M/s.Jagadeeswaran Textiles (P) Ltd.,Represented by its Managing DirectorP.Govindasamy v. The Commercial Tax Officer,Udumalpet (North),Udumalpet,Coimbatore District

Pleader (Taxes) for the respondent.3. In respect of the assessment years 1992-1993, 1993-1994 and1994-1995, the petitioner reported a total and taxable turnover inthe monthly returns filed in Form A-1. However, their accountswere called for and checked by the respondent and thereafter,revised assessment orders were passed on 20.2.1995, 20.2.1995 and5.6.1996 respectively. After 11 years of the passing of thoseorders, the petitioner filed applications under Section 16D beforethe Special Committee, in 2007, but the Special Committee rejectedthe applications, by orders dated 30.10.2007 passed in SCP Nos.117,115 and 116 of 2007 in respect of the assessment years 1992-1993,1993-1994 and 1994-1995 respectively. 4. Thereafter, the petitioner filed writ petitions inW.P.Nos.902, 907 and 963 of 2008. Those writ petitions were allowedby this Court, by a common order dated 4.2.2008, subject to thecondition that the petitioner pays the entire tax and penaltywithin 12 weeks. In the meantime, the petitioner was directed toproduce necessary records and also peruse the relevant records aspermitted by the respondent and after such perusal, the AssessingOfficer was directed to pass fresh orders of assessment. 5. In accordance with the said order of this Court, theAssessing Officer summoned the petitioner and the petitionerappeared before him on 28.1.2009 and 3.2.2009 and produced therecords. Finding that there was no variation, the Assessing Officerissued a final notice inviting objections to be filed on or before12.2.2009 and 18.2.2009. Since the petitioner did not respond tothe notices, the Assessing Officer passed fresh orders ofassessment dated 16.2.2009, 16.2.2009 and 18.2.2009. 6. After passing fresh orders of assessment in respect of theassessment years 1992-1993, 1993-1994 and 1994-1995, on 16.2.2009,16.2.2009 and 18.2.2009 respectively, the Assessing Officer tooknote of the belated payments of tax made by the petitioner inrespect of all these assessment years and consequently issued Form29 under Section 24(3) of TNGST Act, 1959, demanding interest forthe delay in making payments. 7. Therefore, challenging the assessment orders dated16.2.2009, 16.2.2009 and 18.2.2009 in respect of the assessmentyears 1992-1993, 1993-1994 and 1994-1995, the petitioner came upwith three writ petitions in W.P.Nos.15040 to 15042 of 2009,contending that the Assessing Officer did not comply with thedirections of this Court in the earlier batch of writ petitions.The petitioner also filed three writ petitions in W.P.Nos.15265,15546 and 15818 of 2009, challenging the demand of interest. 8. Similarly, in respect of the assessment years 1995-1996 and1996-1997, the petitioner reported a total and taxable turnover intheir monthly returns. But after calling for the accounts andchecking them, the Assessing Officer passed orders dated 24.3.2000.After 7 years of the passing of those orders, the petitioner filed https://hcservices.ecourts.gov.in/hcservices/ applications under Section 16D before the Special Committee in SCPNos.114 and 118 of 2007 respectively. The Special Committee allowedthe applications by separate orders dated 30.10.2007, on the groundthat the cancellation of Registration Certificate led to interstatepurchases of Cotton being treated as local purchases and that sinceregistration had been obtained afresh, the petitioner could begiven an opportunity. In pursuance of the orders of the SpecialCommittee, the Assessing Officer reopened the assessment and passedfresh orders of assessment on 26.3.2009 and 28.4.2009 in respect ofthe assessment years 1995-1996 and 1996-1997. Consequent upon thefresh orders of assessment, the Assessing Officer issued Form 29demanding interest under Section 24(3) for the belated payment oftax. Therefore challenging this demand for interest, the petitionerhas filed 2 writ petitions in W.P.Nos.16150 and 16223 of 2009.9. Since all the writ petitions raise a common question as tothe liability of the petitioner to pay interest, all of them weretaken up together for disposal.10. The assessment orders, relating to the five assessmentyears viz., 1992-1993, 1993-1994, 1994-1995, 1995-1996 and 1996-1997, have now attained finality, in the sense that the time limitfor filing statutory appeals have expired and the petitioner hasnot filed any statutory appeal against any of them. The assessmentorders relating to the years 1992-1993, 1993-1994 and 1994-1995,were challenged directly in W.P.Nos.15040 to 15042 of 2009, but bya separate order passed today, I have dismissed the writ petitions.11. Admittedly, the petitioner has also paid the entire amountof tax as on date in respect of all these assessment years.Therefore, there is no dispute as on date, about two essentialfactors viz., (i) the quantum of tax liability and (ii) the dateson which the petitioner discharged the liability by makingpayments. 12. For determining a dealer's liability to pay interest underSection 24(3), there are three essential factors viz., (i) thequantum of tax liability (ii) the date on which the liability aroseand (iii) the date on which the liability was discharged. Out ofthese three factors, the factors 1 and 3 are not in dispute as ondate. But there is a dispute as to the date on which the liabilitycan be said to have arisen, for the purpose of determining whetherthe petitioner is a defaulter, liable to pay interest. 