Commissioner (CT), Trichy
which, various category of tax payers with due of tax can pay the tax due with
interest at the rate of 6% per annum. Such kind of offer can be accepted and on the
settlement scheme, the balance of interest as well as the entire penalty would be
waived.
4.In view of the Settlement Act, 2008, the petitioner immediately wanted to
respond and in fact requested the second respondent to state the exact amount to be
paid to avail the scheme, so that they can make arrangement from their financial
sources for payment of the same. Accordingly, the second respondent informed the
petitioner that the petitioner has to pay a total sum of Rs.52,97,656/- as per the
scheme comprising of the entire arrears of tax of Rs.27,61,469/- towards TNGST
Act arrears and Rs.4,30,877/- towards CST Act arrears and also the interest
calculated at 6% is Rs.17,20,304/- towards TNGST Act arrears and Rs.3,84,689/-
towards CST Act arrears. The said intimation had been given by the second
respondent vide his proceedings dated 03.04.2009.
5.Accordingly, the petitioner, having mobilised funds from various sources
with great difficulty, including selling some of the properties of the petitioner,
arranged the said amount of Rs.52,97,656/- and paid the same along with an
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W.P.(MD)Nos.5419 to 5426, 4261 & of 2015
Sri Shanmugha Solvent Extracts (P) Ltd., v. The Joint Commissioner (CT), Trichy
application made under Section 5 of the Settlement Act, 2008 before the first
respondent on 30.03.2009. Thereafter, on 15.07.2011, the first respondent to the
surprise of the petitioner, had issued a notice proposing to reject the petitioner's
Samadhan application on the ground that the payment of interest as per the scheme
is fall short of more than 10%. The reason being for such shortfall, according to the
first respondent is that, they calculated the interest from the date of returns due,
stating that the petitioner's unit since was closed in November 1995 i.e., during the
deferral period, such interest shall be calculated from the returns due. Whereas, the
petitioner had calculated the interest of 6% per annum from the date of actual
deferral due, that starts only from September 2001 and ends in September 2002.
6.Though the petitioner, in response to the said notice dated 15.07.2011 had
given a detailed reply and objection dated 03.10.2011, with supporting documents
and requested the first respondent to grant Samadhan certificate and also requested
for personal hearing, which was granted on 21.12.2014 and on that date, the
petitioner or his representative appeared before the first respondent and explained
the details as to how the interest shall be calculated from the deferral due date. It
seems however that the first respondent was not convinced, with the result, the first
respondent has passed a rejection order dated 16.02.2015 stating that the Samadhan
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Sri Shanmugha Solvent Extracts (P) Ltd., v. The Joint Commissioner (CT), Trichy
application made by the petitioner is liable to be rejected on the ground that the
difference amount is more than 10% and therefore, the benefits of Settlement Act,
2008 cannot be availed by the petitioner. Accordingly, such rejection of the
application of the petitioner was made through the impugned order and therefore,
challenging the same, this Writ Petition has been filed.
7.It is to be noted that, insofar as the petitioner is concerned, since the
TNGST arrears is for six years starting from 1990-1991 upto 1995-1996 and the
CST arrears is for 2 years i.e., for 1991-1992 and 1992-1993, orders have been
passed in respect of all the six assessment years arrears of TNGST Act and two
assessment years arrears of CST Act. Hence, these eight writ petitions of the writ
petitioner were filed with identical facts.
8.Like that, writ petition in W.P.(MD)No.4261 of 2015 has been filed by the
another petitioner, in that writ petition also all other facts are similar except one
difference, where, under the deferral scheme, it is not five years deferral of payment
of sales tax, it is ten years deferral from 2001 to 2010 and the petitioner wanted to
avail the benefit of the scheme under Tamil Nadu Sales Tax [Settlement of Arrears]
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W.P.(MD)Nos.5419 to 5426, 4261 & of 2015
Sri Shanmugha Solvent Extracts (P) Ltd., v. The Joint Commissioner (CT), Trichy
Act, 2011 [in short “Settlement Act, 2011”], where there was a tax due for the
assessment year 1994-1995, which had become due after some years, based on the
deferral scheme. Therefore, based on the due under the deferral scheme, the tax
arrears as well as the interest at the rate of 7.5%, which has been fixed under the
Settlement Act, 2011, though had been paid by the petitioner in that case along with
an application made in this regard under the Settlement Act, 2011, the same had
also been rejected by the first respondent, of course on the very same reason as has
been narrated in respect of eight other cases of other petitioner. Therefore, all these
nine cases have been grouped together and were heard accordingly.
9.Assailing the impugned order passed by the first respondent,
Mr.A.Chandrasekaran, learned Counsel appearing for the petitioner has made
submissions. Though the learned Counsel has made extensive submissions on
various aspects of the deferral scheme as well as the salient features of the
Settlement Act, 2008 and also the fact that the petitioner, having calculated the
entire arrears of Sales Tax for the relevant years as well as the interest at the rate of
6% having been calculated, paid along with an application, his submissions had
been made on the pointed issue as to whether the interest of 6% as provided under
Settlement Act, 2008, is to be calculated from the date of actual returns due of each
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Sri Shanmugha Solvent Extracts (P) Ltd., v. The Joint Commissioner (CT), Trichy
assessment year or from the date of deferral due based on the deferral scheme.
10.In order to delve into the said question and in support of the case of the
petitioners, the learned counsel has made submissions that the reason mainly stated
in the impugned orders for rejecting the application of the petitioners is that, the
petitioner has not paid 90% of the tax arrears with interest and since it is 17.72%
and 15.27% etc., in each of the cases invariably, since it is above 10% maximum
permissible limit, those applications cannot be accepted.
