Andhra HC (Pre-Telangana)
M/S. Madhu Solvent Extraction Private ... vs 1.Commercial Tax Officer, Guntakal, ... on 20 April, 2018
Author: J. Uma Devi
Bench: J. Uma Devi
HONBLE SRI JUSTICE V.RAMASUBRAMANIAN And HONBLE MS. JUSTICE J. UMA DEVI W.P.No.9299 of 2018 20-04-2018 M/s. Madhu Solvent Extraction Private Limited, Gooty, Ananthapuram District, Rep. by its Chairman and Managing Director. Pe 1.Commercial Tax Officer, Guntakal, and others. Respondents For the Petitioner: Mr. M/s. S. Krishna Murthy For the Respondents : Mr. Shaik Jeelani Basha <GIST: >HEAD NOTE: ?Cases referred HONBLE SRI JUSTICE V.RAMASUBRAMANIAN AND HONBLE MS. JUSTICE J. UMA DEVI W.P.No.9299 of 2018 ORDER:
(per VRS,J) Challenging a notice of attachment issued under the Andhra Pradesh Revenue Recovery Act, 1864, the petitioner has come up with the above writ petition.
2. Heard Mr. S. Krishna Murthy, learned counsel for the petitioner. Mr. Shaik Jeelani Basha, learned Special Standing Counsel takes notice for the respondents 1 and 2.
3. The petitioner is a dealer under the A.P. VAT Act, 2005 on the rolls of the 1st respondent. In terms of G.O.Ms.No.108, the petitioner was granted industrial incentive in the form of sales tax deferment for a period of 10 years commencing from 01.04.1993 to 31.03.2002.
4. Admittedly the petitioner committed default in making payment of the installments, forcing the authorities to issue show cause notices for the levy of interest on the belated payment of installments. The show cause notices were both under the A.P. VAT Act, 2005 and under the Central Sales Tax Act, 1956.
5. To the show cause notices, dated 12.10.2016, the dealer did not file objections. Therefore, an order was passed on 05.01.2017 in terms of Rule 25 (5) of the A.P. VAT Rules, 2005. The petitioner failed even to question the said order. Hence, a notice of demand was issued in Form No.4 under Section 25 of the A.P. Revenue Recovery Act, 1864, followed by a notice of attachment in Form No.5 under Section 27 of the A.P. Revenue Recovery Act, 1864. It is against this notice of attachment that the dealer has come up with the above writ petition.
6. The impugned notice of attachment is challenged by the petitioner on the ground inter alia
i) That Section 25 of the A.P. VAT Act, 2005 can be invoked only for the recovery of tax due under a deferred payment scheme but not for recovery of interest due thereon;
ii) That since the very scheme of deferred payment of tax contemplates the treatment of the amount due under the scheme as a loan repayable to the Government, the recovery of interest due on the said loan is purely contractual in nature, which cannot come within the purview of Section 25 of the Act; and
iii) That in any case, the properties sought to be attached are already mortgaged with the 3rd respondent Bank, and hence, the Banks dues will have priority of treatment, in terms of Section 26E of the SARFAESI Act, 2002.
7. We have carefully considered the above submissions.
8. In order to understand the reach of the first two contentions of the learned counsel for the petitioner, we must first take a look at Section 25 of the A.P. VAT Act. It reads as follows:
25. Tax as an arrear of land revenue: If the tax assessed or penalty levied or interest payable under the Act, or any amount of tax including deferred tax which is treated as a loan extended by the Government to the dealer and any installment thereof, are not paid by a dealer within the time specified therefore, the whole of the amount then remaining unpaid may be recovered as if it were an arrear of land revenue
9. As can be seen from the statutory prescription, the whole of the amount remaining unpaid by a dealer, may be recovered as if it were an arrear of land revenue. The words the whole of the amount used in the last part of Section 25 has a correlation to four different types of amounts mentioned in the first part of Section 25. They are (1) tax assessed; (2) penalty levied; (3) interest payable under the Act; and (4) any amount of tax including deferred tax, which is treated as a loan extended by the Government and any installment due thereof.
10. Since all of these four different types of amounts, viz., (1) tax;
(2) penalty; (3) Interest; and (4) deferred tax, are used disjunctively, due to the use of the word or in between every one of them, the first contention of the learned counsel for the petitioner is that there is no reference in section 25, to the interest payable on the installments due under the scheme of deferred payment of tax and that therefore Section 25 can be invoked only for the recovery of installments due under a deferred payment scheme but not for the recovery of interest due thereon.
11. But we are unable to agree with the said contention. Tax deferment is granted by the Government generally in terms of Section 69 of the A.P. VAT Act, 2005. But the manner in which the period of eligibility has to be fixed, the method of debiting the eligibility amount and the question of repayment, are all left by Section 69 (3) of the Act to the rule making authority to prescribe. Section 69(3) reads as follows:
69(3): The period of eligibility, the method of debiting eligibility amount, the repayment and any other benefits for all units availing tax deferment shall be in the manner prescribed.
