Parry (India) Ltd. Vs. Asst. Commissioner of
Commercial Taxes, Chennai  Insc 305 (3 May 2005)
N. Variava,Dr. Ar. Lakshmanan & S. H. Kapadia
Civil Appeal No. 4230 of 2003] S. N. VARIAVA, J.
Appeals are against the Judgment of the Madras High Court dated 8th October, 2001.
stated the facts are as follows:
Appellants are the manufacturer of sugar. They purchase sugarcane from farmers.
By virtue of the Sugarcane (Control) Order, 1966 made under the Essential
Commodities Act, 1955 the price for such purchase is statutorily fixed. Clause
3 of the Sugarcane (Control) Order lays down the minimum price of sugarcane
payable by a producer of sugar. This is the price which is payable immediately
at the time that the sugar is purchased. Over and above this, by virtue of
Clause 5-A, an additional price is also payable. This additional price is to be
fixed on the basis of a formula laid down in the first Schedule of the
Sugarcane (Control) Order. The Formula given therein is as follows:
R L +
2A + B X = ------------------- 2C R is the amount in rupees of sugar produced
during the sugar year excluding the excise duty paid or payable to the factory
by the purchaser. It is evident from the formula itself that the additional
price is the amount which is incapable of determination at the time the
sugarcane is supplied to the factory by the grower. The additional price can
only be determined at the end of the sugar year and not earlier. Even though
the additional price could not be determined till the end of the sugar year, in
practice it took a long time to determine this price. Therefore the State
Government advised the sugar producers to pay a price which was higher than the
minimum price fixed under Clause 3. The manufacturers of sugar, like the
Appellants, also paid the additional price as fixed by the Government at the
time of purchase. The additional price so paid was then adjusted against the
price fixed under Clause 5-A of the Sugarcane (Control) Order, 1966.
the Tamil Nadu General Sales Tax Act, 1959 dealers were given an option, under
Section 13(2), of paying tax in advance on the basis of monthly returns.
Section 13 is relevant and it reads as follows:
Advance payment of tax
The tax for each year payable under any of the provisions of this Act may be
collected in advance during the year in monthly or other prescribed instalments
and for this purpose a dealer may be required to furnish within the prescribed
period such returns as may be prescribed. The assessing authority may
provisionally determine the amount of tax payable in advance during any year or
in respect of any period and on such determination and intimation to the dealer
he shall pay such tax in such instalments and within such period as may be prescribed.
lieu of the tax provisionally determined under sub-section (1), a dealer may,
at his option, pay tax in advance during the year on the basis of his actual
turnover for each month or for such other periods as may be prescribed. For
this purpose, he may be required to furnish returns showing his actual turnover
for each month or other periods as may be prescribed and to pay tax on the
basis of such returns. The tax under this sub-section shall become due without
any notice of demand to the dealer on the date of receipt of the return or on
the last due date as prescribed, whichever is later.
Notwithstanding anything contained in sub- sections (1) or (2), every dealer
other than those paying tax under sub-section (2) of section 3D, section 3E or
7E, whose total turnover in the preceding year was not less than ten lakhs of
rupees or his taxable turnover was not less than three lakhs of rupees and all
dealer newly registered in the year shall pay tax during the year on the basis
of his actual turnover for each month or for such other period, as may be
no return is submitted by the dealer under sub-section (1) or sub-section (2)
within the prescribed period, or if the return submitted by him appears to the
assessing authority to be incomplete or incorrect, the assessing authority may,
after making such enquiry as it considers necessary, determine the tax payable
by the dealer to the best of its judgment:
that, before taking action under this sub- section on the ground that the
return submitted by the dealer is incomplete or incorrect, the dealer shall be
given a reasonable opportunity of proving the correctness or completeness of
the return submitted by him.
the assessing authority has reason to believe that the tax determined by it for
any period was based on too low a turnover or was made at too low a rate or was
based on too high a turnover or was made at too high a rate, it may enhance or
reduce, as the case may be, such determination tax:
that before making an enhancement of the tax payable as aforesaid, the
assessing authority shall, except where such enhancement is based on the
turnover finally determined for the preceding year, give a reasonable
opportunity to the dealer to show cause against such enhancement and make such
enquiry as it may consider necessary.