11.In respect of the said reason stated by the first respondent through various
impugned orders herein, the learned counsel would contend that, the said higher
due more than 10% has come not because that the petitioner had not paid 90% of
the tax due with interest, but only on the reason that, the method of calculation
adopted by the first respondent in calculating the interest. In this context, it is the
contention of the petitioner's counsel that, interest on the tax due payable by the
petitioner shall be calculated only from the date of deferral due. In support of his
submission, the learned counsel has relied upon the communication issued by the
second respondent dated 03.04.2009. For the sake of convenience, the contend of
the said communication dated 03.04.2009 is extracted hereunder:
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W.P.(MD)Nos.5419 to 5426, 4261 & of 2015
Sri Shanmugha Solvent Extracts (P) Ltd., v. The Joint Commissioner (CT), Trichy
“While acknowledging the receipt of a letter cited
above, please note that you are due totally Rs.52,97,656/-
(Rupees Fifty two lakhs ninty seven thousand six hundred and
fifty six only) as on 31.03.2009 under one time settlement of
tax arrears scheme' 2008. Kindly remit the said arrears within
the stipulated date.
Commercial Tax Officer
Pudukkottai.”
12.Along with the said communication, a working /calculation sheet has been
annexed separately for TNGST Act arrears as well as CST Act arrears. The learned
Counsel relying upon heavily this communication with annexure would contend
that, it is their own stand of the respondent that the arrears of tax due as well as the
interest being calculated for the purpose of availing settlement of tax arrears
scheme, 2008 is only based on the interest calculated from the date of deferral due
and not from the date of returns due.
13.The learned counsel would further add that, only after getting these
figures from the second respondent, through his communication dated 03.04.2009,
the petitioner has mobilized the funds and paid the same, along with the application
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W.P.(MD)Nos.5419 to 5426, 4261 & of 2015
Sri Shanmugha Solvent Extracts (P) Ltd., v. The Joint Commissioner (CT), Trichy
made in this regard under Settlement Act, 2008. Therefore, the learned Counsel
would submit that, the present reason, which is reflected in the impugned orders
stating that the petitioner has not paid interest calculating from the date of return
due and calculated only from the date of deferral due, thus, it goes beyond
minimum permissible limit of 10% and accordingly, it was rejected, is untenable.
14.In this context, it is the vehement contention of the learned Counsel
appearing for the petitioner that, nowhere in the Settlement Act, 2008, nor in any
other legislation, it is stated that, interest shall be calculated from the date of return
due in cases of the assessee, who availed the deferral scheme. In fact, in support of
his contention, the learned Counsel appearing for the petitioner has relied upon the
judgment of a Division Bench of this Court dated 06.12.2006 made in
W.A(MD)No.1482 of 2006 in the case of M/s.Amutha Mills Private Limited Vs.
The Assistant Commissioner Zone-III, Coimbatore, and 2 others. For the sake
of convenience, the relevant portion of the Judgment of the Division Bench as
referred to above is extracted hereunder:
“The learned counsel appearing for the
appellant/petitioner submitted that as per the terms of the
deferral agreement, in the event of default in the repayment
of the IFST deferral loan, the loan can be recoverable along
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Sri Shanmugha Solvent Extracts (P) Ltd., v. The Joint Commissioner (CT), Trichy
with interest at 24% p.a. Calculated from the due date for
repayment of loan. Therefore, the penal interest, if any,
should be calculated only from the due date for repayment of
the loan and not from the date on which the IFST deferral
loan was availed. He submitted that the issue has already
been settled by the Tamil Nadu Taxation Special Tribunal in
O.P. Nos. 65 to 68 of 1998. The decision of the Special
Tribunal has been accepted by the Commercial Taxes
Department. This position is not disputed by the learned
Special Government Pleader but he submitted that since the
appellant/petitioner stopped the production in 2002, they are
liable to pay the penal interest from November, 2002 in
terms of the Circular of the Commercial Taxes and Religious
Endowments Department dated 18.03.1994. However, a
perusal of the said Circular shows that this was only in the
form of recommendation and this term has not been
specifically incorporated in the agreement. In the
circumstances, we are of the view that the
appellant/petitioner shall be liable to pay penal interest only
with effect from June,2003. The writ petition is disposed of
accordingly. Consequently, writ appeal and miscellaneous
petitions are closed. No costs.”
15.The learned counsel would also rely upon an order of a Single Judge
dated 01.12.2010 made in W.P.No.19060 of 2009 in the case of S.R.Subramaniam
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W.P.(MD)Nos.5419 to 5426, 4261 & of 2015
Sri Shanmugha Solvent Extracts (P) Ltd., v. The Joint Commissioner (CT), Trichy
vs. The Assistant Commissioner (CT), Coimbatore, Zone-III, Coimbatore and
others, where the learned Judge following the dictum of the Division Bench
Judgment in M/s Amutha Mills Private Limited case cited supra has taken the
view that, the interest shall be calculated from the deferral date and not from the
return due date. To appreciate the said order of the learned Judge, the relevant
portion of the same is extracted hereunder:-
“5.As rightly pointed out by the petitioner following
the Hon'ble First Bench judgment of this Hon'ble Court made
in W.A.No.1462 of 2006 dated 06.12.2006, the Department
could at best claim the interest on the Deferral Scheme only
from the due date of repayment of loan and not on the date
from the IFST was filed. But at the same time as rightly
pointed out by the Department, the Scheme itself was
cancelled in the year 2001 because the erst-while owner has
seized to avail and closed the business. Therefore, it should
be construed that he is liable to repay as per the Hon'ble
First Bench judgment of this Hon'ble Court made in W.A.No.