13.The liability to pay interest is disputed by thepetitioner, primarily on three grounds viz., (i) that the date onwhich fresh orders of assessment were passed, is the date on whichthe liability to pay tax could be construed to have arisen, for thepurposes of Section 24(3); (ii) that when the liability is coveredby a deferral scheme, no interest is payable, by virtue of Section17-A (2) of the Act and (iii) that in any case, there cannot be anyliability to pay interest on disputed turnover, until such disputegot resolved. https://hcservices.ecourts.gov.in/hcservices/ FIRST CONTENTION: 14. Placing reliance both upon the second proviso under sub-section (3) of Section 24 and upon the decision of the SupremeCourt in Philips India Ltd vs. Assistant Commissioner, CommercialTaxes {(2004) 136 STC 636}, Mrs.R.Hemalatha, learned counsel forthe petitioner, contended that the petitioner could be construed asa defaulter, only if he had failed to make payment of the taxdetermined in the fresh orders of assessment passed after remand bythis Court in the first three cases and after remand by the SpecialCommittee in the remaining two cases. It is her contention that thefresh orders of assessment effaced, substituted or replaced theoriginal order of assessment and hence the petitioner cannot bestamped as a defaulter, from the date of the original order ofassessment, so as to attract interest under Section 24(3). Inparagraph-9 of its decision in Philips India, the Supreme Courtheld that once the original assessments are set aside and remandedfor re-computation, the original orders ceased to exist and thattherefore the liability would be to pay the amount before the dateset out in the fresh notices. Therefore, the learned counsel forthe petitioner contended that the demand under Section 24(3) isunsustainable. 15. The issue of interest on belated payment of tax has alwaysbeen a vexed one, with judicial decisions swinging from one extremeto the other. The reason for the judicial mind acting like apendulum, on this issue, is perhaps the fact that many times courtswere confronted either with the question of penalty (not interest)or with genuine disputes which led to non payment/ belated paymentof tax.16. In State of Rajasthan vs. Ghasilal (AIR 1965 SC 1454), aConstitution Bench of the Supreme Court, while considering theliability to pay penalty, held that " till the tax payable isascertained by the assessing authority under section 10 or by theassesseee under section 7(2) (of the Rajasthan Act) no tax can besaid to be due within section 16 (1)(b) of the Act, for till thenthere is only a liability to be assessed to tax." It was heldtherein that there must be a tax due and there must be a failure topay the tax due within the time allowed, so as to attract penalty.17. When the above observations of the Constitution Bench inGhasilal were sought to be relied upon by an assessee, in asubsequent case, Associated Cement Co. Ltd., Vs. Commercial TaxOfficer {(1981) 4 SCC 578}, a three judges Bench made a distinctionbetween penalty and interest. On the question of penalty, theJudges were of the unanimous opinion that no penalty can be leviedfor non inclusion of freight charges in the taxable turnover andnon payment of tax in respect of such charges. But on the questionof payment of interest under section 11B of the Rajasthan Sales TaxAct, the Judges were divided even on the purport of the decision ofthe Constitution Bench in Ghasilal. In paragraph-40 of thejudgment, the majority (of 2 Judges) opined that even as perGhasilal, the tax becomes payable, for the purpose of Section 11B, https://hcservices.ecourts.gov.in/hcservices/ before assessment is made, though it becomes due when return isfiled under section 7(2) or ascertained under section 10. Relyingupon the observations of Sikri.,J., in Ghasilal, the majority inAssociated Cement Company held that a tax can become payable, evenbefore assessment is made. In paragraph 41 and 42, the majorityview in Associated Cement Company was expressed as follows:-"41. We are of opinion that either bydelaying the filing of the return or notfiling it at all or by filing a returnwrongly claiming that a certain part of theturnover is not taxable or by not disclosinga part of the taxable turnover in the returnan assessee cannot escape the liability topay interest under Section 11-B(a) on theamount of tax withheld, as a consequence ofhis own action or inaction, from the lastdate on which it had to be paid as per sub-section (2) or sub-section (2A), of Section7, as the case may be read with the Rules.""42. We are of the view that thestatutory liability under Section 11-B (a)arises wherever there is default in paymentof the tax within the period allowed by lawirrespective of any doubt which an assesseemay be entertaining about the liability topay the tax."However P.N.Bhagwati.,J, in his minority opinion held that so longas the assessee pays the amount of tax, which according to him isdue on the basis of the return filed by him, there would be nodefault on his part and that the liability of the assessee todeposit the amount of tax cannot depend upon a future discretionaryevent of final assessment by the assessing authority. Therefore, heheld that where the assessee paid the full amount of tax due as perthe return filed by him, no interest would be leviable on the taxfurther payable by him in the revised returns on account of freightcharges being included. 18. In so far as Tamilnadu General Sales Tax Act, 1959 isconcerned, section 12 (3) imposes penalty and section 24 (3) leviesinterest. In Sakthi Sugars vs. Assistant Commissioner {(1985) 59STC 52}, a Division Bench of this Court considered theconstitutional validity of Section 24(3) and held that the paymentstipulated by Section 24(3) is compensatory and not penal incharacter. 19. Though it was held in Sakthi Sugars that a provisionalassessment under Rule 18(3) of the Tamil Nadu General Sales TaxRules, would not be covered by Section 24(3), the Act was amendedthereafter by Act 78 of 1986 with effect from 1.1.1986. It is onlyby the said amendment that sub-section (3) of Section 24 and thetwo provisos thereunder, as they stand on date, replaced the thenexisting provision. 