The determination and collection of tax under this section shall be subject to
such adjustment as may be prescribed on the completion of final assessment in
the manner prescribed." The Appellants were thus filing returns. In these
monthly returns they showed their turnover on the basis of minimum price paid
by them and paid tax thereon. They indicated the additional price which they
had paid as per the advice of the Government but did not include it as part of
the turnover and did not pay tax on such additional price. As and when the
price, under Clause 5-A, was fixed the Appellants filed a revised return and
paid tax on that.
the revised returns were filed an Assessment Order was passed. In the
Assessment Order interest was sought to be charged, under Section 24(3), on the
price fixed under Clause 5-A from the date that the sugar was purchased till
payment of tax was made by the Appellants. The Appellants challenged the demand
for interest before the Tamil Nadu Taxation Special Tribunal. The Tribunal
dismissed the Petition on 19th April, 2000.
The Appellants then filed Writ Petition before the High Court which has been
dismissed by the impugned Judgment.
questions arise for our consideration:
the advance paid, pursuant to the advice of the Government, can be considered
to be price and thus includible in the monthly turnover of the Appellants and
interest under Section 24(3) can be charged on the price fixed under Clause 5-A
and/or on the advance paid and if so, from what date.
these questions, Mr. Vellapally has submitted that the price fixed under Clause
5-A would only be known after it was determined and that till the Clause 5-A
price was announced it would not be includible in the returns for the reason
that the price would not be known. He submitted that the advances given as per
the advice of the Government are mere ad-hoc payments and that these advances
do not constitute price. In support of his submission, he relied upon the
Judgment of this Court in the case of State of Tamil Nadu vs. Kothari Sugars
& Chemicals Ltd. reported in 1996 (7) SCC 751. He further submitted that,
in any case, on a plain reading of Sections 13 and 24 of the Tamil Nadu General
Sales Tax Act no interest can be levied unless and until an assessment has
taken place and a notice of demand has been issued and tax had not been paid
within the time specified in the notice of demand. In support of this
submission, he relied upon the cases of J.K. Synthetics Ltd. vs. Commercial
Taxes Officer reported in 1994 (4) SCC 276 and Frick India Ltd. vs. State of Haryana
reported in 1994 (5) SCC 559.
other hand, Mr. Iyer submitted that the Appellants had chosen to follow the
procedure under Section 13(2). He submitted that tax had to be paid on the
actual turnover. He submitted that the decision of this Court in Kothari Sugars
and Chemicals Ltd.'s case (supra) was only concerned with the question as to
whether the amounts paid in advance, over and above the price fixed under
Clause 5-A, can be considered to be price. He submitted that the observations
made in that case are in the context of this question. He points out that this
Court has in the case of U.P. Cooperative Cane Unions Federations vs. West U.P.
Sugar Mills Association reported in 2004 (5) SCC 430 so noted. He submitted
that therefore the observations in Kothari Sugars and Chemicals Ltd.'s case
cannot be construed to mean that the advance price, paid towards the price fixed
under Clause 5-A, does not constitute price. He further submitted that J.K.
Synthetics Ltd.'s case would have no application as, in the present case, the
tax is to be paid on actual turnover which would mean the actual amounts paid
by way of price.
heard the parties and considered the submissions.
first consider whether the advance paid, towards the Clause 5-A price,
constitutes price and is includible in the monthly returns as turnover. As
stated above, reliance has been placed, by Mr. Vellapally, on the Judgment of
this Court in Kothari Sugars and Chemicals Ltd.'s case (supra). This Judgment
does indicate that the advance paid pursuant to the advice of the Government
cannot be considered to be the price. But we find that the observations made in
this Judgment are in the context of the question whether additional amounts
paid over and above the price fixed under Clause 5-A can be considered to be
the price. This has been so noticed by a Constitution Bench of this Court in
U.P. Cooperative Cane Unions Federations's case (supra). In Kothari Sugars
& Chemicals Ltd.'s case, tax had admittedly been paid in time on the
advance paid towards Clause 5-A price. Tax was also sought to be levied on
monies advanced over and above the Clause 5-A price. The observations made are
merely setting out that advances made, over and above the Clause 5-A price,
cannot be considered to be price. However it is clear that if amounts are paid
towards the Clause 5-A price, they would be payment towards price and therefore
part of turnover even though they may be paid in advance. In our view, Kothari
Sugar & Chemicals Ltd.'s case does not lay down to the contrary. It does
not even deal with this aspect. Of course Clause 5-A price will not be known
till much later. However the Government advice makes it clear that the advance
payment is to be towards the Clause 5-A price. Thus so long as the advance made
is less than or equal to the Clause 5-A price it is advance payment of price.
