The Bombay High Court has remanded back the matter to the appellant authority to adjudicate whether interest or penalty charged is included in the expression “tax”.
The bench of Justice K. R. Shriram and Justice Jitendra Jain have observed that the issue raised was whether to challenge levy of “cess”, interest and penalty is also to be deposited as precondition for entertaining the appeal. The single Judge after analysing the scheme of levy of “cess” and appeal provisions held that the Bombay Provincial Municipal Corporation Act recognises distinction between tax, interest and penalty and since what is required to be deposited is “disputed tax”, interest and penalty is not required to be deposited for entertaining the appeal.
The respondents/department have passed an order levying Local Body Tax (LBT), interest for the period June 2015 to June 2017 and penalty. The petitioners have deposited the LBT but have not deposited the interest and penalty amount while filing the appeal.
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The Petitioner/assessee contended that on a true and proper construction of Section 406(8) for entertaining an appeal it is only the amount of “disputed tax” claimed from petitioner which has to be deposited.
The department contended that for entertaining the appeal under the section 406(8) petitioner is required to deposit not only the disputed tax but also the interest and penalty.
Section 127 deals with taxes to be imposed and Section 127(2)(aaa) provides for levy of LBT on the entry of the goods into the limits of the city for consumption, use or sale therein, in lieu of octroi or cess, if so directed by the State Government by notification in the official gazette. Sub-section (3) provides that the tax shall be levied in accordance with the provisions of the Act and the Rules. The levy of LBT is regulated by Rules.
The scheme of levy of LBT makes a distinction between levy of tax and interest and penalty. Rule 5 of the rules provides for liability to pay LBT in certain cases and various sub-rules therein prescribes liability to pay LBT including any interest and penalty. Rule 27 of the Rules provides for lump sum payment of LBT in case of registered dealer having small turnover and the LBT based on the turnover ranges from Rs.2,000/- to Rs.5,000/-.
Rule 33 of the Maharashtra Municipal Corporation (Local Body Tax) Rules distinguishes between the local body tax and interest and penalty. Sub Rule (1) of Rule 33 of the said Rules provides that the amount of local body tax due from a registered dealer liable to pay shall be assessed separately for each period. Sub Rule (9) of Rule 33 provides the order of assessment shall be in Form I. Sub Rule (10) of Rule 33 says an order imposing a penalty or interest under Rule 48 or an order of forfeiture with or without penalty or interest or both in respect of any period, may be incorporated in the order of assessment relating to that period, made under this Rule. So therefore, the order of assessment would only contain local body tax due and to the order of assessment, order imposing penalty or interest may be incorporated. Therefore, the tax due, interest and penalty are distinct.
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The court concluded that order is quashed and set aside and the matter is remanded for denovo consideration. The appellate authority shall dispose of the appeal in accordance with law by giving a personal hearing, notice shall be communicated at least 5 working days in advance. If the Assessing Officer is going to rely on any judgement/order of any Court or Tribunal, a list thereof shall be made available to petitioner in advance before the personal hearing so that petitioner will be able to deal with the same/distinguish the same during the personal hearing. Should, petitioner wish to file written submission to record what transpired during the personal hearing, petitioner may file the written submission within four working days of the completion of personal hearing.
Case Title: Wintry Engineering And Chemicals Versus The Commissioner of Local Body Tax
Citation: Writ Petition No. 3821 Of 2024
Decision Date: 22 August 2024
