Bharat Petroleum Corporation Ltd. v. State of Kerala

**IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON** **WEDNESDAY, THE 11TH DAY OF JULY 2018 / 20TH ASHADHA, 1940** **ST.Rev..No. 101 of 2012** **TA 101/2011 of KERALA AGRICULTURAL INCOME TAX AND SALES TAX APPELLATE TRIBUNAL (ADDL. BENCH), ERNAKULAM** ## **PETITIONER/APPELLANT/APPELLANT/ASSESSEE :** **BHARAT PETROLEUM CORPORATION LTD., ERNAKULAM.** **BY ADVS.SRI.K.I.MAYANKUTTY MATHER** **SMT.M.RAMANYA GAYATHRI** ## **RESPONDENT/RESPONDENT/RESPONDENT/REVENUE:** **STATE OF KERALA, REPRESENTED BY JOINT COMMISSIONER (LAW), COMMERCIAL TAXES, ERNAKULAM.** **BY GOVERNMENT PLEADER SRI.MOHAMMED RAFIQ** **THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 11-07-2018, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** ## **EL** **ST.Rev..No. 101 of 2012** ## **APPENDIX** ## **PETITIONER(S)' ANNEXURES** |**ANX.A**|**TRUE COPY OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR**| |---|---| ||**1997-98 KGST DATED 31.12.2003**| |**ANX.B**|**TRUE COPY OF THE FIRST APPELLATE ORDER FOR THE ASSESSMENT YEAR**| ||**1997-98 KGST DATED 30.4.2005**| |**ANX.C**|**TRUE COPY OF THE ORDER OF THE TRIBUNAL IN T.A. NO.294/2005**| ||**DATED 6.2.2006**| |**ANX.D**|**TRUE COPY OF THE MODIFIED ORDER OF THE ASSESSING OFFICER FOR**| ||**THE ASSESSMENT YEAR 1997-98 KGST DATED 30.12.2008**| |**ANX.E**|**TRUE COPY OF THE REPLY FILED BY THE PETITIONER DATED**| ||**21.11.2011**| |**ANX.F**|**TRUE COPY OF THE ORDER OF THE DEPUTY COMMISSIONER, COMMERCIAL**| ||**TAXES, ERNAKULAM FOR THE ASSESSMENT YEAR 1997-98 KGST DATED**| ||**14.11.2011**| |**ANX.G**|**TRUE COPY OF THE ORDER OF SALES TAX APPELLATE TRIBUNAL,**| ||**ERNAKULAM IN T.A. NO.101/2011 DATED 8.3.2012**| ## **RESPONDENT(S)' ANNEXURE** ## **NIL** **TRUE COPY** **P.S. TO JUDGE** ## **EL** **24.7.2018** ## **K. VINOD CHANDRAN & ASHOK MENON, JJ. ---------------------------------S.T.[Rev.] No.101 of 2012 ---------------------------------Dated this the 11[th] day of July, 2018** ## **O R D E R** ## K. Vinod Chandran, J. The petitioner/assessee is before us concerned with the assessment of the year 1997-1998 and the levy of interest made thereon by a _suo motu_ revision effected under Section 35 of the Kerala General Sales Tax Act, 1963 [for brevity, the KGST Act]. The questions of law arising in the aforesaid case as available in the memorandum and those framed additionally are as follows:- _“A. Whether the reliance placed by the lower authorities on section 55C in exercising the suo motu revision is right in law in the light of the fact that the present case pertains to the assessment year 1997-1998 and the provision (Section 55C) came into effect only from 01.01.2000 onwards?_ _B. Whether the lower authorities were right in appropriating the amount paid by_ **S.T.[Rev.] No.101 of 2012** **2** _the petitioner towards the fictitious interest amount for which there was no demand in the original order or in the modified order? C. Whether the Tribunal was right in sustaining the order of the Deputy Commissioner passed in purported exercise of the power conferred under Section 35 of the KGST Act?_ ## _Additional questions of law_ _1. Whether there is any liability for interest under Section 23(3) on the petitioner in the given situation with reference to the assessment year 19971998 particularly in the light of the sequence of amendments brought to Section 23 by the legislature?_ _2. Can there be automatic and fictional accrual of interest from such date on which the tax would have fallen due in the case in hand referable to the assessment year 1997-1998 in as much as such a liability was introduced for the first time only with effect from 29.07.1998?”_ 2. On facts suffice it to notice that the petitioner's assessment for the subject year was completed by Annexure A. An appeal was filed, during the pendency of which the petitioner paid almost the entire balance tax due as per the assessment order coming to around Rs.75 lakhs. The **S.T.