Many a times dealers face a situation where due to technical error or clerical mistake while making payment of sales tax, tax is wrongly paid in wrong account i.e. instead of paying under the head of Central sales tax, it is paid under the head State VAT/sales tax. In such case whether adjustment between both heads can be done or not is a question which arises.
The Calcutta High Court in Hindustan Uniliver Limited vs Deputy Commissioner Commercial Taxes and others W.P. 1384 of 2008 (Original side) has held that such adjustment can be done, as both taxes gets credited into the same Consolidated funds of the State. Further no interest is payable in such case on the deficit amount of tax which has been paid in other head as no loss is caused to the Government by depositing tax into the wrong head and since interest is a kind of damages for loss which a person claims for loss of money.
The High court held as under:
"the question whether Central Sales Tax and State Sales Tax are separately levied and collected do not matter. If two taxes are credited into the same fund it creates a gross credit in the fund. Similarly, short payment of Central Sales Tax in circumstances above into a fund against a corresponding increased payment of State Sales Tax into it does not reduce the gross credit. Therefore, if a dealer wants adjustment or set off, it is to be readily granted without insisting on any formalities. There is no question of charging any interest, penalty etc. provided the deposits were made concurrently. Interest is a kind of damages which a person claims for loss of money, according to Bhai Jaspal Singh and Another Vs. Assistant Commissioner of Commercial Taxes and Others reported in (2011) 1 SCC 39 and Indodan Industries Ltd. Vs. State of U.P. and Others reported in [2010] 27 VST 1(SC) cited by Mr. Sengupta for the petitioner. Here there is no loss to the government."
"The Special Commissioner, Sales Tax, West Bengal has very labouriously gone into the facts, the decisions of various courts, the legislative fields of the Union and State legislature, the nature and mode of collection and Central and State Sales Tax. But his approach has been very technical. He has been pedantic. He missed the basic principles. The question before him was whether the two types of taxes were credited into the same account or into different accounts, of different departments. If it went into the same account, could it be properly said that there was a shortfall in payment of tax for which the assessee should pay interest?
The discussion above shows that the gross tax paid by the assessee was not even a paisa short and that it was paid into one account or one fund. Therefore, there could not be any monetary loss to the government for which it could legitimately claim interest."
The Hon'ble High Court further held that this kind of an adjustment can be made only when taxes paid in excess or short paid are credited into a known account or fund and can be easily adjusted. This ratio would not apply in case of interdepartmental adjustment or completely different types of taxes.
The Full Judgement is as follows:
W.P.
No.1384 of 2008
IN
THE HIGH COURT AT CALCUTTA
Constitutional
Writ Jurisdiction
Original
Side
Hindustan
Unilever Limited
Vs.
Deputy
Commissioner, Commercial Taxes,
Corporate
Division & Ors.
Heard
On: - 11.09.2014
Judgement
On: - 19.09.2014
I.P. MUKERJI, J.
This case is
very interesting. The writ petitioner is registered under the Central Sales Tax
Act, 1956 as well as the West Bengal Sales Tax Act 1994. It makes sales under
both the Acts. Under the Central Sales Tax Act it made sales of various items
to the canteen stores department in Assam during four quarters ending 31st December, 2003.
The sale value was Rs.10,18,30,914/-. Chargeable Central Sales Tax was @ 4%. The
writ petitioner also regularly made sales under West Bengal Sales Tax Act.
I would like to
say this at the outset, that undisputedly collection of 4% Central Sales Tax
and State Sales Tax or VAT is credited directly into the consolidated fund of
the State.
This was
observed in Cotmac Private Limited Vs. Commercial Tax Officer , 20 STC
20, by a Division Bench of the Mysore High Court as follows:-
“It is not
possible, in our opinion, to adjust the tax refundable under one Act against
Tax due under another Act. The fact that even the tax levied under the Central
Act is ultimately intended for State purposes and may therefore get directly
credited into the Consolidated Fund of the State, would make no difference,
because the two taxes are distinct and different, and levied under two
different statutes, one of the State Legislature and the other of Parliament.”
Now, a clerical
mistake has given rise to the problem in this case. While doing ministerial
activities like making entries, writing challans and depositing tax, the
clerical staff of the writ petitioner deposited a part of the Central Sales Tax
collection as Sales Tax under the State Act.
The result was
that there was an excess payment of Sales Tax and an equal under payment of
Central Sales Tax. For short payment of Central Sales Tax the writ petitioner
is theoretically liable to pay interest under Section 31 of the West Bengal
Sales Tax Act, 1994 which has been made applicable to Central Sales Tax.
