INTEREST AND PENALTIES

Interest Payable (Section 30)

1. On non-payment or late payment of tax by an unregistered dealer or dealer who has failed to apply for registration in time: Simple interest at prescribed rate/s for each month or part thereof from 1st day of April of respective year till the date of payment.
2. Late payment of tax by registered dealer: Simple interest at prescribed rate/s for each month or part thereof from due date till the date of payment. In case of fresh or revised return, for any period, due date of original return shall be considered for differential dues if any.
3. Interest on differential dues on assessment of a registered dealer: Simple interest at prescribed rate/s for each month or part thereof from the next date following the last date of the period/s covered by assessment order till the date of assessment order.

The rate of interest payable under sub-sections (1), (2) and (3) of section 30 as prescribed in Rule 88(1) are as follows (w.e.f. 1st December, 2015):

Period liable for Interest

4. Interest on Additional Dues: A penal rate of interest @ 25% of the additional amount of tax payable on filing a revised return for any particular period (whether by a registered dealer or unregistered dealer), under any of the following circumstances:

Additional dues arising in a revised return filed:

1. After the commencement of: (i) Audit of the business of the dealer in respect of any period, or (ii) Inspection of the accounts, registers and documents pertaining to any period, kept at any place of business of the dealer, or (iii) Entry and search of any place of business or any other place where the dealer has kept his accounts, registers, documents pertaining to any period or stock of goods,
2. In consequence of any intimation issued under sub-section (7) of section 63. Concession in additional interest u/s. 30(4): (Refer Trade Circular 15T of 2014 dated 6th August, 2014)
3. Wherever the additional tax liability paid as per revised returns on account of audit or investigation proceedings is less than 10% of the tax paid with original returns, then the additional interest of 25% u/s. 30(4) shall not be payable.
4. Interest u/s. 30(4) shall not apply, where the additional tax liability arises on account of non-production of declarations. [New proviso inserted in section 30(4)]

Although, there is no bar on filing appeal against order levying interest u/ss. 30(1) and 30(3), the specific power of appellate authority, to either confirm or cancel or modify such order of levying interest, has been removed w.e.f. 1st May, 2011.

There is no provision for remission of interest, and, no appeal shall lie against orders levying interest under sections 30(2) and 30(4).

Interest Receivable (Sections 52 and 53, Rule 88)

A dealer is entitled to receive interest on refunds due to him @ 0.5%, for each month or part thereof, for the period commencing from the next day of the end of the period to which refund relates till the date of sanctioning refund or for a period of 24 months whichever is less.

Such interest is to be granted on the net amount of refund (after adjustment of any dues under the earlier laws, under the MVAT Act and under the CST Act). The interest shall not be granted on any refund/s u/s. 51.

The dealer is also entitled to receive interest @ 0.5%, for each month or part thereof, on delayed refunds for the period commencing the next day after expiry of 90 days from the date of order granting refund till the date of refund.

It has further been provided that the decision of Commissioner of Sales Tax for exclusion of any period, while working out such refund, shall be final.

Penalties (Section 29)

Notes:

1. No Order of Penalty under above provisions shall be passed in respect of any period after 8 years from the end of the year containing the said period.
2. However, if due to some reasons, assessment is done after 8 years, penalty may be imposed while passing such assessment order. (as per amended provision w.e.f. 26th June, 2014)
3. Prior approval of the Deputy Commissioner needed by a Sales Tax Officer or an Assistant Commissioner for issuing order for imposing a penalty under any of the above sub-sections if penalty exceeds ₹5 lakh (This requirement of prior approval is deleted w.e.f. 26th June, 2014).
4. Prior approval of the Joint Commissioner needed by a Deputy Commissioner or a Senior Deputy Commissioner for issuing order for imposing a penalty under any of the above sub-sections if penalty exceeds ₹10 lakhs. (This requirement of prior approval is deleted w.e.f. 26th June, 2014).

AUDIT OF ACCOUNTS

Section 61 of MVAT Act requires certain dealers/persons to get their accounts audited by an accountant, within the prescribed period from the end of the year. The report of such audit is required to be furnished in a prescribed format. The provisions contained in the Act and Rules in this regard are reproduced below for the attention of members.

