Interest leviable u/s 27(1) of the DST Act if full amount of tax due has not been paid by the assessee as per a correct and complete return: Delhi HC

Matter: Mohan Hotel Pvt. Ltd v. Commissioner of Sales Tax, S.T. Ref. No.2/2002, decided on 03.06.2011

Assessment Year: 1984-85 to 1989-90

Relevant Facts:

1. The assessee supplies food to airlines which are not for consumption/consumed in India. The assessee thus claims exemption from local sales tax as the food being in the course of export/

2. The assessee contented that the sale came within the purview of section 5(1) of the Central Sales Tax Act, 1956. http://www.vakilno1.com/bareacts/centralsalestaxact/s5.htm. Furthermore, as there was a correct and complete disclosure in the returns of the assessee, no interest would be liable to be paid.

3. The AO rejected the claim of the assessee. The Dy. Commissioner (A) also rejected the claim of the assessee. The tribunal reasoned against the assessee that the document was not a document of title. A review before the Tribunal was also dismissed.

Question of law made under a reference:

(i). Whether on the facts and under the circumstances of the case, the Tribunal was correct in holding that the delivery order issued by the dealer is not a document of title and therefore, the case of the appellant does not fall under the second limb of section 5(1) of the Central Sales Tax Act, 1956?

(ii). Whether on the facts and under the circumstances of the case, the Tribunal was correct to hold that the second limb of the aforesaid section 5(1) pre-supposes foreign destination of the goods?

(iii). If the answer to both the aforesaid questions is in the negative, whether on the facts and under the circumstances of the case the Tribunal was correct in upholding levy of interest under Section 27(1) of the Delhi Sales Tax Act, 1957 read with Section 9(2A) of the Central Sales Tax Act, 1956?

Dismissing the appeal of the petitioner, the Hon’ble Court held that:

1. Only question (iii) came to be adjudicated before the court.

2. Each question is to be decided on the facts of the case. It is clear that there was no correct and complete disclosure of sales in the returns.

3. Interest will be leviable under section 27(1) of the DST Act read with section 21(3) if full amount of tax due has not been paid by the dealer/assessee as per return which is both correct and complete. The correctness and completeness of the return and the bonafide of the assessee/dealer would have to be ascertained in the facts and circumstances of each case.

The decision is available here.

Section 27: If any dealer fails to pay the tax due as required by sub- section (3) of section 21, he shall, in addition to the tax (including any penalty) due, be liable to pay simple interest on the amount so due at one per cent per month from the date immediately following the last date for the submission of the return under sub-section (2) of the said section for a period of one month, and at one and a half per cent per month thereafter for so long as he continues to make default in such payment or till the date of completion of assessment under section 23, whichever is earlier.

Section 21(3): Every registered dealer required to furnish returns under sub-section (2) shall pay into a Government Treasury, or the Reserve Bank of India or in such other manner as may be prescribed, the full amount of tax due from him under this Act according to such return, and shall where such payment is made into a Government Treasury or the Reserve Bank of India furnish along with the return a receipt from such Treasury or bank showing the payment of such amount.