What the writ
petitioner wants is this. It wants a set off or an adjustment of the excess
payment of state Sales Tax against the deficit of Central Sales Tax. In that
way it would be able to avoid interest, penalty and other consequences, Mr.
Sengupta, learned counsel for them submitted.
The respondent
authorities do not support this approach. According to Mr. P.K. Dutta, learned
senior advocate appearing for the Central Sales Tax authorities, this kind of adjustment is not
possible. According to him it may be true that the Central Sales Tax and State
Sales Tax are directly credited into the Consolidated Fund of the State.
Nevertheless, Central Sales Tax is an item under list I entry 92A of the
Seventh Schedule to the Constitution over which Parliament has exclusive power
to legislate and Sales Tax falls under list II entry 54 over which the State
Legislature has exclusive power.
A Division Bench
of the High Court of Mysore in Cotmac Private Ltd. vs. Commercial Tax
Officer, 1st
Circle
Hubli and Another expressed
an opinion quoted above which if applied here without going into the facts, would
have been fatal for the writ petitioner.
But on a close
scrutiny of the facts it appears that in that case reliance was placed on a
proviso to rule 20 of the Mysore Sales Tax Rules, 1957 which stated that any
excess tax refundable to a dealer was adjustable against any tax due by him.
Now, this rule applied to Sales Tax only. It did not apply to adjustment of
Central with State Sales Tax. It is on this basis that the Division Bench ruled
as it did.
A subsequent
circular No. 9 of 2006 dated 19th October, 2006 issued by the Central Government it is
set out below. It takes care of the exact situation:
“Thus a tax
payable under the West Bengal Value Added Tax Act, 2003 can be given credit under
the same Act although the challans has been used under the West Bengal Sales
Tax Act, 1994 or under the Central Sales Tax Act, 1956. Similarly a tax meant
for deposit under the Central Sales Tax Act, 1956 may be given credit under the
same Act although the challans used for such deposit is either under the West
Bengal Value Added Tax Act, 2003 or the West Bengal
Sales Tax Act,
1994. Likewise a tax required to be deposited under the West Bengal Sales Tax Act,
1994 may be given credit under the same Act although the challans for the
purpose has been used inadvertently under the West Bengal
Value Added Tax
Act, 2003 or the Central Sales Tax Act, 1956.”
Moreover, the 4%
collection of Central Sales Tax and the State Sales Tax are being credited into
the Consolidated Fund of the State directly as noted above.
Therefore, in my
opinion the question whether Central Sales Tax and State Sales Tax are
separately levied and collected do not matter. If two taxes are credited into
the same fund it creates a gross credit in the fund. Similarly, short payment
of Central Sales Tax in circumstances above into a fund against a corresponding
increased payment of State Sales Tax into it does not reduce the gross credit.
Therefore, if a dealer wants adjustment or set off, it is to be readily granted
without insisting on any formalities. There is no question of charging any
interest, penalty etc. provided the deposits were made concurrently. Interest
is a kind of damages which a person claims for loss of money, according to Bhai
Jaspal Singh and Another Vs. Assistant Commissioner of Commercial Taxes and
Others reported in (2011) 1 SCC 39 and Indodan Industries Ltd.
Vs. State of U.P. and Others reported in [2010] 27 VST 1(SC) cited
by Mr. Sengupta for the petitioner. Here there is no loss to the government.
The Special
Commissioner, Sales Tax, West Bengal has very labouriously gone into the facts,
the decisions of various courts, the legislative fields of the Union and State
legislature, the nature and mode of collection and Central and State Sales Tax.
But his approach has been very technical. He has been pedantic. He missed the
basic principles. The question before him was whether the two types of taxes
were credited into the same account or into different accounts, of different
departments. If it went into the same account, could it be properly said that
there was a shortfall in payment of tax for which the assessee should pay
interest?
The discussion
above shows that the gross tax paid by the assessee was not even a paisa short
and that it was paid into one account or one fund.
Therefore, there
could not be any monetary loss to the government for which it could
legitimately claim interest.
I make it
abundantly clear that this kind of an adjustment can be made only
when taxes paid
in excess or short paid are credited into a known account or
fund and can be
easily adjusted. This ratio would not apply in case of interdepartmental adjustment
or completely different types.
For all those
reasons the order of the Special Commissioner dated 27th November, 2007,
is set aside. This writ application succeeds. Order in terms of prayers (a) and
(b) of the writ petition.
Certified
photocopy of this Judgment and order, if applied for, be supplied to the
parties upon compliance with all requisite formalities.
(I.
P. MUKERJI, J.)
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