20. After the amendment to Section 24(3), a Division Bench of https://hcservices.ecourts.gov.in/hcservices/ this Court held in Apollo Tubes Ltd vs. Additional DeputyCommercial Tax Officer {(1994) 93 STC 339}, that the liability topay interest is not only automatic but that the Section enjoins aliability to pay interest in addition to the amount due by way oftax. 21. But again, the question as to whether an assessee isrequired to pay interest on the additional sales tax upon theinclusion of freight charges in the sale price and whether interestunder Section 11-B of the Rajasthan Sales Tax Act was payable onlyupon final assessment being made and a notice of demand beingissued, was referred to a Constitution Bench in J.K.Synthetics Ltdvs. Commercial Tax Officer {1994 (4) SCC 276}. While the assesseerelied upon the decision of the Constitution Bench in Ghasilal, theRevenue relied upon the decision of the three Judges Bench inAssociated Cement Company. Even at the outset, the ConstitutionBench in J.K.Synthetics, made it clear in paragraph-9 that thepenalty provisions in a Statute have to be strictly construed andthat the considerations which may weigh with the authority as wellas the Court in construing penal provisions would be different fromthose which would weigh in construing a provision for payment ofinterest on unpaid amount of tax. While emphasising that the ruleof interpretation of a charging provision may be different from theinterpretation adopted in respect of a machinery provision, theBench pointed out in paragraph-9 as follows:-"But the machinery provisions neednot be strictly construed. The machineryprovisions must be so construed as wouldenable smooth and effective collection ofthe tax from the dealers liable to paytax under the Statute. Section 11-Bprovides for levy of interest on failureof the dealer to pay tax due under theAct and within the time allowed. Shouldthis provision be strictly construed orshould it receive a broad and liberalconstruction, is a question which we willhave to consider in determining the sweepof the said provision."After pointing out in paragraph-16 that ordinarily the chargingsection which fixes the liability is strictly construed, while therule of strict construction is not extended to the machineryprovisions, the Bench held that the machinery provisions must be soconstrued as would effectuate the object and purpose of the Statuteand not defeat the same. But the Bench also made a smalldistinction, between other machinery provisions and the provisionrelating to levy of interest, in the following words:-"But it must also be realised thatprovision by which the authority isempowered to levy and collect interest,even if construed as forming part of themachinery provisions, is substantive lawfor the simple reason that in the absenceof contract or usage, interest can be https://hcservices.ecourts.gov.in/hcservices/ levied under law and it cannot be recoveredby way of damages for wrongful detention ofthe amount."22. After referring to two earlier decisions, which held thatthe provision for charging interest was to compensate for the lossoccasioned to the Revenue due to delay, the Bench opined that eventhen the provision has to be given only its plain meaning. In thelater part of paragraph-16, the Bench held (in J.K.Synthetics) asfollows:-"But then interest was charged on thestrength of a statutory provision, may be itsobjective was to compensate the Revenue fordelay in payment of tax. But regardless ofthe reason which impelled the Legislature toprovide for charging interest, the Court mustgive that meaning to it as is conveyed by thelanguage used and the purpose to be achieved.Therefore, any provision made in a statutefor charging or levying interest on delayedpayment of tax must be construed as asubstantive law and not adjectival law. Soconstrued and applying the normal rule ofinterpretation of statutes, we find, aspointed out by us earlier and by Bhagwati,J., in the Associated Cement Co. case, thatif the Revenue's contention is accepted itleads to conflicts and creates certainanomalies which could never have beenintended by the Legislature.""The conjoint reading of Sections 7(1),(2) and (2-A) and 11-B of the Act leaves noroom for doubt that the expression 'taxpayable' under Section 11-B can only mean thefull amount of tax which becomes due undersub-sections (2) and (2-A) of the Act whenassessed on the basis of the informationregarding turnover and taxable turnoverfurnished or shown in the return. Therefore,so long as the assessee pays the tax whichaccording to him is due on the basis ofinformation supplied in the return filed byhim, there would be no default on his part tomeet his statutory obligation under Section 7of the Act and, therefore, it would bedifficult to hold that the 'tax payable' byhim 'is not paid' to visit him with theliability to pay interest under clause (a) ofSection 11-B. It would be a different matterif the return is not approved by theauthority but that is not the case here. Itis difficult on the plain language of thesection to hold that the law envisages theassessee to predicate the final assessment https://hcservices.ecourts.gov.in/hcservices/ and expect him to pay the tax on that basisto avoid the liability to pay interest. Thatwould be asking him to do the nearimpossible."Therefore, the Constitution Bench in J.K.Synthetics, overruled themajority view in Associated Cement Company and upheld the minorityview of Bhagwati, J. 23. However, the decision in J.K.Synthetics, was distinguishedby a Division Bench of this Court in Godrej & Boyce ManufacturingCo. Ltd vs. Joint Commissioner of Commercial Taxes {1995 (97) STC44}, on the ground that the provisions of Sections 7(2), 7(2-A) and11-B of the Rajasthan Sales Tax Act, are not in pari materia withthe provisions of Sections 13(2), 24(1) and 24(3) of the TamilnaduAct and Rule 18(2) of the Tamilnadu Rules. The Division Bench,after distinguishing J.K.Synthetics, chose to follow the earlierDivision Bench in Apollo Tubes and held