1462 of 2006 dated 06.12.2006 from the date when it is
closed i.e., when the Deferral Scheme was cancelled namely,
January 2001.
6.As per the order of Hon'ble First Bench judgment of
this Hon'ble Court made in W.A.No.1462 of 2006 dated
06.12.2006 in which also a similar point was taken, in that
case, the erst-while owner has even sold the machinery and
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W.P.(MD)Nos.5419 to 5426, 4261 & of 2015
Sri Shanmugha Solvent Extracts (P) Ltd., v. The Joint Commissioner (CT), Trichy
therefore, they claimed that the penal interest is liable to be
paid from January 2002 onwards relying upon the circular by
the Department. But the Hon'ble First Bench judgment of
this Hon'ble Court made in W.A.No.1462 of 2006 dated
06.12.2006 has categorically stated as follows:
“2.The learned counsel appearing for the
appellant/petitioner submitted that as per the
terms of the deferral agreement, in the event of
default in the repayment of the IFST deferral
loan,, the loan can be recoverable along with
interest at 24% p.a. Calculated from the due date
for repayment of loan. Therefore, the penal
interest, if any, should be calculated only from the
due date for repayment of the loan and not from
the date on which the IFST deferral loan was
availed. He submitted that the issue has already
been settled by the Tamil Nadu Taxation Special
Tribunal in O.P.Nos.65 to 68 of 1998. The
decision of the Special Tribunal has been
accepted by the Commercial Taxes Department.
This position is not disputed by the learned
special government Pleader but he submitted that
since the appellant/petitioner stopped the
production in 2002, they are liable to pay the
penal interest from November, 2002 in terms of
the Circular of the Commercial Taxes and
Religious Endowments Department dated
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18.03.1994. However, a perusal of the said
Circular shows that this was only in the form of
recommendation and this term has not been
specifically incorporated in the agreement. In the
circumstances, we are of the view that the
appellant/petitioner shall be liable to pay penal
interest only with effect from June, 2003. The
writ petition is disposed of accordingly.
Consequently, writ appeal and miscellaneous
petitions are closed. No costs.”
(Emphasis Supplied)
7.Following the Hon'ble First Bench judgment of this
Hon'ble Court made in W.A.No.1462 of 2006 dated
06.12.2006, the Department is entitled to claim penal interest
only from the date of repayment namely, May, 2005 and
therefore, the impugned order in so far as it relates to
claiming interest from 1996 to May, 2005 alone is set aside. ”
16.Having relied upon these decisions, the learned counsel would contend
that, the law has been made in this regard by these judgments, where the Division
Bench Judgment had come prior to the Settlement Act, 2008 and the Single Judge
order had come after the Settlement Act,2008. Though in those cases, it was not the
case of the assessees, who had availed the benefit of any of the scheme like
Settlement Act, 2008, but the Principle is whether the interest or penal interest shall
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Sri Shanmugha Solvent Extracts (P) Ltd., v. The Joint Commissioner (CT), Trichy
be calculated from which date as to whether it is from the return due or otherwise.
17.The learned counsel, insofar as the reason stated by the first respondent,
having relied upon the letter or circular issued by the Commissioner of Commercial
Taxes Department, Government of Tamil Nadu, in Letter No.Drafting Cell-
I/28518/2012 dated 28.02.2014 and also having relied upon the clarification to a
pointed query No.04, has submitted that, the said clarification given by the
Commissioner of Commission Taxes Department is nothing but beyond the scope
of the decision already made in this regard and also contra to the very scheme itself
as provided under Settlement Act, 2008.
18.By making all these submissions, the learned Counsel would submit that,
in this kind of Samadhan Scheme, which was being introduced by the State with its
legislative wisdom, what has been intended by the legislature that shall be given
credence and in this context, no further clarification or interpretation, detrimental or
contra to the legislative intent as has been intended in the legislature can be made
by the executives. Herein the case in hand, since the first respondent heavily relied
upon the clarification given by the Commissioner of Commercial Taxes
Department, dated 28.02.2014, the said view taken by the first respondent by
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W.P.(MD)Nos.5419 to 5426, 4261 & of 2015
Sri Shanmugha Solvent Extracts (P) Ltd., v. The Joint Commissioner (CT), Trichy
applying the clarification given by the executives, unmindful of the import of the
Settlement Act, 2008 is untenable and unjustifiable. Therefore, the learned Counsel
seeks indulgence of this Court against the impugned orders.
19.The aforesaid submissions made by the learned Counsel
Mr.A.Chandrasekaran were adopted by Mr.N.Sudalaimuthu, learned Counsel
appearing for the petitioner in W.P.(MD)No.4261 of 2015, except the one single
difference that the deferral scheme is for ten years between 2001 and 2010 and the
Samadhan Scheme, which the petitioner availed in this case ie., W.P(MD)No.4261
of 2015 is under Settlement Act, 2011, where the only difference is rate of interest,
as it is 7.5% rate of interest, that should be calculated under the Settlement Act,
2011. Therefore, the learned Counsel in this Writ Petition would contend that what
are all the grounds urged or argued in respect of first eight cases by the learned
counsel appearing for the petitioner in that batch, would apply to this case also.
Accordingly, he has adopted those arguments and he also seeks indulgence of this
Court against the impugned orders in his writ petition.
20.Per Contra, Mr.R.Suresh Kumar, learned Government Advocate has relied
upon the following averments made in the counter affidavit, which are extracted
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Sri Shanmugha Solvent Extracts (P) Ltd., v. The Joint Commissioner (CT), Trichy
hereunder:
“5.It is further submitted that the Writ petitioner
accordingly started availing deferral from October 1990 and
availed the same up to September 1996. From November
1995, the unit was not functional and thereby they violated
the conditions of agreement and hence they were not eligible
to avail the deferral scheme. The Assistant
Commissioner(CT), Pudukottai therefore issued show cause
notice as to why the deferral agreement should not be
cancelled, and after having examined the objections raised
by the Writ Petitioner, cancelled the agreement.