However if anything more has been paid then that would not be price in the
absence of a contract or any statutory provision. It will thus have to be held
that in the monthly returns the advance should have been included as part of
turnover. If tax has been paid on advance and it is found that excess payment
has been made, refund of tax on the excess payment can be claimed.
question then arises whether interest, under Section 24(3) can be charged on
the Clause 5-A price or on the advance and if so from what date. As has been
noted hereinabove, the price fixed under Clause 5-A can only be decided on the
basis of a formula set out hereinabove. It therefore cannot be decided at least
till the end of the sugar year. In practice it is however decided much later.
As the price would be an unknown, neither the assessee could predict what the
price would be nor could the Assessing Officer, even on the basis of his best
judgment, predict what that price would be. Therefore till the price under
Clause 5-A is fixed there would be no question of an assessee including it in
the monthly returns filed by him. A monthly return filed not showing the price
fixed under Clause 5-A would neither be incorrect nor incomplete. It is only
after the price under Clause 5- A is fixed that the assessee would be required
to file a revised return showing the price fixed under Clause 5-A as part of
his turnover. Mr. Iyer fairly admitted that interest on the price fixed under
Clause 5-A could not be levied from the date the sugarcane was purchased as it
would be impossible to know in advance what the price under Clause 5-A would
be. His submission however was that the advance paid was towards the price
fixed under Clause 5-A and therefore the amount paid as advance should have
been included in the monthly returns as turnover and tax paid on that. He
submitted that such returns had to show the actual turnover and if the returns
did not show the actual turnover then the returns were incorrect and/or
incomplete and therefore interest would be leviable from the date that these
amounts were actually paid to the sugarcane growers till the tax on these
amounts was paid.
the Assessment Order levying interest on the entire price fixed under Clause
5-A and the Judgments of the Tribunal and the High Court upholding that are
clearly erroneous. As stated above, the price fixed under Clause 5-A would not
be known till much later. Thus, it would be impossible to show it in the
monthly returns filed earlier.
course as indicated earlier, Mr. Iyer is right the monthly returns should have
included the amounts paid as advance in the turnover.
question still remains whether by not including them interest becomes payable
on them under Section 24(3).
consider this aspect, one needs to look at Section 13, which has been set out
hereinabove. It is to be seen that under Section 13(2) tax could be paid in
advance on the basis of monthly returns. A plain reading of Section 13(2) shows
that the tax which has to be paid on the basis of such returns. If, as now
contended by Mr. Iyer, the returns are incomplete or incorrect then, under
Section 13(3), the Assessing Authority must, after giving a reasonable
opportunity to the assessee, determine what was the tax payable and issue a
notice to pay the tax within a particular period. The determination and collection
under Section 13 would then be subject to such adjustments as may be prescribed
on completion of the final assessment.
24 reads as follows:
Payment and recovery of tax
Save as otherwise provided for in sub-section (2) of section 13, the tax
assessed or has become payable under this Act from a dealer or person and any
other amount due from him under this Act shall be paid in such manner and in
such instalments, if any and within such time as may be specified in the notice
of assessment, not being less than twenty-one days from the date of service of
the notice. The tax under sub-section (2) of section 13 shall be paid without
any notice of demand. In default of such payments the whole of the amount
outstanding on the date of default shall become immediately due and shall be a
charge on the properties of the person or persons liable to pay the tax or
interest under this Act.
