Bombay High Court Upholds 18% Interest Levy On Delayed VAT Payment, Says Interest Levied Automatically Once Payment Is Delayed

A Division Bench of Justices Bharati Dangre and Ashish S. Chavan held that interest under Section 25(4) of the Goa Value Added Tax Act, 2005 is compensatory in nature and becomes automatically payable once tax is not deposited within the prescribed time, irrespective of any claimed ambiguity on taxability.

The assessee, United Spirits Ltd, engaged in manufacture and sale of alcoholic beverages and spirits, had filed VAT returns for FY 2019–20 but did not pay VAT on HBS/ENA initially, citing uncertainty after the introduction of GST from 1 July 2017.

The assessee later paid the differential VAT amount of ₹1.63 crore in September 2021, though the tax was due during 2019–20.

However, the Assessing Authority levied interest of ₹53.58 lakh at 18% per annum under Section 25(4) of the GVAT Act for delayed payment. This levy was upheld by the appellate authority, leading to the present writ petition.

Rejecting the assessee's plea that ambiguity regarding VAT versus GST liability justified the delay, the Court held that once returns are filed, tax becomes “due and payable” within the statutory timeline. The Bench stated that any delay in payment mandatorily attracts interest.

The Bench noted that after 1 July 2017, although the specific entry for Rectified Spirit and High Bouquet Spirit was removed from Schedule C of the GVAT Act, such goods continued to be taxable at the residuary rate of 12.5% under Section 5(1)(e) of the Act. The goods were never exempt from tax.

The Bench also observed that United Spirits was fully aware that ENA/HBS continued under the VAT/CST regime pending GST Council clarity. It had, in fact, collected VAT from buyers in earlier periods and had even approached the High Court earlier in related proceedings, acknowledging VAT applicability.

Emphasising the scheme of Section 25(4) read with Rule 24 of the GVAT Rules, the Bench held that interest is automatic where tax is unpaid or partly paid by the due date. Filing returns showing “zero” liability despite taxable turnover does not absolve a dealer from interest liability.

The Bench ruled that uncertainty or pending policy deliberations cannot justify retention of tax amounts that were statutorily payable to the State exchequer.

In view of the above, finding no illegality or arbitrariness in the assessment and appellate orders, the High Court dismissed the writ petition and upheld the demand of interest of ₹53.58 lakh on delayed VAT payment.

Case Title: United Spirits Ltd. v. Additional Commissioner of State Tax-II & Appellate Authority, South Goa & Ors.

Case No.: Writ Petition No. 229 of 2025

Appearance for Petitioner: Mr.Rohan Shah, Senior Advocate with Mr.Mohammad Anajwalla, Ms.Eesha Dukle and Ms.Neha Shirodkar

Appearance for Respondent: Mr.Devidas J. Pangam, Advocate General with Mr.Shubham

Priolkar, Additional Government Advocate for the State, Mr. Ayush Mittal (through VC)