that there need not be anorder of assessment, before interest is levied under Section 24(3)of the Act. 24. Again in Calcutta Jute Manufacturing Co. and Another vs.Commercial Tax Officer {1997 (106) STC 433}, a two Judges Bench ofthe Apex Court was concerned with the question whether an assesseewas liable to pay interest on the turnover tax for the periodduring which, the recovery of tax was stopped by orders of theCourt. After distinguishing J.K.Synthetics on facts, the SupremeCourt held that the challenge to the constitutional validity of acharging provision (which resulted in a stay order and subsequentbelated payment), cannot be equated to a dispute whether thefreight charges would form part of the sale price or not.Thereafter, the Bench held in paragraph-16 as follows:-"16. The tax amount which they shouldhave paid as per Section 6B remained with theappellant during the entire period and theywould have earned good profit with thatamount. The State, to which the tax amountshould necessarily have gone, was not able toutilize it for public purposes. Whenappellants had the advantage of keeping theamount of tax without paying it to the Stateexchequer only because the High Court grantedorders restraining the State from recoveringthat amount from the assessee, no act of theCourt shall cause prejudice to any party. Theprestine doctrine couched in the maxim "actuscuriae neminem gravabit" has ever remained asalutary and guiding principle."25. Similar views, as expressed by the Apex Court inparagraph-16 of Calcutta Jute Manufacturing Co., (extracted in thepreceding paragraph) were expressed by a Division Bench of thisCourt in E.I.D. Parry (India) Ltd vs. Assistant Commissioner ofCommercial Taxes {2002 (126) STC 399}, paragraph-36 of which readsas follows:- https://hcservices.ecourts.gov.in/hcservices/ "36. For the purpose of Section 13(2),the tax payable by the assessee is not anamount which is confined to the erroneousoriginal returns filed by the assessee, butis an amount which is payable in terms of therevised corrected returns filed by theassessee. The returns being returns of self-assessments, the basis for calculating thetax is the figures set out in that return. Itis wholly impermissible for an assessee tofile a defective return, disclaim liabilityfor payment of tax as also of any interestfor delayed payment of tax on the basis ofthat incorrect return and thereafter file arevised return including therein the correcttaxable turnover admitting the liability forpayment of further amounts by way of tax, andthen claim that it is not liable for paymentof any interest for the delay in remittingthe tax from the date of original return tothe date of the revised return."26. Though the Division Bench that decided E.I.D. Parry(India) Ltd., did not seek to distinguish the decision of theConstitution Bench in J.K.Synthetics, another Division Benchdistinguished J.K.Synthetics on the following lines, in AshokLeyland Ltd vs. Assistant Commissioner (CT) {2002 (127) STC 73}:-"Thus the language employed in theTamil Nadu Provision as "actual turnoverfor each month" and the requirement of theprovision that the dealer has to furnishthe return showing his "actual turnover foreach month" and pay tax on the basis ofsuch return is in contra distinction to theexpression employed the 'tax payable' underSection 11-B of the Rajasthan Act, whichonly mean the full amount of tax becomesdue under sub sections (2) and (2-A) of theAct make clear that the provisions of theRajasthan Act and the Tamil Nadu Act arenot comparable provisions."27. The distinction so made as above, was also reiterated byanother Division Bench of this Court in Indian Commerce andIndustries Co. Pvt. Ltd vs. Commercial Tax Officer {2003 (129) STC509}, on the ground that the provisions of the Rajasthan Act arenot in pari materia with the provisions of the Tamil Nadu Act.Thus, almost all the Division Benches of this Court, right fromApollo Tubes Ltd., Godrej & Boyce Manufacturing Co. Ltd., andE.I.D. Parry (India) Ltd., upto Indian Commerce and Industries Co.Pvt. Ltd., were of the view that interest under Section 24(3) wasautomatic. All these Division Benches of this court, were also ofthe view that the provisions of the Rajasthan Act are notcomparable to Tamilnadu Act. https://hcservices.ecourts.gov.in/hcservices/

28. However, the decision of the Division Bench in E.I.D.Parry (India) Ltd., was reversed by the Supreme Court in E.I.D.Parry (India) Ltd vs. Assistant Commissioner of Commercial Taxes{2005 (141) STC 12}, by a Bench of three Judges. It is seen fromparagraph-5 of the said decision that two questions arose forconsideration in that case. While one related to the inclusion ofthe advance paid to the sugarcane growers, in the monthly turnover,the other related to the liability to pay interest under Section 24(3). After holding that the advance paid will have to be includedas part of the turnover in the monthly returns, the Supreme Courtheld in paragraph-10 of the said decision that the price ofsugarcane, fixed under Clause 5-A cannot be known till the end ofthe sugar year, but was decided much later. Therefore, there was noquestion of including the price ultimately fixed under Clause 5-Ain the monthly returns. Consequently, the Supreme Court pointed outin paragraph-13 (after extracting Section 24) that tax underSection 13(2), in the absence of any determination by the AssessingAuthority, is tax as per the returns. If default is made in paymentof the tax as per the returns, interest automatically becomespayable. The tax payable under Section 13(2), as per the returns,has to be paid without any notice of demand. But when an incorrector incomplete return is filed, the Assessing Authority had todetermine the tax payable and issue a notice of demand, withoutwhich no interest would be payable under Section 24(3). With such apremise, the Supreme Court held in paragraph-13 as follows:-"In the