[Rev.] No.101 of 2012** **3** appeal was rejected as per Annexure B. later, a second appeal was filed before the Tribunal, in which certain modifications were made as per Annexure C. The modifications were given effect to by Annexure D order dated 30.12.2008. The Assessing Officer, while making the modified order, failed to take into account the interest due and also did not apply Section 55C of the KGST Act. 3. The Deputy Commissioner issued notice and revised the order in so far as applying interest and also Section 55C first appropriating the amounts paid towards interest and then towards the balance dues as determined in Annexure A, which stood modified by Annexure C. The revisional order directed the Assessing Officer to compute the interest and the balance tax due. The assessee challenged the same in appeal, which failed and the assessee is before us raising the above questions of law from the order of the Tribunal. **S.T.[Rev.] No.101 of 2012** **4** 4. The learned Counsel for the petitioner/ assessee would argue that Section 55C was introduced only in the year 2000 and the assessment is pertaining to an earlier year. There could be no application of Section 55C to a prior year. It is further contended that there was no demand made by the Assessing Officer and in such circumstances there could be no levy of interest made. It is also argued that there is a limitation provided under Section 17 of the KGST Act for completion of assessment, which is five years. As on the date when the revisional order was passed under Section 35 of the KGST Act, the limitation was over and there could be no assessment completed by levy of interest at that distance of time, argues the revision petitioner. 5. Section 55C of the KGST Act, though brought into statute on 01.01.2000, is applicable in so far as all the assessment years. The general principles **S.T.[Rev.] No.101 of 2012** **5** in appropriating amounts paid, first towards the interest, and then the principal dues was adopted by a clarificatory amendment to the statute. It is also to be noticed that Section 55C specifically refers to the amounts due under the Act including the interest and appropriation of payment; which applies whenever the recovery is made after the amendment was introduced, without reference to the assessment years, whether it is prior or post. The reliance on _**Aby Engineering and Consultants (P) Ltd. v. Assistant Commissioner [2010 (1) KLT SN 50]**_ would be apposite to further fortify the view taken by us. _“Section 55C applies to all payments made on or after 01.01.2000 irrespective of the year to which arrears of the tax and interest relates”_ was the binding declaration in the aforesaid judgment of a Division Bench of this Court. The first questions raised at A to C are answered in favour of the revenue and against the assessee. **S.T.[Rev.] No.101 of 2012** **6** 6. The next ground raised by the petitioner is with respect to the applicability of Section 23(3) of the KGST Act. When there has been no levy of interest made, at the time of assessment and as a result no demand raised, the liability for interest would not arise is the argument. Yet another plea is that the assessment being liable to be completed before the limitation provided of five years there could be no interest levied after the said period. The supplementary questions raised also project a ground on the sequence of amendments made to Section 23 and its effect on the subject assessment year; 1997-1998. 7. An assessment completed does not necessarily involve the determination of interest, which is an automatic levy as per the statute. Section 23(3) is to be extracted to throw further light on the above proposition: _“23(3) If the tax or any other amount_ **S.T.[Rev.] No.101 of 2012** **7** _assessed or due under this Act is not paid by any dealer or other person within the time prescribed therefore in this Act or in any rule made thereunder and in other cases within the time specified therefore in the notice of demand, the dealer or other person shall pay, by way of interest, in the manner prescribed, in addition to the amount due, a sum equal to:_ _(a) one per cent of such amount for each month or part thereof for the first three months after the date specified for its payment;_ _(b) two per cent of such amount for each month or part thereof subsequent to the first three months aforesaid._ _Explanation.-Where the period of default is less than one month, interest shall be calculated for the actual number of days of default.”_ 8. It is to be noted that prior to this as the provision read, there was a need for notice of demand, since the accrual was only on the failure of the assessee to pay the amounts demanded within the stipulated time as stated in the notice. The position was made clear by a Division Bench of this Court in _**Chandramani Traders v. State of Kerala [(2008) 16 VST 294 (Ker)]**_ distinguishing the **S.T.