6.It is further submitted that as the agreement was
cancelled as stated above, action was initiated under the
Revenue Recovery Act to realize the arrears due from the
default-Writ petitioner.
7.It is submitted further that though “Samadhan
Scheme” for settling the arrears of sales tax were available
through the Tamil Nadu Sales Tax (Settlement of Arrears) Act
2008, the Writ petitioner filed applications under section 5 of
the Act for settling the arrears for all the years i.e. From
1990-1991 to 1995-1996 under the TNGST ACT 1959 and
from 1990-1991 to 1995-1996 and under the CST ACT 1956.
8.It is submitted further that the applications so
submitted were examined by the petitioner herein-namely the
Joint Commissioner (CT), Trichy Division-with reference to
records and found to be defective as the Writ petitioner had
not complied with the conditions stipulated under section
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Sri Shanmugha Solvent Extracts (P) Ltd., v. The Joint Commissioner (CT), Trichy
7(a) of the TN Sales Tax (Settlement of Arrears) Act 2008 (in
short Settlement Act) and hence summarily rejected all the
applications of the Writ Petitioner on 16.02.2015, under Sec.
6(3) of the Settlement Act.
9.It is submitted further that aggrieved against the
order passed by the Joint Commissioner(CT), Trichy Division
on 16.02.2015, the Writ Petitioner filed W.P.(MD)No.5419 of
2015 before the Hon'ble Madurai Bench of Madras High
Court.
10.It is submitted further that in that case, the dealers
have violated the conditions of agreement during the
repayment period only (Repayment period from 01.10.1996
to 30.09.2002 – violation – non-repayment of loan-in
October 1996).”
By relying upon the said averments made in the counter affidavit, the learned
Government Advocate would further submit that, as per the deferral scheme, there
has been condition imposed along with the eligibility certificate issued in this
regard and also, there has been a deferral agreement between the parties. Under the
conditions imposed under eligibility certificate as well as the Clauses of the
deferral agreement, if the petitioner failed to strictly adhere to the terms and
conditions of the deferral scheme or in case of any violation of the deferral scheme,
the petitioner would not be entitled to get any benefit arising out of the deferral
scheme.
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21.In this context, the learned Government Advocate submits that, the
deferral scheme, which was availed by the petitioner starts from October 1990 and
it must end only in September 1996, whereas during the deferral scheme, the
petitioner closed the unit during November 1995, thereby, the petitioner had
violated the conditions of agreement. Hence, the petitioner is not at all eligible to
avail the benefit of deferral scheme.
22.Once the petitioner has become ineligible to avail the benefits occurred or
arisen out of the deferral scheme, because of their own action of closing down the
industry or stopping the production, insofar as the availment of benefit under the
Settlement Scheme as per the provisions of the Settlement Act, 2008, the petitioner
if at all wants to make the payment of tax due with 6% interest, the same shall be
calculated from the date of actual due ie., return due and accordingly, 6% interest
should have been calculated and paid along with an application.
23.However, admittedly the petitioner had calculated the interest of 6%, not
from the date of actual return due, but from the date of deferral due. Therefore,
there is a vast difference of interest due between the return due date and deferral
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due date and if that interest is calculated, certainly the petitioner should have made
more payment, which admittedly he has not paid. Therefore, the petitioner cannot
avail the benefit of Samadhan Scheme under Settlement Act, 2008. By making
these contentions, the learned Government Advocate has relied upon the following
decisions:-
(i) W.A.(MD)No.396 of 2011 dated 08.01.2018 in
the case of Pandian Industries vs. The Joint
Commissioner (CT), Tirunelveli and another;
(ii) W.P.(MD)No.3735 of 2015 dated 09.11.2018 in
the case of Chetak Timber Products (P) Limited vs.
Joint Commissioner (CT) and others; and
(iii) W.P.(MD)No.3676 of 2015 etc., batch, dated
10.07.2019 in the case of M/s.Cheran Cements Limited
vs. The Joint Commissioner (CT), Trichy, and another.
24.By relying upon these decisions, the learned Government Advocate would
vehemently contend that, once the deferral scheme is availed by any assessee,
where he has violated the conditions or terms of agreement of such deferral scheme
during the deferral period, certainly, such assessee would not be entitled to seek any
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benefits arising out of the deferral scheme. Therefore, in the present case, the
petitioner since has violated the deferral scheme, as he stopped production in
November 1995 ie., well before the deferral scheme come to an end, he would not
be entitled to claim any benefit arising out of the said deferral scheme.
25.As a sequel, the petitioner would also not be entitled to claim any benefit
of calculating the interest from the date of deferral due, as the petitioner in view of
his default or violation of the scheme, would be considered as normal or regular tax
payer. Therefore, the interest shall be calculated for the tax due from the actual due
date, ie., return due date and not from the deferral due date. If that calculation of
interest is made, certainly the payment admittedly made now by the petitioner along
with the application filed under Samadhan Scheme is definitely less than what is
minimum 90% of the payment. Therefore, the maximum permissible due of 10%
under the scheme since has been above like 17% or 15% etc., mandatarily such
application is liable to be rejected. Therefore, accordingly the applications of the
petitioner have been rejected. Hence, the learned Government Advocate, by
making these submissions, would contend that, the reasons stated by the respondent
in the impugned orders for rejecting the applications of the petitioner under
Samadhan Scheme are fully justifiable with acceptable reasons. Hence, no
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interference is called for against these orders, which are impugned in these writ
petitions. Hence the learned Government Advocate would seek dismissal of these
writ petitions.