“61(1) every dealer liable to pay tax shall; For the periods

For periods commencing on or after 1st April, 2013:

1. If the
   1. Aggregate of his turnover of sales and the value of goods transferred to any of his place of business or of his agent or principal situated outside the State, not by reason of sale, or
   2. Turnover of purchases exceeds rupees one crore in any year
   3. For dealers having migrated to GST w.e.f. 1-7-2017, the turnover limit is proposed in budget 2018 to be ₹ 25 lakhs for April to June 2017.
2. (deleted)
3. If he holds an Entitlement Certificate in respect of any Package Scheme of Incentives, granted under this Act or, as the case may be, under the Bombay Sales Tax Act, 1959.

Get his accounts in respect of such year audited by an accountant, within the prescribed period from the end of that year, and furnish within that period a complete report of such audit, in the prescribed form, duly signed and verified by such accountant and setting forth such particulars and certificates as may be prescribed.

Explanation: For the purposes of this section, “Accountant” means a Chartered Accountant within the meaning of the Chartered Accountants Act, 1949 or (w.e.f. 15-8-2007) a Cost Accountant within the meaning of Cost & Works Accountants Act, 1959).

(2) If any dealer liable to get his accounts audited under sub- section (1) fails to furnish a complete report of such audit within the time as aforesaid, the Commissioner may, after giving the dealer a reasonable opportunity of being heard, impose on him, in addition to any tax payable, a sum by way of penalty equal to one-tenth per cent of the total sales.

Provided that the dealer fails to furnish such report within the aforesaid period but files it within one month of the end of the aforesaid period and the dealer proves to the satisfaction of the Commissioner that the delay was on account of factors beyond his control, then the Commissioner may condone the delay. (This proviso is deleted w.e.f. 26th June, 2014).

Explanation: Explanation-II (W.e.f. 1st May, 2011) provides that for the purposes of section 61, an audit report shall be deemed to be “complete audit report” only if all the items, certification, tables, schedules and annexure are filled appropriately and are arithmetically self-consistent.

Sub-section 2A (inserted w.e.f. 1st May, 2011) further provides that where a dealer, liable to file audit report u/s. 61, knowingly furnished the audit report which is not complete, then the Commissioner may, after giving a reasonable opportunity of being heard, impose on him, in addition to any tax payable or any other penalty leviable under section 61, a sum by way of penalty equal to one-tenth per cent of the total sales.

(3) Nothing in sub-sections (1) and (2) shall apply to Departments of Union Government, any department of any State Government, local authorities, the railway administration as defined under the Indian Railways Act, 1989, the Konkan Railway Corporation Limited and the Maharashtra State Road Transport Corporation constituted under the Road Transport Corporation Act, 1950.”

“Rule 65. The report of audit under section 61 shall be in Form 704.” The auditor is required to download latest version of Form 704 from the website.

“Rule 66. The report of the audit under section 61 shall be submitted electronically within nine months and fifteen days from the end of the year to which the report relates.”

SUBMISSION OF FORM 704

1. The dealer is required to submit “Statement of submission of Audit Report in Form 704” along with this statement, the dealer is also required to submit the following documents:
   1. A copy duly signed by VAT auditor as well as dealer, of an acknowledgment generated after uploading of Form 704.

      (Copy of Balance Sheet, Profit & Loss Account, Trial Balance, other Audit Reports, Part I of 704 Audit Report etc. not required to be submitted).

      1. The aforesaid documents shall be submitted:
         1. To the concerned LTU officer, if the dealer is large taxpayer
         2. To the “Desk Audit Cell” in the Office of the Joint Commissioner of Sales Tax (Business Audit) in Mumbai if the dealer is not large taxpayer. For & from FY 2015-16, it has to be submitted to jurisdictional nodal officers.
         3. In the rest of the State to the concerned LTU officer, if the dealer is large taxpayer, and in any other case to the Joint Commissioner of Sales Tax, VAT (ADM). (Please refer Trade Circular No. 27T of 2009, dated 1-10-2009.)
      2. As per Rule 66, The report of the audit under section 61 shall be submitted on or before 28th February of the immediate succeeding year to which the report relates.