absence of any assessment, evenprovisional, and a notice of demand, nointerest would be payable under Section 24(3)"."There is no provision under the Actwhich permits charging of interest unless anduntil there has been a provisional assessmentand a notice of demand prescribing the periodwithin which the tax was to be paid." In paragraph 16, the Supreme Court also held categorically, thatthe principles laid down in J.K.Synthetics would fully apply, eventhough the provisions of the Tamil Nadu General Sales Tax Act andthe Rajasthan Act may not be identical. It requires a deeperexamination to find out if this opinion of the Apex Court, byimplication, over rules the consistent view taken by the variousDivision Benches of this Court right from Apollo Tubes upto EIDParry, on the basis that both Acts are not in pari materia. Sincethat question does not arise here, I do not wish to stray into thatarea.29. After holding that the principles in J.K.Synthetics wouldsquarely apply even if the Acts are not identical, the SupremeCourt went on to hold as follows:-"The default arising on non-payment oftax on an admitted liability in the case ofself-assessment falls under Section 24(3)read with Rule 18(3) which attracts automaticlevy of interest whereas the default in https://hcservices.ecourts.gov.in/hcservices/ filing incomplete and incorrect return fallsunder Rule 18(4) which attracts best judgmentassessment in which the levy of interest isbased on the adjudication by the AssessingOfficer".Thus, from Ghasilal to E.I.D. Parry, the law appears to have come afull circle. Though the distance travelled was not too long, theroad was certainly bumpy and the Supreme Court had clearlyindicated in E.I.D. Parry that though the provisions of theRajasthan Act are not in pari materia with the provisions of theTamil Nadu Act, the principle enunciated in J.K.Synthetics had tobe kept in mind. 30. Keeping the above principles in mind, if we look at theissue on hand, it is seen that none of the above decisions wasconcerned with an interpretation to the second proviso to Section24(3). All the above decisions arose either out of a challenge tothe charging section, or out of a challenge to the inclusion ofcertain charges in the taxable turnover or out of filing of revisedreturns or out of revised orders of assessment. Consequently, thesecond proviso to Section 24(3) of the TNGST Act or any provisionsimilar to this provision or in pari materia, in any otherenactment, did not fall for jural exploration in those cases. 31. Therefore, it is necessary to have a close look at Section24. Therefore, it is extracted as follows:-"Section 24. Payment and recovery oftax – (1) Save as otherwise provided forin sub-section (2) of Section 13, the taxassessed or has become payable under thisAct from a dealer or person and any otheramount due from him under this Act shallbe paid in such manner and in suchinstalments, if any, and within such timeas may be specified in the notice ofassessment, not being less than twenty-onedays from the date of service of notice.The tax under sub-section (2) of Section13 shall be paid without any notice ofdemand. In default of such payment thewhole of the amount outstanding on thedate of default shall become immediatelydue and shall be a charge on theproperties of the person or persons liableto pay the tax or interest under this Act.(2) Any tax assessed on or has becomepayable by, or any other amount due underthis Act from a dealer or person and anyfee due from him under this Act, shall,subject to the claim of the Government inrespect of land revenue and the claim ofthe Land Development Bank in regard to theproperty mortgaged to it under Section 28(2) of the Tamil Nadu Co-operative Land https://hcservices.ecourts.gov.in/hcservices/ Development Banks Act, 1934 (Tamil NaduAct X of 1934), have priority over allother claims against the property of thesaid dealer or person and the same maywithout prejudice to any other mode ofcollection be recovered,(a) as land revenue, or(b) on application to any Magistrate,by such Magistrate as if it were a fineimposed by him:Provided that no proceedings for suchrecovery shall be taken or continued aslong as he has, in regard to the paymentof such tax, the amount or fee, as thecase may be, complied with an order by anyof the authorities to whom the dealer orperson has appealed or applied forrevision, under Sections 31, 31-A, 33, 35,36, 37 or 38.(3) On any amount remaining unpaidafter the date specified for its paymentas referred to in sub-section (1) or inthe order permitting payment ininstalments, the dealer or person shallpay, in addition to the amount due,interest at two per cent per month of suchamount for the entire period of default:Provided that if the amount remainingunpaid is less than one hundred rupees andthe period of default is not more than amonth, no interest shall be paid:Provided further that where a dealeror person has preferred an appeal orrevision against any order of assessmentor revision of assessment under this Act,the interest payable under this sub-section, in respect of the amount indispute in the appeal or revision, shallbe postponed till the disposal of theappeal or revision, as the case may be,and shall be calculated on the amount thatbecomes due in accordance with the finalorder passed on the appeal or revision asif such amount had been specified in theorder of assessment or revision ofassessment as the case may be."32. Primarily, the liability to pay interest at 2% per month,on the amount remaining unpaid, arises under any one of the twocontingencies prescribed in Section 24(3). They are (i) that theamount remains unpaid after the dates specified for its payment asreferred to in sub-section (1) or (ii) that the amount remainsunpaid after the date specified for its payment in the orderpermitting payment in instalments. But this liability is https://hcservices.ecourts.gov.in/hcservices/ circumscribed by two provisos under sub-section (3). By the firstproviso, any liability of less than Rs.100/- is exempt from theliability to pay interest, if it remains unpaid for not more than amonth. By the second proviso, the liability to pay interest ispostponed, if an appeal or revision against an order of assessmenthas been made, till the appeal or revision is disposed of. But thepostponement of the liability to pay interest is only in respect ofthe amount in dispute in the appeal or revision. However, after thedisposal of the appeal or revision, the interest is bound to becalculated on the amount that ultimately becomes due as per thefinal order passed on the appeal or revision, as if such amount hadbeen specified in the order of assessment.33. The second proviso to sub-section (3) of Section 24, asseen from its plain language, operates at two levels viz., (i) theinterest payable on the amount in dispute in the appeal orrevision, is postponed till the disposal of the appeal or revision,whenever an appeal or revision is filed and (ii) the interest insuch cases will be worked out on the basis of the order passed inthe appeal or revision, as if such amount had been specified in theorder of assessment. 34. Three things are indicated, in clear terms, by the secondproviso and they are as follows:-(i) The liability to pay interest is merely postponed, if anappeal or revision is filed. In other words, the liability ariseseven at the first instance, but its payment stands postponed tillthe disposal of the appeal or revision. (ii) What is postponed is only the interest component on thedisputed amount alone. The liability to pay tax is not postponed(unless there was stay). The liability to pay interest if any, onthe amount which is not the subject matter of the appeal orrevision is also not postponed. In other words, the admitted taxshould have been paid and the interest arising out of any belatedremittance of such admitted liability is also not postponed. (iii) After the disposal of the appeal or revision, the amountdetermined in such appeal or revision, will be taken to be theamount specified in the original order of assessment. In simpleterms, the liability determined in the appeal or revision, relatesback to the date of the original order of assessment. 35. What is incorporated in the last part of the secondproviso to sub-section (3) of Section 24, is "the Doctrine ofrelation back". Black's Law Dictionary defines it as "the Doctrinethat an act done at a later time is, under certain circumstances,treated as though it occurred at an earlier time". It is a fictionof law and is aptly stated in the Latin Maxim "relatio est ficiiojuris et intenta ad unum" meaning "Relation is a fiction of law,and is intent to one point". Ramanatha Iyer's Law Lexicon definesRelation Back as follows:-"Relation Back" is where a thing oract constructively relates back to anantecedent thing or act.It is said that relation is a fiction https://hcservices.ecourts.gov.in/hcservices/ of law, resorted to for the promotion ofjustice and for promoting the lawfulintention of parties, by giving effect toacts or instruments which without it wouldbe invalid. It has its most frequentapplication to contracts of sale where thedeed is not made for sometime after thesale, but, when it is made, relates backto the sale."36. Thus the second proviso to Section 24(3) creates a fictionof law. It is created for the purpose of promoting the object ofpreventing unjust enrichment. After all, sales tax, unlike incometax, is not something that is paid by a dealer out of his pocket.In normal circumstances, it is something which is collected by thedealer from his customer. The dealer is permitted by law, to retainthe sales tax so collected from his customers, for a brief periodof time. During the said period, the dealer retains the taxcollected by him, in trust for the Government. If the period ofretention exceeds the period statutorily fixed, the dealer will beguilty of unjust enrichment, though not of temporarymisappropriation. This is why, the levy of interest under Section24(3) is held by Courts to be automatic. Upon the expiry of theperiod stipulated for payment of the tax due, the liability to payinterest arises automatically. The 'tax due' is the cause and'interest' is the consequence and both stand separated only for aspecified period. 37. The decision in Philips India Ltd {(2004) 136 STC 636},relied upon by the learned counsel for the petitioner, arose out ofthe demand for interest made after the orders of the AppellateAuthority, directing re-computation, which ultimately resulted inreduction of tax. But as pointed out earlier, the Supreme Court wasconcerned in Philips India with Section 10-A of the Bengal Finance(Sales Tax) Act, 1941. The said Section 10-A read as follows:-"10.A. Interest payable by dealer –(1) Where a registered or certified dealerfurnishes a return referred to in Section10 in respect of any period by theprescribed date or thereafter, but failsto make full payment of tax payable inrespect of such period by such prescribeddate, he shall pay a simple interest atthe rate of two per centum for eachEnglish calendar month of default from thefirst day of such month next following theprescribed date up to the month precedingthe month of full payment of such tax orup to the month prior to the month ofassessment under Section 11 in respect ofsuch period, whichever is earlier, upon somuch of the amount of tax payable by himaccording to such return as remains unpaidat the commencement of each such month: https://hcservices.ecourts.gov.in/hcservices/ Provided that where such dealeradmits in writing that the amount of taxpayable in respect of such period is anamount which is either more or less thanwhat has been originally shown as payablein the return and where the Commissioneris satisfied on the point of suchadmission, the interest shall be payableupon so much of the amount of tax payableaccording to such admission as remainsunpaid at the commencement of each suchmonth.