Case: E.I.D. Parry (India) Ltd Vs. Asst.Comnr. Of Commercial Taxes,Chennai

2. Briefly stated the facts are as follows:The 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 + BX = -------------------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.

Reasoning: 11. Thus 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. Of course as indicated earlier, Mr. Iyer is right the monthly returns should have included the amounts paid as advance in the turnover15. Our 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 incorrect18. The 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 therein. 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 that 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 the 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. The 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 the levy of interest is based on the adjudication by the Assessing Officer. Therefore, Rule 18(3) and Rule 18(4) operate in different spheres14. 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. However, 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. Interest 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 paid15. Our 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 incorrect18. The 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 thereinThe 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 that 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 the 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. The 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 the levy of interest is based on the adjudication by the Assessing Officer. Therefore, Rule 18(3) and Rule 18(4) operate in different