Case Law Details
Tvl. Nagoorar Enterprises Vs State Tax Officer (Madras High Court)
In the case of Tvl. Nagoorar Enterprises vs. State Tax Officer, the Madras High Court addressed challenges to orders imposing interest liability on the petitioner for delayed filing of returns and payment of taxes during relevant assessment periods. The petitioner cited various reasons for the delays, including family bereavements, non-payment by suppliers, and the impact of the COVID-19 pandemic. The central contention was that the petitioner had eventually filed the returns and paid the requisite taxes, but interest liability was imposed nonetheless.
The petitioner’s counsel argued that a personal hearing was not granted before the issuance of the impugned orders. Additionally, they requested permission to pay the outstanding amounts in installments, citing financial constraints exacerbated by the pandemic. It was also highlighted that a circular had been issued allowing for reduced interest rates during specific months of the COVID-19 pandemic, which the petitioner sought to apply retroactively to their case.
On behalf of the respondents, the learned Government Advocate contended that the imposition of interest, as prescribed by statute, was mandatory upon belated payment of taxes. They argued against remanding the matter, asserting that the assessing officer lacked discretion in such matters.
Upon reviewing the case, the Madras High Court noted that the challenged orders pertained solely to interest liabilities. The petitioner had already paid a substantial amount towards the aggregate demand but sought remand to address the procedural deficiencies and apply for favorable considerations under the circular regarding reduced interest rates.
The court acknowledged the mandatory requirement of a personal hearing under the GST enactments when adverse orders are contemplated against taxpayers. It also took into account the circular that provided for lower interest rates during pandemic months, which could potentially mitigate the petitioner’s liabilities.
In its judgment, the Madras High Court set aside the impugned orders but imposed conditions for remand. It directed the petitioner to remit an additional sum of Rs. 2 lakhs, making a total of Rs. 4 lakhs towards the demand. This remittance was required within three weeks from the date of receipt of the court’s order. Upon receipt of the total sum, including amounts previously paid, the first respondent (State Tax Officer) was instructed to provide a reasonable opportunity for a fresh adjudication, including a personal hearing. The State Tax Officer was directed to issue fresh orders within three months from the date of receiving the full payment.
Furthermore, the court ordered the setting aside of garnishee orders contingent upon the receipt of the aggregate sum of Rs. 4 lakhs. The disposal of the writ petitions (W.P.Nos. 11797, 11804, 11837, & 11846 of 2024) was done without imposing costs on either party, and the connected miscellaneous petitions were closed accordingly.
In conclusion, the Madras High Court’s decision in Tvl. Nagoorar Enterprises vs. State Tax Officer underscores the importance of procedural fairness in tax assessments, including the mandatory provision of personal hearings and considerations for exceptional circumstances like those arising from the COVID-19 pandemic.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
By these writ petitions, orders imposing interest liability on the petitioner are challenged.
2. The petitioner asserts that he was unable to file returns and pay taxes on time during the relevant assessment periods on account of multiple reasons, including bereavements in the family, nonpayment by suppliers and the onset of the COVID-19 pandemic. Eventually, returns were filed and requisite taxes were paid. Orders imposing interest liability are challenged in these circumstances.
3. Learned counsel for the petitioner submits that a personal hearing was not provided before the impugned orders were issued. He also submits that the petitioner had requested the respondents to permit the petitioner to make payments in installments by taking into account the financial situation of the petitioner. He also submits that such request could have been placed before the appropriate authority under Section 80 of the applicable GST enactments. The last submission is that a circular was issued for the imposition of interest at lower rates during specific months during the COVID-19 pandemic. After pointing out that the petitioner has paid about Rs.2 lakhs towards the aggregate demand of about Rs.12 lakhs, learned counsel seeks another opportunity to place these contentions before the respondents. On instructions, he submits that the petitioner agrees to remit an additional sum of Rs.2 lakhs as a condition for remand and as a condition for raising the garnishee orders.
4. Mr. V. Prashanth Kiran, learned Government Advocate, accepts notice for Respondents 1 to 3. He submits that the imposition of interest, including the rate of interest, is prescribed by statute and is a corollary of belated payment of tax. Consequently, he contends that the assessing officer has no discretion in the matter and that no purpose would be served by remanding the matter.
5. On examining the orders impugned herein, it is clear that such orders pertain only to interest. In the affidavit in support of these writ petitions, the petitioner has set out details of payment of requisite taxes in respect of the relevant assessment periods. The petitioner has also placed on record proof of payment of about Rs. 2 lakhs towards interest. In sub-section 4 of Section 75 of the applicable GST enactments, a personal hearing is mandatory if requested for or if an order adverse to the tax payer is proposed to be issued. Under Circular No.13/2020-TNGST dated 17.08.2020, tax payers had the benefit of reduced rate of interest during specific months of the COVID-19 pandemic period. By taking into account all the aforesaid factors, albeit by imposing conditions, interference with orders impugned herein is warranted.
6. Therefore, orders impugned herein are set aside on condition that the petitioner remits an additional sum of Rs.2 lakhs, in the aggregate, towards the demand under the orders impugned herein. Such remittance shall be made within three weeks from the date of receipt of a copy of this order. Subject to receipt of the aggregate sum of Rs.4 lakhs, the first respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue fresh orders within three months from the date of receipt of the above sum from the petitioner. Subject to receipt of the aggregate sum of Rs.4 lakhs, including amounts previously remitted, the garnishee orders are also set aside.
7. W.P.Nos.11797, 11804, 11837 &, 11846 of 2024 are disposed of on the above terms without any order as to costs. Consequently, the connected miscellaneous petitions are closed.
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