26.I have considered the said rival submissions made by the learned Counsel
appearing for the parties and have perused the materials placed before this Court.
27.Though such elaborate submissions have been made by the learned
Counsel appearing for both sides, the issue raised in this batch of writ petitions is in
very narrow compass. The only question to be delved into in the batch of cases, is
that, whether a tax payer, who availed the benefit of deferral scheme, if he becomes
a defaulter in paying the tax arrear or tax due, would be entitled to calculate the
interest payable on such tax due, when he intended to file Samadhan Scheme
provided under the state legislation, from the date of actual return due or from the
date of deferral due.
28.Though both sides, some judgments of this Court have been relied upon,
the exact question now posed before this Court in the given facts and circumstances
whether has been considered and decided in those cases. If we look at the cases
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cited by the revenue side by the learned Government Advocate, there is one
Division Bench judgment and two Single Judge orders. In Pandian Industries case
cited supra, the Division Bench, having considered the scheme under the
Settlement Act, 2008 had decided the issue posed before this Court in the said case,
where the facts are definitely differed from the facts of the present case. In order to
appreciate the same, the relevant portion of the Division Bench Judgment is
extracted hereunder:
“8.As already pointed out, sub section (3) of section 6
mandates the applicant to remit 90% of the arrears and if the
applicant has not paid 90% of the amount payable under
Section 7, along with the application, the designated
authority shall summarily reject the application. Admittedly,
the father of the appellant has paid only 63% of the arrears
as against the said mandate of 90% of the arrears. In the
considered opinion of this Court, it cannot be termed as mere
omission or defect so as to attract Rule 3(5) of the Tamil
Nadu Sales Tax (Settlement of Arrears) Rules, 2008.
9.In the considered opinion of this Court, the appellant
/ writ petitioner has failed to comply with the mandatory
provisions and the first respondent, in exercise of the power
under Section 6(3) of the Act, has rightly rejected the
application and the learned Judge has taken note of the
statutory provisions and rightly came to the conclusion that
the writ petition deserves to be dismissed and accordingly,
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dismissed.
10.This Court, on an independent application of mind
to the entire materials placed before it, it is of the considered
view that there is no error in the reason assigned by the
learned Single Judge. This Court finds no merit in the writ
appeal. Therefore, this writ appeal is dismissed.
Consequently connected miscellaneous petition is closed.
However, in the circumstances of the case, there shall be no
order as to costs.”
29.Insofar as Chetak Timber Products (P) Limited, case cited supra, the
learned Judge in this case, had considered the import of the Settlement Act, 2011,
where also if we look into the facts, it is certainly different, which could be culled
out from the following:
“6.According to the first respondent, the petitioner
ought to have filed the Samadhan application in terms of
Section 7(c) and remitted the entire tax due, together with
7½% interest. But, in this case, the petitioner filed his
application by remitting only 40% of the tax amount with
interest, as per Section 7(a). Therefore, the only question is
whether Section 7(a) will apply or Section 7(c).
7.The learned Counsel appearing for the petitioner
strongly contended that admittedly, there is a dispute pending
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between the petitioner and the Department. In fact, the
appeal is still pending before the appellate authority as on
date, with regard to the transaction in question. Therefore,
according to him, only Section 7(a) will apply and the
petitioner was right in remitting only 40% of the tax due,
together with the Samadhan application. He also drew the
attention of this Court to the communication issued by the
second respondent, who was also the assessing authority. The
petitioner's Counsel contended that if the mistake, now,
attributed to the petitioner had been pointed out on the right
time, he would probably have filed the application in terms of
Section 7(c) itself.
8.Though there is a considerable force in the
submission of the learned Counsel for the petitioner that the
petitioner was apparently misled by the communication of the
second respondent made on 12.03.2012, I am of the view that
there cannot be any estoppel against the statute. The
petitioner is a businessman. Therefore, it is for him to have
promptly understood the true import of Section 7 of the Tamil
Nadu Sales Tax (Settlement of Arrears) Act, 2011.
9.While considering the fiscal provisions, the Court is
obliged to apply the law by strictly construing the same.
Equity plays no role in the scheme of things. Section 7(c) of
the said act reads that where it relates to arrears of tax, which
was admitted as tax due as per the returns file for the year, the
applicant will have to pay the entire arrears of tax. In this
case, no doubt dispute is pending between the parties. But
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then, it arose subsequent to the filing of the returns for the
year concerned. Therefore, the issue on hand will have to be
resolved with reference to the returns filed by the applicant
for the year concerned. The subsequent development will
have to be ignored. In this case, as per the returns filed by the
petitioner, the tax amount was fixed as Rs.1,91,507/-.
Therefore, the said amount of Rs.1,91,507/- together with
7½ % interest has to be paid, along with the Samadhan
application. But, the petitioner remitted only as sum of Rs.
63,118/-, including interest. If the amount paid by the
petitioner was short by 10% or less, then the authority was
oblige to call upon the petitioner to adjust the short fall. But,
in this case, the short fall is more than 60%. Once the short
fall goes beyond 10%, the authority could not even return the
application. The only option left to the authority was to reject
the application. Therefore, I find no ground to interfere with
the order impugned and the same is sustained.”
30.In Cheran Cements limited case cited supra from the revenue side, the
learned Judge has followed the decision made in W.A.(MD)No.498 of 507 of 2015,
where also the issue is slightly different on the basis of the facts projected therein.