(2) Where a registered or certifieddealer fails to furnish a return referredto in Section 10 in respect of any periodby the prescribed date or thereafterbefore the assessment under Section 11 inrespect of such period, and on suchassessment full amount of tax payable forsuch period is found not to have been paidby him by such prescribed date, he shallpay a simple interest at the rate of twoper centum for each English calendar monthof default from the first day of the monthnext following the prescribed date up tothe month preceding the month of fullpayment of tax for such period or up tothe month prior to the month of assessmentunder Section 11 in respect of suchperiod, whichever is earlier, upon so muchof the amount of tax payable by himaccording to such assessment as remainsunpaid at the commencement of each suchmonth:Provided that where an assessmentunder Section 11 is made for more than onereturn period and such assessment does notshow separately the tax payable for theperiod in respect of which interest ispayable under this sub-section, theCommissioner shall estimate the taxpayable for such period on the basis ofsuch assessment after giving the dealer anopportunity of being heard.(3) Where a dealer fails to makepayment of any tax payable afterassessment by the date specified in thenotice issued under sub-section (3) ofSection 11 for payment thereof, he shallpay a simple interest at the rate of twoper centum for each English calendar monthof default from the first day of the monthnext following the date specified in suchnotice up to the month preceding the month https://hcservices.ecourts.gov.in/hcservices/ of full payment of such tax or up to themonth preceding the month of commencementof proceedings under sub-section (4) ofSection 11, whichever is earlier, upon somuch of the amount of tax payable by himaccording to such notice as remains unpaidat the commencement of each such month.(4) Where as a result of an orderunder Section 20 or Section 21 the amountof tax payable is reduced, the interestpayable under sub-section (3) shall bedetermined or redetermined on the basis ofsuch reduced amount and the excessinterest paid, if any, shall be refunded."38. A comparative study of Section 10-A of the Bengal Act,which fell for consideration in Philips India, and Section 24(3) ofthe TNGST Act, 1959, shows that Section 10-A(4) of the Bengal Act,stands on a different footing from the second proviso to sub-section (3) of Section 24 of the TNGST Act, 1959. Section 10-A(4)of the Bengal Act, states in simple terms that if the amount of taxpayable is reduced on appeal or revision, the interest should bere-determined on the basis of the reduced amount of tax. On thecontrary, the second proviso to Section 24(3), as pointed outearlier, makes three things very clear viz.,(i) that the liabilityto pay interest is just postponed (ii) that what is postponed isonly the interest component of the disputed tax and not theinterest component of the admitted tax and (iii) that once anappeal or revision is disposed of, the determination made wouldrelate back to the order of assessment.39. In view of such a fiction created by the second proviso, Iam of the considered view that the decision in Philips India maynot be of any assistance to the petitioner. The second proviso toSection 24(3) may operate to exclude the general principles statedin paragraph-9 of the decision in Philips India Ltd., that once theoriginal assessment is set aside and the matter remitted for re-computation, the original orders ceased to exist and that theliability arises only thereafter. Since the second proviso toSection 24(3) invokes the "Doctrine of Relation Back" and alsosince by a fiction, it merely postpones but not erases theliability, the decision in Philips India would not go to the rescueof the petitioner. 40. Since the Apex court has pointed out in EID Parry thatthough the Acts (Bengal and Tamilnadu Acts) may not be identical,the principles will have to be applied, I have not simply gone byhair splitting distinctions between the Bengal Act which wasconsidered by the Supreme Court in Philips India case and theTamilnadu Act, with which we are now concerned. I have gone only bythe plain language of the second proviso to section 24(3). Themandate of the Constitution Bench in J.K.Synthetics was thatregardless of the reason which impelled the Legislature to providefor charging interest, the Court must give that meaning to it as is https://hcservices.ecourts.gov.in/hcservices/ conveyed by the language used and the purpose to be achieved andthat therefore, any provision made in a statute for charging orlevying interest on delayed payment of tax must be construed as asubstantive law and not adjectival law. Applying the saidprinciple, I find that the orders of assessment passed afterremand, related back to the original orders and hence interest isan inevitable consequence of belated payment.41.Even on facts, it is seen that in respect of the assessmentyears 1992-1993, 1993-1994 and 1994-1995, what were set aside bythis Court were only the orders of the Special Committee and notthe orders of assessment. In any case, the dispute raised by thepetitioner in respect of all the five assessment years, is not inrespect of the entire total and taxable turnover, but only inrespect of a portion thereof. Since the second proviso enablespostponement of payment of only the disputed tax, the petitionerought to have paid at least the tax on the turnover not in dispute.Admittedly, in the cases on hand, the petitioner did not even paythe tax on the admitted turnover. Therefore, the petitioner cannottake refuge under the theory of merger and contend that theoriginal order of assessment stood erased.42. To recapitulate the facts, the orders of assessment forthe assessment years 1992-1993, 1993-1994 and 