Any tax assessed on or has become payable by, or any other amount due under
this Act from a dealer or person and any fee due from him under this Act,
shall, subject to the claim of the Government in respect of land revenue and
the claim of the Land Development Bank in regard to the property mortgaged to
it under section 28(2) of the Tamil Nadu Co-operative Land Development Banks
Act, 1934 (Tamil Nadu Act X of 1934), have priority over all other claims
against the property of the said dealer or person and the same may without
prejudice to any other mode of collection be recovered-
land revenue; or
application to any Magistrate by such Magistrate as if it were a fine imposed
that no proceedings for such recovery shall be taken or continued as long as he
has, in regard to the payment of such tax, other amount or fee, as the case may
be, complied with an order by any of the authorities to whom the dealer or
person has appealed or applied for revision, under sections 31, 31A, 33, 35,
36, 37 or 38.
any amount remaining unpaid after the date specified for its payment as referred
to in sub-section (1) or in the order permitting payment in instalments, the
dealer or person shall pay, in addition to the amount due, interest at one and
half per cent per month of such amount for the first three months of default
and at two per cent per month of such amount for the subsequent period of
that if the amount remaining unpaid is less than one hundred rupees and the
period of default is not more than a month, no interest shall be paid:
FURTHER that where a dealer or person has preferred an appeal or revision
against any order of assessment or revision of assessment under this Act, the
interest payable under this sub-section, in respect of the amount in dispute in
the appeal or revision, shall be postponed till the disposal of the appeal or
revision, as the case may be, and shall be calculated on the amount that
becomes due in accordance with the final order passed on the appeal or revision
as if such amount had been specified in the order of assessment or revision of
assessment, as the case may be.
Where a dealer submits the prescribed return within ten days after the expiry
of the prescribed period, he shall also pay, in addition to the amount of tax
due as per his return, interest at two per cent of the tax payable for every
month or part thereof.
Where the tax paid under this Act is found to be in excess on final assessment
or revision of assessment, or as a result of an order passed in appeal,
revision or review, the excess amount shall be refunded to the dealer after
adjustment of arrears of tax, if any, due from him.
the excess amount is not refunded to the dealer within a period of ninety days
from the date of the order of assessment or revision of assessment and in the
case of order passed in appeal, revision or review, within a period of ninety
days from the date of receipt of the order, the government shall pay by way of
interest, where the amount refundable is not less than one hundred rupees, a
sum equal to the sum calculated at the rate of one percent or part thereof of
such amount for each month or part thereof after the expiry of the said period
of ninety days.
Explanation: For the purpose of this section,
the expression "order passed in appeal, revision or review" shall not
include an order passed in such appeal, revision or review with direction to
make fresh assessment order." Under Section 24(1) if the tax has been
assessed or has become payable under the Act, then the payment has to be made
within the said time as may be specified in the notice of assessment and tax
under Section 13(2) has to be paid without any notice of demand.
as seen above, the tax under Section 13(2), in the absence of any determination
by the Assessing Authority, is tax as per the returns. If default is made in
payment of such tax then interest becomes payable under the Act. In the present
case, it is an admitted position that tax as per the monthly return had been
paid within time. It is also an admitted position that there was no assessment,
even provisional, by the Assessing Authority prior to the final assessment made
after the revised returns had been filed.
becomes payable under Section 24(3) on an amount remaining unpaid after the
date specified for its payment under sub- section (1) of Section 24. As seen
above sub-section (1) of Section 24 deals with an assessed tax or tax which has
become payable under the Act. In cases covered by Section 13(2) tax must be
paid without any notice of demand. But as stated above, under Section 13(2) tax
is to be paid "on the basis of such returns". Tax as per the returns
has admittedly been paid. If the returns were incomplete or incorrect as now
claimed the assessing authority had to determine the tax payable and issue a
notice of demand. In the absence of any assessment, even provisional, and a
notice of demand no interest would be payable under Section 24(3). In this
case, it is an admitted position that as soon as the revised return was filed
the Appellants paid the tax as per the revised return. Therefore they paid the
tax even before the final assessment took place. Thus the claim for interest,
under Section 24(3) from the date that the advances were paid to the sugarcane
growers is not sustainable. There is no provision under the Act which permits
charging of interest unless and until there has been a provisional assessment
and a notice of demand prescribing the period within which the tax was to be
view finds support from the Constitution Bench decision of this Court in J.K.