31.Insofar as the fact of the cases in this batch is concerned, in these cases,
the respective petitioners have calculated the tax arrears payable by them and paid
the same along with interest, while making applications under the Samadhan
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Scheme. It is pertinent to note that insofar as the first eight cases of the assessee,
ie., Sri Shanmugha Solvent Extracts Private Limited is concerned, after the
Settlement Act, 2008 comes into effect, the petitioner had requested the respondent
to spell out the arrears of tax with interest, so that they can make arrangement and
to come forward to file the application by paying the tax due with interest. In
response to the same, on 03.04.2009, the second respondent has given letter stating
that the total due is Rs.52,97,656/- and break-up figures had been given as what is
the interest reduction availed by the petitioner in respect of the TNGST arrears and
what is the interest reduction availed by the petitioner in respect of CST arrears.
Along with the said communication dated 03.04.2009, the second respondent also
annexed the working sheet separately for TNGST arrears and separately for CST
arrears. According to the said communication, the total TNGST arrear is Rs.
44,79,910/- and CST arrear is Rs.8,17,746/- totalling Rs.52,97,656/-. Therefore,
this is the arrear within the meaning of the provisions of the Settlement Act, 2008.
32. In this context, the following provisions of the Settlement Act, 2008 are
relevant to be noted:
“5.Application for settlement-(1) An application for
the purpose of section 4 shall be made to the designated
authority by an applicant within three months from the date
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of commencement of this Act or by such later date as the
Government may, by notification, specify, from time to time,
in such form, and in such manner, as may be prescribed,
with proof of payment of the amount payable at the rates
specified in section 7.
(2) A separate application shall be made for each
assessment year.
(3)The applicant shall send a copy of the application
made under sub-section (1) to the assessing authority,
appellate authority or revisional authority under the
relevant Act, before whom any proceeding or appeal or
revision, as the case may be, is pending, within seven days
from the date of making such application before the
designated authority.
6.Determination of amount payable by the
applicant-(1) The designated authority shall verify the
correctness of the particulars furnished in the application
made under section 5 with reference to all relevant records
and determine the amount payable at the rates specified in
section 7.
(2) The designated authority shall demand further
amount payable by the applicant in the form prescribed, if
the amount paid by the applicant along with application
falls short of not more than ten per cent of the amount
determined under sub-section (1).
(3) If the applicant has not paid ninety per cent of the
amount payable under section 7 alongwith the application,
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the designated authority shall summarily reject the
application.
(4) The amount determined under sub-section (1)
shall be rounded off to the nearest rupee and, for this
purpose, where such amount contains a part of a rupee,
and, if such part is fifty paise or more, it shall be rounded
off to the nearest rupee, and if such part is less than fifty
paise, it shall be ignored.
7.Rate applicable in determining amount payable-
The amount payable by the applicant and to be waived shall
be determined as follows:
(a)Where it relates to arrears of tax which was
assessed on the best of judgment due to non-production of
accounts with corresponding arrears of penalty and interest,
the applicant shall pay one third of arrears of tax pending
collection on the date of application along with interest
calculated at six per cent per annum on the arrears of tax
and on such payment of tax, the balance of tax and interest
and the entire penalty shall be waived.
(b)Where it relates to arrears of tax which was in
excess of the tax admitted as per the returns filed for the
year with the corresponding arrears of penalty and interest,
the applicant shall pay one third of such arrears of tax
pending collection on the date of application along with
interest at six per cent per annum on the arrears of tax and
on such payment of tax, the balance of tax and interest and
the entire penalty shall be waived.
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(c)Where it relates to arrears of tax, which was
admitted as tax due as per returns filed for the year with
corresponding arrears of penalty and interest, the applicant
shall pay the entire arrears of tax pending collection along
with interest at six per cent per annum and on such
payment, the balance of interest and the entire penalty shall
be waived.
(d)Where it relates to arrears of penalty or interest or
both and where there is no corresponding arrears of tax
pending collection on the date of application, the applicant
shall pay ten per cent of the penalty and twenty five per cent
of interest, the balance of penalty and interest shall be
waived.”
33.Under the scheme, applications for the purpose of getting the Settlement
Arrears shall be made to the Designated Authority within three months from the
date of commencement of the Settlement Act, 2008. Separate applications shall be
made for each assessment year. Under Section 6 of the Settlement Act, 2008, the
Designated Authority, after verifying the correctness of the particulars furnished in
the application, determine the amount payable at the rates specified in Section 7.
Under Section 6 (2) of the Settlement Act, 2008, the Designated Authority shall
demand further amount payable by the applicant in the form prescribed, if the
amount paid by the applicant along with the application falls short of not more than
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10% of the amount determined under Sub-Section (1).
34.Herein, the case in hand, as we discussed above, in fact the tax arrears
with interest has already been determined and communicated by the second
respondent vide his communication dated 03.04.2009, according to which, the
grand total of both TNGST arrear as well as CST arrear comes to Rs.52,97,656/-,
where what is the tax due and what is the interest component calculated at the rate
of 24% or 6%, whatever it may be, have also been given in the annexure along with
communication dated 03.04.2009.
35.Therefore, it is already determined tax due in respect of the petitioner's
case. If that determined tax is paid with interest along with an application as
contemplated under Section 5 of the Settlement Act, 2008 and if there is any
shortage of arrear, which is not more than 10% of the total due payable by the
assessee / tax payer, then, under Section 6 (2) of the Settlement Act, 2008, the
Designated Authority can demand further amount to be paid by the assessee.