1994-1995 were passedon 20.2.1995, 20.2.1995 and 5.6.1996. For a period of more than 10years, the petitioner did not challenge these orders. It was onlyin the year 2007 that the petitioner filed applications before theSpecial Committee under Section 16D. These applications wererejected by orders dated 30.10.2007. The orders of the SpecialCommittee alone were set aside by this Court and the matterremitted back to the Assessing Officer, on condition that thepetitioner pays the entire amount of tax. The orders of assessmentdated 20.2.1995, 20.2.1995 and 5.6.1996 were not set aside by thisCourt. Similarly, in respect of the assessment years 1995-1996 and1996-1997, the orders of assessment were dated 24.3.2000. Withoutchallenging these orders for about 7 years, the petitionerapproached the Special Committee under Section 16D only in the year2007 and the Special Committee gave a small reprieve. Thereafterfresh orders were passed. Therefore, the first contention that thefresh orders of assessment passed in the year 2009 provided thecrucial date for determining whether the petitioner was a defaulteror not, cannot be accepted, as these fresh orders related back tothe date of the original orders of assessment, by virtue of thesecond proviso to Section 24(3). SECOND CONTENTION:43. The second ground of attack of the petitioner to theimpugned orders is that the deferred payment of tax under a scheme,would not attract interest, in view of Section 17-A(2) of the TNGSTAct, 1959. Section 17-A of the Tamil Nadu General Sales Tax Act,1959, reads as follows:-"17-A. Power of Government to notifydeferred payment of tax for new https://hcservices.ecourts.gov.in/hcservices/ industries, etc. - (1) The Government may,in such circumstances and subject to suchconditions as may be prescribed, bynotification issued whether prospectivelyor retrospectively, defer the payment byany new industrial unit or sick unit orsick textile mill of the whole or any partof the tax payable in respect of anyperiod:Provided that such retrospectiveeffect shall not be earlier than the 9thMay 1998.(1-A) The Government may by generalor special order authorise the TerritorialAssistant Commissioner to exercise such oftheir powers specified in sub-section (1).(2) Notwithstanding anythingcontained in this Act, the deferredpayment of tax under sub-section (1) orsub-section (1-A) shall not attractinterest under sub-section (3) of Section24 provided the conditions laid down forpayment of the tax deferred aresatisfied."44. It is true that Section 17-A(2) begins with a non abstanteclause. But the benefit of Section 17-A(2) will be available, onlyif the conditions laid down for payment of the tax deferred aresatisfied. In fact, even without a non abstante clause, interestmay not be chargeable on the tax due, if the dealer has beengranted the benefit of deferred payment under a scheme. This isbecause Section 24(3) itself contains an in-built safeguard.Section 24(3) makes a dealer liable to pay interest if the tax dueis not paid either within the date specified in sub section (1) orwithin the date specified in the order permitting payment ininstalments. Deferral scheme is nothing but a scheme ofpostponement of the tax due. Therefore Section 17-A(2) has acorrelation to what is stipulated in Section 24(3). 45. But the moment a dealer commits breach of the conditionslaid down under the deferral scheme, the protection granted underSection 17-A (2) would go, since the very availability of thebenefit under Section 17-A(2) is made contingent upon thesatisfactory compliance with the conditions laid down in thedeferral scheme. Admittedly, the petitioner in this case, hasdefaulted in payment of the amounts, as per the deferral scheme.Therefore, the protection under Section 17-A(2) is no moreavailable to them. Hence the second contention of the petitioneralso cannot be accepted.THIRD CONTENTION:46. The third contention of the petitioner is that therecannot be any liability to pay interest on the disputed portion of https://hcservices.ecourts.gov.in/hcservices/ the tax, till the dispute is resolved. But the answer to thiscontention is also found in the second proviso to Section 24(3)itself. As pointed out by me, while dealing with the firstcontention, the effect of the second proviso is merely to postponeand what is postponed is only the interest on the disputed portionof the tax. This is made clear by the use of the expression "theinterest payable under this sub section, in respect of the amountin dispute in the appeal or revision". After a final order ispassed, the order relates back to the original order of assessment.Therefore the third contention is also not well founded. 47. The dispute raised by the petitioner can also be lookedat, from another angle. Suppose a dealer was assessed to tax in thefirst instance and he also makes payment of the tax so assessed.But later on, if the tax assessed is found to be in excess, therefund of the excess amount is to be made within 90 days, failingwhich the Government is also liable to pay interest to the dealer,by virtue of Section 24(4). Though the interest payable by thedealer under Section 24(3) is higher than the interest payable bythe Government under Section 24(4), the choice is with the dealer,either to make full payment and claim refund under Section 24(4) orto make part payment and run the risk of being imposed with a penalinterest under Section 24(3). 48. In view of the above, there are no merits in the writpetitions. Hence they are dismissed. No costs. Consequentlyconnected miscellaneous petitions are also dismissed.SvnSd/Asst.Registrar/true copy/Sub Asst.RegistrarToThe Commercial Tax Officer,Udumalpet (North),Udumalpet,Coimbatore District.+1 cc to Mrs. R. Hemalatha, Advocate, SR.No.54945.+5ccs to the Special Government Pleader (Taxes), SR.no.55062 to55066.Pre-Delivery Common Orderin W.P.Nos.15265, 15546,15818, 16150 and 16223 of 2009rs(co)ar/9.11.2009.