12. In exercise of the powers conferred by Section 78 of the Act, the Government of Andhra Pradesh issued the A.P. VAT Rules, 2005. Rule 24 of these rules deals with payment of tax. Sub-rule (5) of Rule 24 specifically deals with deferred payment of tax. Sub-Rule (5) of Rule 24 of the A.P. VAT Rules, 2005 reads as follows:
24 (5): Where any dealer has been permitted to pay tax or any other amount by way of instalments, the following conditions shall apply:
a) The dealer shall not default payment of any other taxes or any other amount due under the Act subsequent to the granting of instalments.
b) In the event of any default, the order granting instalments shall become infructuous unless on application it is specifically restored by the Deputy Commissioner.
c) Any other conditions as may be specified in the order.
13. From Rule 24(5)(b) it is clear that whenever any default in payment of tax is committed, the order granting the facility of payment by installments would become infructuous. Once the order granting the facility of deferred payment of tax becomes infructuous, the amount that remains unpaid automatically gets restored to the status of a tax. As a consequence, Section 22(2) would come into play, imposing a liability upon the dealer to pay interest on the amount due at a rate statutorily fixed. It is of relevance to point out that the liability to pay interest arising under Section 22(2) is not merely on tax. This can be seen from Section 22 (2), which reads as follows:
22(2): If any dealer fails to pay the tax due on the basis of return submitted by him or fails to pay any tax assessed or penalty levied or any other amount due under the Act, within the time prescribed or specified there for, he shall pay, in addition to the amount of such tax or penalty or any other amount, interest calculated at the rate of one percent per month for the period of delay from such prescribed or specified date for its payment. The interest in respect of part of a month shall be computed proportionately and for this purpose, a month shall mean a period of 30 days.
14. As seen from Section 22(2) extracted above, the liability to pay interest arises whenever a dealer fails to pay the tax assessed or penalty levied or any other amount due under the Act. Therefore, it is not as though the liability to pay interest is correlated only to the tax assessed or penalty levied. It has a correlation even to any other amount due under the Act. The arrears or installments payable under a deferment scheme would fall under the category of any other amount due under the Act mentioned in Section 22 (2), especially on account of Rule 24 (5) (b) of the Rules.
15. Hence, the invocation of Section 25 of the Act for the recovery of interest on the amount remaining unpaid under a deferment scheme, as if it were an arrear of land revenue, is clearly borne out by the provision itself. The expression interest payable under the Act used in Section 25 has to be understood in the context of Section 22 (2), which makes every other amount, apart from tax and penalty, liable to bear interest. The words interest payable under the Act used in Section 25 cannot be read to go only along with tax assessed and penalty levied, but should also go with the amounts becoming due under a deferment scheme, in view of the manner in which the liability to pay interest is fastened under Section 22 (2).
16. In any case, after indicating four different types of amounts, viz., (1) tax assessed; (2) penalty levied; (3) interest payable under the Act; and (4) amount of tax under the deferment scheme, the last part of Section 25 uses an omnibus expression, viz., the whole of the amount then remaining unpaid. Therefore, it is futile on the part of the learned counsel for the petitioner to contend that Section 25 does not cover interest due on the arrears of installments payable under the deferment scheme.
17. The second contention of the learned counsel for the petitioner is that under a tax deferment scheme a contract is entered into by the Government with the dealer treating the whole of the tax as having been paid but regarding it as a loan repayable with interest. Therefore, it is the contention of the learned counsel that the interest which becomes due on an amount deemed to be a loan cannot be covered by Section 25.
18. But as we have pointed out earlier, the said contention also overlooks the prescription contained in Rule 24 (5) (b) read with Section 69 (3), which makes the facility of payment by installments as infructuous, the moment a default is committed. Once the contract becomes infructuous, the deeming fiction disappears, restoring the status of tax to the amount earlier treated as deemed to have been paid. A deeming fiction will have to disappear in the face of a hard fact. Take for instance a case, where a person is deemed to be dead, in terms of section 108 of the Evidence Act, the moment the person appears, the deeming fiction will disappear. It is only on account of this consequence that the liability to pay interest is fastened under Section 22(2) not merely on the tax assessed or penalty levied but also on any other amount due. Amount due even under the contract of deferred payment of tax, is an amount due under the Act, since the very power to grant such a facility arises out of statutory prescription and not outside the purview of the Act. Hence the second contention cannot also be accepted.
19. The next contention of the learned counsel for the petitioner revolves around Section 26E of the SARFAESI Act, 2002. Section 26E of the Securitization Act, was inserted by way of an amendment under Act No.1 of 2013. For some time it was not notified, but now it has been notified. But, Section 26E of the Securitization Act merely prescribes the priority to be assigned to secured creditors. If ever the sales tax Department proceeds against the properties of the petitioner, the dues of the 3rd respondent Bank may get priority of treatment.
20. To have an attachment on the property which is already under mortgage to the Bank is completely different from the priority that Section 26E of the Securitization Act talks about. There is no bar in law for any property to be mortgaged second time, subject to the concurrence of the first mortgagee. The second mortgagee will stand in queue next to the first mortgagee. The same logic would apply to an order of attachment passed by the respondents. If the property is sold, the Banks claim will take priority. It is not to say that the respondents cannot even attach the same. Even to stand in the queue for disbursement of the amounts that become surplus, the respondents need an order of attachment. Therefore, we find no illegality in the impugned order of attachment.
21. Hence, the writ petition is dismissed. As a sequel, the miscellaneous petitions pending in this writ petition, if any, shall stand closed. There shall be no order as to costs.
_________________________ V. RAMASUBRAMANIAN, J.
______________ J. UMA DEVI, J.
20th April, 2018