36.Here the case in hand, the stand appears to be taken by the respondents,
which is reflected in the impugned orders, invariably in any of such orders, that the
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tax payable by the petitioner as determined has been paid. It is admitted in the
impugned orders itself. However, the dispute arose only in respect of the
calculation of interest, where according to the respondents, the petitioner has not
paid full interest, only part interest has been paid. Therefore, if the full interest is
calculated along with tax due, that would be the total due to be accepted for the
purpose of Samadhan Scheme and comparing with the total due that the amount
paid by the assessee, the difference is more than 10%. Therefore, under the
provisions of the Settlement Act, 2008, the petitioner is not entitled to get no
arrears certificate under Section 8 of the Settlement Act, 2008. Accordingly since
the petitioner's application has to be rejected, it has been rejected.
37.However, if we look at the facts, which have been discussed hereinabove,
there has been no dispute with regard to the quantum of tax arrears. The only
dispute is the quantum of interest. While we are speaking about the quantum of
interest, still there is no quarrel on the rate of interest to be calculated, because, the
rate of interest ie., 6% per annum under the Settlement Act, 2008 and 7.5 % under
the Settlement Act, 2011 has already been provided in the Act itself. The
petitioners also having calculated the respective rate of interest ie., 6% in respect of
the first petitioner, 7.5% in respect of the second petitioner, have paid the same.
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38.Now, we have come almost the exact gray area, where, the respondents'
stand is that, while calculating the interests, it should be calculated from the return
due ie., actual due date with regard to the corresponding assessment years and not
from the deferral due date.
39.Though in this regard, some judgments have been cited by the revenue
side, which we have dealt with in the earlier parts, in all these cases, exactly this
issue has not been dealt with and moreover, factual aspects can be distinguished in
all these cases. Admittedly, the tax arrears in these cases with interest calculated
and paid along with application to avail the benefit of Samadhan Scheme is like
40% or 60%. Therefore, not even nearly to 90%.
40.However, in the cases in hand, though a stand has been taken by the
respondent revenue that it is not 90% of the tax due with interest paid by the
petitioners as per their calculation, but, the fact remains that, the tax due with
interest paid by the petitioners has not come upto 90% and it goes down below, not
because the petitioners have not paid the amount, but because the method of
calculation of the period of interest, as suggested by the revenue.
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41.In this context, heavy reliance has been placed by the learned Government
Advocate appearing for the respondents that the Commissioner of Commercial
Taxes, by letter dated 28.02.2014 has given a clarification to query No.4, which
reads thus:
“4.The due date for arriving at the interest dues for
the dealers who have violated deferral repayment.
It has been legally settled in the case law of the
Division Bench of the Hon’ble High Court of Madras in
W.P.No.1462/2006, dated 06.12.2006 (M/s. Amutha Mills Pvt.
Ltd., Annur vs. Assistant Commissioner (CT), Zone-III,
Coimbatore and others), which had been followed in the
subsequent decision of the Hon’ble Madras High Court in
W.P.No.19060 of 2009, dated 01.12.2010
(Mr.S.R.Subramanian, M/s. Sree Kalpatharu Spinning &
Weaving Mills vs. Assistant Commissioner (CT), Zone-III,
Coimbatore), that “the penal interest, if any, should be
calculated only from the due date for repayment of the loan
and not from the date on which the IFST deferral loan was
availed”
The above ruling of the Hon’ble High Court of
Madras will have to be followed in arriving at the interest
due from the dealers who have violated the conditions for
deferral availment/repayment.
In deciding such issues, the officials may take note of
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the fact that there are two periods in IFST / Deferral
Schemes. The first is IFST / Deferral availing period and the
second relates to the repayment period. If the violation
happens during the first period, the interest has to be
calculated as if a normal delay had occurred i.e. from the
dates on which returns were due. If violation happened
during the second tenure, interest will start from the date of
violation or from the date of default in payment of dues.”
This clarification was heavily relied upon by the learned Government Advocate,
because the said clarification has been taken into account by the first respondent,
while passing the impugned order.
42.If we look into the said clarification, the Commissioner of Commercial
Taxes, after having taken note of the decisions of this Court made in M/s.Amutha
Mills Private Limited as well as S.R.Subramaniam cases, has added that, the said
rulings of this Court will have to be followed in arriving at the interest due from the
dealers, who have violated the conditions for deferral availment/repayment. But not
stopping with that the circular further states that, in deciding such issue, the
officials may take note of the fact that there are two periods in IFST/Deferral
schemes. The first is IFST/Deferral availing period and the second relates to the
repayment period. If the violation happens during the first period, the interest has to
be calculated, as if a normal delay had occurred ie., from the dates on which returns
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were due. This clarification or interpretation sought to be given by the
Commissioner of Commercial Taxes in the said letter, in the considered opinion of
this Court, is nothing but traversing beyond the scope of the Settlement Act, 2008
as well as 2011.
43.Though the judgment in M/s.Amutha Mills Private Limited as well as
S.R.Subramaniam case cited supra had been relied upon by the Commissioner, it
seems that the decision of this court have not been properly understood. In the
Judgment in M/s.Amutha Mills Private Limited cited supra, which has been
quoted hereinabove already, the Division Bench has held that, even though the
petitioner appellant in that case stopped production in particular year, ie., middle of
the deferral scheme period, he would not be liable to pay penal interest from that
date in terms of the circular issued in this regard, by the Commissioner of
Commercial Taxes dated 18.03.1994.
44.Exactly the similar position we are confronting in dealing with the
clarification given to the point No.4 in the said letter of the Commissioner of
Commercial taxes dated 28.02.2014.
