In a major relief to M/s Indian Oil Corporation, Justices S K Seth and Anjuli Palo, on Thursday deleted the interest demand made by the VAT authorities under section n 18 (4)(a) of the Madhya Pradesh Value Added Tax Act, 2002 by considering the fact that the Company had paid tax as per the return filed in prescribed time.
Petitioner is a registered dealer and is wholly owned and controlled by the Central Government as an Oil Marketing Company, engaged in the business of refining and distribution of Petroleum products.
The petitioners distributes LPG within the State of Madhya Pradesh by purchasing the same from the Gas Authority of India Limited (GAIL), another Central Government owned and controlled company and also a registered dealer.
For the relevant period under consideration, the Assessing Officer denied the set-off of input rebate on amount of VAT paid to the GAIL on the ground that the GAIL had issued credit notes in favour of the petitioner due to price revision as per the direction of Petroleum Planning and Analysis Cell (PACC) of the Government of India after the invoices were issued.
It was noted that the price revision has only been made in respect of base price and no credit note has been issued for the VAT paid by the petitioner and deposited by the GAIL in the assessment of the GAIL and an order of forfeiture of amount (tax charged and deposited on the amount of credit notes subsequently issued) has been made under Section 35 (2) of the VAT Act. Consequently, the department imposed interest on the petitioner and initiated recovery proceedings.
The petitioner approached the High Court contending that the levy of interest is illegal since it had paid the full tax amount of VAT along with returns in the prescribed manner.
Analyzing the provision for levy of interest, the bench said that it clearly shows that so long as the assessee pays the tax which according to return is due on the basis of information furnished in the return filed by him, there would be no default on his part to meet the statutory obligation and therefore, it cannot be held that the tax payable by him is not paid to make him liable to pay interest.
Allowing the petition, the division bench ruled that “the law does not envisage assessee to predict final assessment and expecting to pay tax on that basis to avoid the liability to pay interest. As has been pointed out hereinabove, petitioner had paid tax as per the return filed in time and it is not a case which falls under four clauses of Section 18 (4) (a) of MPVAT Act. Thus, demand of interest and recovery thereof is unsustainable in law.”
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