1982 (9) TMI 211 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of recovery proceedings for interest on late payment of taxes for assessment years 1968-69 and 1969-70.
2. Applicability of interest provisions under the Central Sales Tax Act and U.P. Sales Tax Act.
3. Necessity of issuing a fresh notice of demand after modification of the assessment order.
4. Effect of appellate and judicial orders on the running of interest.

Issue-wise Detailed Analysis:

1. Validity of Recovery Proceedings for Interest on Late Payment of Taxes for Assessment Years 1968-69 and 1969-70:

The petitioner challenged the recovery proceedings initiated for the realization of interest for late payment of taxes for the assessment years 1968-69 and 1969-70. The petitioner argued that there was no provision for payment of interest on any outstanding tax liability under the Central Sales Tax Act and that no notice of demand for the amount of interest was issued. The respondents contended that the petitioner was liable to pay interest and that the assessment and demand notices were duly served.

2. Applicability of Interest Provisions under the Central Sales Tax Act and U.P. Sales Tax Act:

The court held that the plea regarding the absence of a provision for interest under the Central Sales Tax Act was not tenable. Sub-section (2) of section 9 of the Central Sales Tax Act was amended by the Central Sales Tax (Amendment) Act, 1976, with retrospective effect, validating the charging of interest on assessed tax in accordance with state law provisions. This was upheld by a Division Bench in Hira Lal Jain Co. v. Sales Tax Officer, and the court agreed with this view, overruling the petitioner's plea.

3. Necessity of Issuing a Fresh Notice of Demand after Modification of the Assessment Order:

For the assessment year 1968-69, the court noted that the petitioner paid part of the tax within the prescribed time and the remaining amount after the dismissal of the appeal. Sub-section (2) of section 8 of the U.P. Sales Tax Act, introduced by the U.P. Sales Tax (Amendment) Act, 1973, clarified that interest is payable for the period during which a stay order is in operation. Furthermore, sub-section (9) of section 8, effective from 1st October 1970, stated that no fresh notice is necessary if the tax amount is not varied as a result of appeal or revision.

For the assessment year 1969-70, the court distinguished the case from Hukam Chand v. State of U.P., where penal interest was quashed due to a specific time allowance in the rectification order. In the present case, no such time was granted in the order dated 1st September 1976. The court held that the order reducing the tax did not necessitate a fresh notice of demand, as per sub-section (9) of section 8, clause (b).

4. Effect of Appellate and Judicial Orders on the Running of Interest:

The court referred to the Supreme Court decision in Haji Lal Mohammed Biri Works v. State of U.P., which held that the operation of a stay order does not prevent the running of interest. The statute creates the liability to pay interest, reinforced by sub-section (2) of section 8. The court concluded that the running of interest for the assessment year 1968-69 did not stop due to the stay order, and no fresh notice of demand was required after the appeal dismissal.

For the assessment year 1969-70, the court noted that the assessment order was partially quashed concerning the Moradabad branch turnover, but the remaining assessment order and demand remained intact. The court rejected the petitioner's argument that a fresh assessment order and notice of demand were necessary, holding that the modification did not equate to a new assessment.

Conclusion:

The court dismissed the writ petition, upholding the validity of the interest claims for both assessment years. The running of interest was not interrupted by stay orders, and no fresh notice of demand was required after the modification of the assessment orders. The petitioner's liability to pay interest was affirmed, and the recovery proceedings were deemed legally well-founded. The stay order, if any, was discharged, and the petition was dismissed with costs.

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