VAT Dept Expected to Raise Interest Demand for belated Tax Payments within a Reasonable Time: Madras HC [Read Order]

The Madras High Court, while considering a writ petition, has held that the VAT department shall raise interest demand within a reasonable time under the provisions of the Tamil Nadu VAT Act.

The petitioner, M/s Aruna Hotel Limited, is a company and claims to have been in a state of turmoil in terms of its management. Company was going through litigations due to mismanagement and internal issues which got resolved in 2015 when present management was in a position to take over the reins of the company, take stock and move forward in a peaceful manner settling all statutory liabilities. During this time, the petitioner had received notices for arrears of TNVAT, TNGST and CST and had responded to the Department disavowing all liability in this regard.

The petitioner challenged the notice dated 05.02.2019 wherein interest has been levied on belated payments of taxes in terms of Section 42(3) of the TNVAT Act. Admittedly, no show cause notice for the levy of interest was ever issued.

Justice Anita Sumanth has held that the impugned notice does not make a distinction between the components of the tax being admitted tax & tax levied on additions made in assessment upon which interest has been levied, had this been done, and the assessing authority made a bifurcation as regards the interest related to the belated payment of admitted tax and the interest relating to the tax on added turnover, there would have been no necessity for further discussion in relation to the first category of interest.

“Needless to say, if the admitted tax has been paid in time, the question of levying interest in 2019 for the remainder of the taxes, after a period of four years when the tax was paid, will not arise as the authorities are expected to have raised demands of interest concurrent with the tax demand or in any event, within a reasonable period of time thereafter. All contentions of the learned counsel for the petitioner are left open to be advanced before the authority in the course of personal hearing,” the Court said.

To Read the full text of the Order CLICK HERE

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