TMI Blog1983 (6) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... hority having accepted his return has issued a composite demand notice, asking him to pay the amount of tax along with interest due on it; (iii) an assessee who has not only filed the return of his turnover, but has also deposited the sales tax due on it, but after filing of the return and not along with it, and the assessing authority having accepted his return has issued a demand notice asking him to pay the interest chargeable on the said amount for the period for which the deposit of the sales tax has been delayed; and (iv) an assessee who has filed the return of his turnover and has at the same time deposited the sales tax due on it, but the assessing authority has not accepted his return and has enhanced the amount of tax payable by him, and issued a composite notice to him demanding the payment of the excess amount of the tax along with interest due on it. The petitioners have challenged the right of the respondents to recover interest from them on the grounds: firstly, that section 8 of the Act under which interest is sought to be recovered, is itself violative of articles 14, 19, 265, 301 and 304 of the Constitution of India, hereinafter referred to as the Constitution; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uarter of the year within thirty days from the expiry of that quarter. Every such return shall be accompanied by a treasury receipt or any other proof of having paid the tax due on that return. (3) Every dealer other than a registered dealer, who may be required so to do by the assessing authority by not-ice served in the prescribed manner, shall furnish such returns by such dates as may be fixed by the said authority. (4) ......................................................... (5) ......................................................... (6) If the assessing authority is satisfied that the return submitted under sub-section (1) or sub-section (3) is correct and complete, he shall assess the amount of tax due from the dealer on the basis of such return. (7) If the assessing authority is not satisfied that a return furnished is correct and complete, he shall serve on the dealer a notice in the prescribed form requiring him on a date and at a place specified therein to attend in person or to produce or cause to be produced any evidence on which such dealer may rely in support of such return. (8) On the day specified in the notice or as soon afterwards as may be, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced, the interest shall be reduced accordingly and excess interest paid, if any, shall be refunded. Explanation.-Interest shall be charged for full calendar month and not for a part of the month. (3) Tax due on the basis of a quarterly return under sub-section (2) of section 7 shall be paid before the expiry of the last date for filing such return and in case of default the provisions of sub-section (2) of this section, section 16 and section 16-A shall apply to the recovery of these demands." So far as the vires of section 8 are concerned, nothing was urged before us except that this section is not compensatory but confiscatory in nature, in that it requires the defaulting assessee to pay the amount of tax due from him along with interest at an exorbitant rate of 3 per cent per month. Though halfheartedly, it was also argued that selling goods on credit being an unavoidable incident of business, a dealer who sells goods on credit shall have to pay interest from his own pocket which in turn is bound to affect his business adversely. The question as to whether charging interest on the amount of the tax payable according to the rate specified in a provision of a statute rende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding of the tax and the U.P. Finance Minister had stayed the recovery of the tax in the meanwhile. The assessee could not succeed before him as well, who eventually vacated the stay order. Thereafter, the Sales Tax Officer sent two recovery certificates for the two assessment years to Collector, Allahabad, to effect recovery of the tax due from it along with statutory interest. The assessee deposited the amount of sales tax but questioned the right of the Government to recover interest from it, inter aria, on the ground that the recovery was not preceded by a demand notice. For this reliance on its behalf was placed on section 8 of the U.P. Sales Tax Act, which, to the extent it is relevant for the present discussion, is reproduced as below: "8. Payment and recovery of tax.-(1) The tax assessed under this Act shall be paid in such manner and in such instalments, if any, and within such time, not being less than fifteen days from the date of service of the notice of assessment and demand as may be specified in the notice. In default of such payment, the whole of the amount then remaining due shall become recoverable in accordance with sub-section (8). (1-A) If the tax payable un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at freight charges did not form part of the taxable turnover, and also because this question was sub judice before the Supreme Court. The Supreme Court, in Hindustan Sugar Mills Limited v. State of Rajasthan [1979] 43 STC 13 (SC); AIR 1978 SC 1496, having ultimately held that freight charges did form part of taxable turnover, the assessee filed revised return and also deposited the excess amount of tax due on them. In spite of this, the assessing authority imposed penalty as well as interest on the delayed deposit of this amount. The assessee challenged the recovery of penalty on the ground that it had not filed a false return to escape the liability to pay higher amount of tax, but had filed the original return under a bona fide belief that freight charges did not form part of taxable turnover. So far as interest was concerned, its recovery was challenged on the ground that in terms of subsections (1) and (2) of section 7 of the Rajasthan's Sales Tax Act, the amount of sales tax that the assessee would be required to deposit before the filing of the return, could not exceed the amount that would become payable on the basis of the return filed by it. Their Lordships, on the authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who are liable to pay sales tax should file a true return within the period prescribed under sub-section (1) of section 7 and should produce a treasury receipt or a receipt of any bank authorised to receive money on behalf of the State Government showing that full amount of tax due from them has been paid." Holding that sections 7 and 11B were only machinery sections and not charging sections, which had to be interpreted in a way that full effect was given to the charging section, their Lordships further held: "In the present case if we construe the words 'on the basis of return' occurring in sub-section (2) of section 7 of the Act as on the basis of a true and proper return which ought to have been filed under sub-section (1) of section 7 then all the three classes of persons, viz., (i) those who have not filed any return at all and who are later on found to be liable to be assessed, (ii) those who have filed a true return but have not deposited the full amount of tax which they are liable to pay and (iii) those who have filed a return making a wrong claim that either the whole or any part of the turnover is not taxable and who are subsequently found to have made a wrong claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question which arises for consideration in this case. The decision of this Court did not create any new liability. It only declared that such a liability was existing at the relevant point of time. Since it is clear that the amount of tax due in respect of the freight charges which was payable under sub-section (2) of section 7 was not paid within the period allowed, section 11B is clearly attracted and the liability to pay interest as required by it arises." Under section 7(2) of the Act, each petitioner was bound to file his quarterly return within thirty days from the expiry of the quarter. Filing of this return ought to have been preceded by the deposit of the amount of tax due on it; an amount that would be recoverable from him had he filed a true return of his taxable turnover. His liability to pay the sales tax due on it arose when he filed the return, and not on the happening of any subsequent event, including the acceptance or rejection of his return by the assessing authority, or on the assessment made by the assessing authority where he had not even filed the return. An assessment made by the assessing authority would be merely as ex post facto declaration of his a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his, emphasis was laid on the provisions of sub-sections (1) and (2) of section 8. But these provisions cannot be read in isolation. The reason is that the provisions of sections 7 and 8 together form a legislative scheme for the realisation of the tax due under the Act, and as such, the provisions of the two sections must be read together to appreciate and determine the contention raised before us. Section 7(2) requires every dealer to furnish quarterly returns of the taxable turnover as also to deposit the tax payable on the basis of such returns. On a proper construction of section 7(2) the return so filed must disclose a true and correct statement of the taxable turnover and the amount deposited by way of tax must be equal to the full amount which he is liable to pay on the basis of such return. Cases are conceivable where a dealer does not file any return or files a return which is not a true return, or though, it is a true return, he has not deposited the full amount of the tax which he is liable to pay either because the amount calculated falls short of the amount due on the taxable turnover under the Act or because he has claimed impermissible deductions while calculating s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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