Synthetics Ltd.'s case (supra). It must be mentioned that earlier to J.K.
Synthetics Ltd.'s case the question whether interest would be payable from the
date of return on the footing that the return is an incorrect return had come
up for consideration before a three Judge Bench of this Court in the case of
Associated Cement Company Ltd. vs. Commercial Tax Officer, Kota reported in
1981 (4) SCC 578. There was a difference of opinion. The majority Judgment held
that the return must be a true return and if in a final assessment it is held
that the return was incorrect or incomplete, then interest would be leviable
from the date the incomplete or incorrect return was filed. The minority
opinion held that tax was to be paid as per the return and so long as tax was
paid as per the return, merely because in the final assessment it was held that
the return was incorrect or incomplete interest could not be levied prior to
the date of final assessment and the demand thereunder. The majority view was
doubted and the question was referred to a Constitution Bench. The Constitution
Bench in J.K. Synthetics Ltd.'s case accepted the minority view and overruled
the majority view. The Constitution Bench held that tax was payable only as per
the returns. It is held that if incomplete or incorrect return are filed it was
open to the Assessing Officer to provisionally assess and make a demand. It is
held that if that was not done then interest could not be levied on the footing
that in a final assessment it is found that the returns had been incorrect.
decision in J.K. Synthetics Ltd.'s case was thereafter followed by another
Constitution Bench in the case of Frick India Ltd.'s case (supra). These
Judgments fully cover the question under consideration. They are not only
binding on us but we are in full agreement with the principle laid down
made an attempt to distinguish the Judgments on the ground that the provisions
under consideration, in J. K. Synthetics Ltd.'s case, are not in pari materia
with the provisions of the Tamil Nadu General Sales Tax Act. He submitted that
the words "actual turnover" had not been used in the Rajasthan Act.
He submitted that under the Tamil Nadu General Sales Tax Act the return has to
be as per the actual turnover. In our view, the words "actual
turnover" can have no different meaning from the word
"turnover". The word "turnover" has been defined under
Section 2(r) to mean the aggregate amount for which the goods are bought and
sold. Under Section 13(2) the monthly return has to indicate the actual
turnover and tax is then payable as per the return. If the return shows the
actual turnover and tax is not paid as per the return, then interest would be
payable under Section 24(3) as that would be a case where amount has remained
unpaid after the date specified for its payment. However, if the monthly return
does not indicate the actual turnover then it was for the Assessing Authority
to make a demand on the footing that the return was incomplete or incorrect. In
the absence of any such demand interest would not become payable under Section
24(3) as there is no provision for charging of interest prior to the date of
demand. In this respect the principles laid down in J.K. Synthetics Ltd.'s case
fully apply even though the provisions of the Tamil Nadu General Sales Tax Act
and the Rajasthan Act may not be identical.
principle to be kept in mind is, that, when the levy of interest emanates as a
statutory consequence and such liability is a direct consequence of non-payment
of tax, be it under Section 215 of the Income Tax Act or under Section 7(2) /
7(2A) read with Section 11B(a) of the Rajasthan Sales Tax Act, 1954 (as
discussed in the decision of this Court in the case of J. K. Synthetics Ltd.'s
case (supra) or under Sections 13(2) / 24(3) read with Rule 18(3) under the
Tamil Nadu General Sales Tax Act, 1959, then such a levy is different from the
levy of interest which is dependent on the discretion of the Assessing Officer.
The default arising on non-payment of tax on an admitted liability in the case
of self-assessment falls under Section 24(3) read with Rule 18(3) which
attracts automatic levy of interest whereas the default in filing incomplete
and incorrect return falls under Rule 18(4) which attracts best judgment
assessment in which the levy of interest is based on the adjudication by the
Rule 18(3) and Rule 18(4) operate in different spheres.
this view of the matter, the impugned Judgment of the High Court and the Order
of the Tribunal as well as the Assessing Authority cannot be sustained and are
hereby set aside to the extent they levy interest under Section 24(3).
this view of the matter, the Appeals stand allowed. There will be no order as