Latest News | HC Directive on Entry Tax

Chennai, Jul 15 (PTI) The Madras High Court on Friday ruled that a person who had imported a luxury car from a foreign country, need not pay the penalty/interest if he had paid the entry tax on or before January 29, 2019, when a division bench of the High Court had given a clear verdict on the issue.

The ruling came on a batch of petitions from top actor Vijay, music director Harris Jayaraj and Adyar Gate Hotels.

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Justice R Suresh Kumar gave the ruling while disposing of a batch of writ petitions from the two individuals and the private hotel company, which had imported several cars from foreign countries for the 'airport transport' of its elite customers. Vijay has moved the court over Entry Tax on his imported luxury car.

As per the notice of the State Revenue department issued in December, 2021, the tax component in respect of the car imported by actor Vijay in 2005 was only Rs 7.98 lakh, whereas the interest ran to Rs 30.23 lakh. It also threatened to recover the same under the Revenue Recovery Act. In view of indications of coercive steps, Vijay paid the tax component of Rs 7.98 lakh alone and challenged the levy of interest/penalty.

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Vijay contended there must be an assessment order before proceeding for any recovery or demand of tax and such a kind of assessment had not been made in his case under the provisions of the Entry Tax Act as well as the rules made thereunder. Also insofar as making such an assessment, since there was a three year limitation prescribed, within which since no assessment had been made, it was barred by limitation. Therefore, assessment cannot be made now. Hence, the demand to recover the tax as well as the penalty are concerned as unlawful and against the provisions of the Entry Tax Act, Vijay further contended.

Disposing of the petition, the judge pointed out that in number of cases in the first round including the petitioner, who approached this court, of course against the transport authorities, prohibitory orders were issued not to collect or demand the entry tax and directions were issued to register their vehicles without insisting the entry tax. In some cases, conditional orders were passed to pay only 15 per cent of the tax demand.

In view of these decisions and the long pendency of various litigations including those initiated by the petitioner, it cannot be expected that he should have come forward to pay the tax in full at the earliest. How the litigation time now was being deducted for the purpose of limitation on the side of the Revenue department, the same logic would apply to the case of the petitioner also in not paying the tax in time. The only possible way to decide as to whether penalty clause can be invoked against the petitioner was concerned, whether he had paid the tax or had come forward to pay the tax at least after January 29, 2019, when a division bench had said in unequivocal terms about the liability of the petitioners in that case to pay the tax.

If somebody had come forward to pay the tax immediately after the pronouncement of the division bench and paid the same, certainly that can be accepted by the authorities concerned, without invoking any penalty clause, the judge said.

However, even after the judgment of the bench, if the petitioner had not paid the tax or done so belatedly, the department can invoke the penalty clause under Section 15 of the Act and can proceed to recover the penalty as provided under Section 15(2), with effect from January 29, 2019 till the payment of the tax, the judge said.

In the writ petition, since the liability of the importer to pay the entry tax on the imported vehicle had already been held in unequivocal terms by the bench, followed by a number of decisions, the petitioner is liable to pay the entry tax as demanded by the Revenue department. Insofar as the levy of penalty for non-payment of the tax, as levied or imposed against the petitioner is concerned, such a penalty can be imposed on him only after January 29, 2019 but not before that date, the judge said and as a sequel, directed the Revenue department to verify as to when the petitioner had paid the tax.

If the tax was paid as demanded by the Revenue department on or before January 29, 2019, no penalty can be imposed on him. Instead, if he paid only after that date, the penalty can be imposed on him, under Section 15 of the Act only from January 29, 2019 till the date of payment of the full tax. Even if the petitioner had not paid the tax in full, it is open to the department to recover the same along with the penalty, calculating from January 29, 2019 till the date of complete recovery of the tax, the judge said.

Similar orders were passed in respect of the other two petitioners.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)