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45.Moreover, the dichotomy is, which the Commissioner of Commercial
Taxes sought, to be implemented, by adding some more clarification stating that,
there are two periods, one is IFST/Deferral scheme and another one is repayment
period. If any default is taken place in the deferral availing period, the interest has
to be calculated as if any normal delay had occurred ie., from the date, on which
returns due. This kind of interpretation sought to be employed by the Commissioner
of Commercial Taxes, in the considered view of this Court, cannot be sustained,
because, the exercise of interpreting the particular provision of the Act or the Rules
made thereunder is necessarily the job of the judiciary and in this context, the law is
well settled by a number of pronouncements of the Hon'ble Supreme Court that
such an interpretative power cannot be either given to or be taken by the
executives.
46.Therefore, merely based on such an interpretative clarification given by
the Commissioner of Commercial Taxes, vide his letter dated 28.02.2014, the first
respondent cannot reject the claim of the petitioners to accept them for availing
benefit of Samadhan Scheme.
47.These two issues alone ie., one is that the import of the clarification given
by the Commissioner of Commercial Taxes and another is that the petitioner has not
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paid 90% of the due with interest, since were shown as main reasons for rejecting
the Samadhan application of the petitioners are only arising out of mis-
interpretation or wrong interpretation in this regard by way of clarification of the
Commissioner of Commercial Taxes. By virtue of such employment of the said
interpretation, the first respondent cannot reject the applications for Samadhan,
under the Settlement Act, 2008 and 2011 respectively, of these petitioners.
48.It is to be noted that, the very purpose of giving deferral scheme is
nothing but an encouraging factor to develop industrial hub in the backward areas
of the State. The petitioners' industries since have been located in backward areas,
such kind of deferral scheme has been extended to the petitioners, which they have
availed and 4 out of 5 years the industries ran and only at the last year, the
industries could not run and make production for various reasons.
49.Merely because the industry could not run at the fag-end of the deferral
scheme period due to unforeseen reasons, it cannot be stated that the petitioners,
who availed the deferral scheme would be under default or it has violated the
conditions of the scheme and therefore, they are not entitled to calculate the interest
from the deferral due date and they should be treated as ordinary tax payers
resulting in calculation from the return due date.
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50.If this proposition as has been propounded by the revenue through the
impugned orders is accepted, the very purpose of giving such incentive programme
like deferral scheme would get defeated. Therefore, detrimental to any such
concession scheme for the industrial development given by the State Government
cannot be permitted to be taken away by another wing of the State ie.,
Commissioner of Commercial Taxes Department.
51.Moreover, the very Samadhan Scheme itself, which was brought under
two legislations, i.e., 2008, subsequently 2011 Settlement Act, is only to give solace
to the tax payers to pay the entire tax due, which has also been either determined or
to be determined to give concession of waiver of penal interest and penalty.
Moreover, the rate of interest also normally would be calculated either 18% or 24%,
but, here which has been reduced to either 6% or 7.5% respectively and these
concessions were given under the Samadhan Scheme only to bring more defaulters
under the main stream to collect the tax due with 6% or 7.5% interest.
52.Herein the case in hand, the entire tax due payable by the petitioners have
been already determined and in case of the first petitioner, a written order has been
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given in the year 2009 itself. As per the payment made by the petitioner to the
scheme and based on such determined tax, since interest having been calculated at
the rate of 6% from the deferral due date having been paid, the petitioner shall be
treated only under Section 7(c) of the Settlement Act, 2008. Therefore, the reason
stated in the impugned orders that the petitioners have violated Section 7(a) of the
Settlement Act, 2008 does not hold good. Therefore, for that reason also, the
impugned orders cannot be sustained.
53.In view of all these reasons discussed hereinabove, this Court is of the
considered view that, the impugned orders rejecting the applications for Samadhan
Schemes made by the petitioners after having made the payment of either 90% or
more of the determined tax with interest from the date of deferral due, is bad in law,
unsustainable and unlawful. Therefore, the impugned orders are liable to be
interfered with. Accordingly, these writ petitions are disposed of with the following
orders:
" that the respective impugned orders in this batch of
writ petitions are quashed and in the result, the
respondents shall calculate the interest at the rate of
6% as well as 7.5% respectively under the relevant
provisions of Settlement Act, 2008 and 2011 from
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the date of deferral due, not from the date of returns
due and accordingly, shall calculate whether the
respective writ petitioners have paid, not less than
90% of the total due of tax, along with interest and if
so, the first respondent shall demand the remaining
due if any payable, which is less than 10%, from the
petitioners under Section 6 (3) of the Settlement Act,
2008 by giving time, within which, if the petitioners
come forward to make the remaining shortfall also,
the applications for Samadhan submitted by the
petitioners shall be accepted and consequentially,
necessary certificate under Section 8 of the
Settlement Act, 2008 shall be issued to the
petitioners."
54.With these directions and observations, all these writ petitions are ordered
to the terms indicated above. However there shall be no order as to costs.
29.09.2021
Index : Yes / No
sm/btr
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Note : In view of the present lock down owing to
COVID-19 pandemic, a web copy of the order may
be utilized for official purposes, but, ensuring that
the copy of the order that is presented is the correct
copy, shall be the responsibility of the
advocate/litigant concerned.
To
1.The Joint Commissioner (CT),
Trichy Division,
Court Campus, Trichy.
2.The Assistant Commissioner (CT),
Pudukkottai.
https://www.mhc.tn.gov.in/judis
W.P.(MD)Nos.5419 to 5426, 4261 & of 2015
Sri Shanmugha Solvent Extracts (P) Ltd., v. The Joint Commissioner (CT), Trichy
R.SURESH KUMAR,J.,
sm/btr
Order made in
W.P.(MD)Nos.5419 to 5426 & of 2015
Dated:
29.09.2021
https://www.mhc.tn.gov.in/judis