[Rev.] No.101 of 2012** **8** decision of the Hon'ble Supreme Court in _**Maruti Wire Industries (P) Ltd. v. Sales Tax Officer [(2001) 122 STC 410].**_ The Supreme Court was concerned with the pre-amended provision, in a case where there was no return filed. In _**Chandramani Traders**_ [supra], as is the instant revision are cases in which the assessee had filed a return and on regular assessment the taxable turnover stood enhanced; rejecting certain claims raised by the assessee. 9. A reading of the provision also indicate that the interest accrues when the dealer or other person fails to pay the amounts assessed or due under the KGST Act, within the time prescribed in the Act or in any Rule made there under. Only in other cases, where there is no such prescription, there is the requirement of a notice of demand for payment within a specific time; on expiry of which alone the interest accrues. The Act and Rules **S.T.[Rev.] No.101 of 2012** **9** provide for payment of tax for a month, along with monthly returns filed, in the very next month, before the 10[th] of every such subsequent month. Hence the interest as levied by the statute accrues from the time the tax or any other amounts becomes due under the Act and the Rules. 10. When the tax due is assessed under Section 17 of the KGST Act, the accrual of interest is automatic and it relates back from the date on which it becomes due under the Act and Rules. In such circumstances, it cannot be said that a notice of demand is required for accrual of interest. Section 23(3) of the KGST Act also mandates that the interest due should be paid by the dealer or other person in the manner prescribed in addition to the amount due. Hence there is a definite obligation cast on the dealer, assessee or such other person to pay the amounts due even without a determination. This is not to say that the assessee **S.T.[Rev.] No.101 of 2012** **10** cannot dispute the computation, but the levy remains unaltered and there could be a dispute raised only on the actual amounts levied. 11. The further argument was with respect the assessment being completed under Section 17 of the KGST Act and not possible of re-opening after five years. The assessment is of the tax due and interest as earlier noticed is automatic by virtue of the statutory prescription and has to necessarily follow the assessment. The mere fact that the computation of interest payable was not shown in the assessment order will not absolve the assessee from the liability to interest; which is statutorily payable. We have already held that payment of interest is the obligation of dealer, visited on the dealer by the statute and there is no requirement for the assessment order to speak of it nor is there a notice of demand required for its accrual. **S.T.[Rev.] No.101 of 2012** **11** 12. In the present case the assessment was completed within the period of limitation provided under Section 17, in the year 2003; after Section 55C came into the statute. The assessee had filed appeals and later by Annexure D an order was passed giving effect to the modifications as made by the Appellate Tribunal. At that point, the levy of interest was not taken note of and the appropriation under Section 55C was not also applied. In such circumstances, it was perfectly in order for the Deputy Commissioner to have invoked the jurisdiction under Section 35. The appropriation being automatic under Section 55C and being a statutory prescription the assessee cannot wriggle out of the consequence. We also see from the sequence of amendments made that there was none made, to sub-section (3) of Section 23 after it was substituted with effect from 19.02.1988. The provision under sub-section (3) is applicable to **S.T.[Rev.] No.101 of 2012** **12** the year 1997-1998. The introduction of sub-section (3A) after numbering the existing (3A) as (3B) with effect from 01.04.1998, is clarificatory in nature, since even without sub-section (3A), sub-section (3) of Section 23 statutorily levies interest on the amounts assessed. We do not find any reason to interfere with the order of the Tribunal. The questions of law additionally raised are also answered in favour of the Revenue and against the assessee. The revision is rejected, leaving the parties to suffer their respective costs. Sd/- ## **K. VINOD CHANDRAN, JUDGE.** Sd/- ## **ASHOK MENON, JUDGE.** //True Copy// P.A. To Judge sp/11/07/18