TMI Blog2005 (4) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... down. Since the demand of interest was made after almost four years, we hold that the demand is not within a reasonable period and the assessee is not liable to pay the interest as demanded. The Department is not entitled to recover the interest from the assessee-respondent but is at liberty to recover the amount of interest demanded from the Assessing Officer concerned who have not taken steps for four years. Thus the demand of interest was not justified because of the inordinate delay on the part of the officers concerned for raising the demand of interest from the assessee and in the peculiar facts and circumstances of this case. The civil appeal, accordingly, stands dismissed. - Civil Appeal No. 2679 of 2000 - - - Dated:- 29-4-2005 - S.N. Variava and Dr. A.R. Lakshmanan, JJ. R.G. Padia, Senior Advocate (S.W.A. Qadri and J.K. Bhatia, Advocates, with him), for the appellant. Ranbir Singh Yadav, Advocate, for the respondent. P.K. JAIN, J. -Sri Shakeel Ahmad holding brief for Sri Jai Singh, learned counsel for the revisionist and Sri S.D. Singh, learned Standing Counsel have been heard. 2.. Assessment order for assessment year 1977-78 was passed on 6th June, 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice in writing, a copy of which shall be forwarded to the dealer at his last address known to the assessing authority, require,- (a) any person from whom any amount is due or may became due to the dealer, or (b) any person who holds or may subsequently hold money for or on account of the dealer, to pay the assessing authority, (i) forthwith upon the money becoming due or being held, or (ii) at or within the time specified in the notice not before the money becomes due or is held, so much of the money as is sufficient to pay the amount due by the dealer in respect of arrears of tax or other dues under this Act, or the whole of the money when it is equal to or less than that amount. Explanation . For the purpose of this sub-section, the amount due to a dealer or money held for or on account of a dealer by any person shall be computed after taking into account such claims, if any, as may have fallen due for payment by such dealer to such person and as may be legally subsisting." 7. Even if the dealer was liable to pay interest on delayed payment of amount of tax, a notice in writing before passing the impugned order was necessary which is not shown to have been done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leave. 3.We heard Mr. R.G. Padia, learned Senior Counsel appearing for the appellant and Mr. Ranbir Singh Yadav, learned Counsel appearing for the respondent. 4.Learned Senior Counsel appearing for the appellant submitted that the order of the High Court to the extent that a notice of demand was necessary before passing the order of interest is legally not sustainable. He further submitted that the levy of interest is by operation of law and does not require a separate order. 5.Learned Counsel appearing for the respondent submitted that the impugned assessment order passed by the assessing authority dated 30-7-1990 does not refer to any notice served upon the dealer before passing the impugned order and, therefore, the said order has been quashed by the Tribunal in respect of remanding the matter. It was also submitted that the rectification order could be passed within three years from the date of the order of the assessment or the order passed in appeal or revision. The impugned order was passed beyond the period of three years and, therefore, the said order is not sustainable. In this background of facts, the following questions of law arise for consideration by this Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is payable under this Act on the turnover of sales or, as the case may be, the turnover of purchases, or of both, as disclosed in the accounts maintained by the dealer, or admitted by him in any return or proceeding under this Act, whichever is greater, or if no accounts are maintained then according to the estimate of the dealer, and includes the amount payable under Section 3-B or sub-section (6) of Section 4-B. The tax assessed under this Act shall be deposited in the(1-A) manner specified in, and within thirty days of the service of, the notice of assessment and demand. If the tax, other than the tax referred to in sub-section(1-B) (1), assessed by any Assessing Authority is not paid within the period specified in the notice of assessment and demand referred to in sub-section (1-A), simple interest at the rate of one and half per cent per mensem on the unpaid amount calculated from the date of expiration of the period specified in such notice shall become due and be payable. If the tax, assessed under this Act is enhanced in(1BB) reassessment or otherwise by any authority, tribunal or court the dealer shall also be liable to pay simple interest at the rate specified i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanding anything contained in any law or contract to(3) the contrary, the assessing authority may, at any time or from time to time, by notice in writing, a copy of which shall be forwarded to the dealer at his last address known to the assessing authority, require - (a) any person from whom any amount is due or may become due to the dealer, or (b) any person who holds or may subsequently hold money for or on account of the dealer, to pay to the assessing authority - (i) forthwith upon the money becoming due or being held, or (ii) at or within the time specified in the notice, not being before the money becomes due or is held, so much of the money as is sufficient to pay the amount due by the dealer in respect of arrears of tax or other due under this Act, or the whole of the money when it is equal to or less than that amount. Explanation. - For the purpose of this sub-section, the amount due to a dealer or money held for or on account of a dealer by any person shall be computed after taking into account such claims, if any, as may have fallen due for payment by such dealer to such person and as may be legally subsisting." 9.The High Court w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affirmed the said levy. The matter was carried to the High Court by way of a revision. The learned Judge allowed the revision holding that "there has been no finding by the Tribunal that the assessee acted mala fide in not depositing the tax at the rate of 7%. The demand of interest was not justified." 12.In the case of The Sales Tax Officer, Sector I, Kanpur Anr. v. M/s. Dwarika prasad Sheo Karan Dass, (1977) 1 SCC 22, this Court has held that the assessee is liable to pay interest under Section 8(1-A) of the U.P. Sales Tax Act, 1948 on unpaid amount of tax and that such liability arises automatically by operation of law. This Court also held that fresh notice of demand not necessary where amount of tax or other dues reduced as a result of the appeal, revision or other proceedings. 13.This Court had an occasion to consider sub-section (1-A) of Section 8 of the Act in the case of Haji Lal Mohd. Biri Works v. State of U.P., (1974) 3 SCC 137 and held that the liability to pay interest under Section 8(1-A) of the Act is automatic and arises by operation of law. It was further observed in that case that it is not necessary for the Sales Tax Officer to specify the amount of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the assessing authority passed an assessment order against the respondent and in accordance with the assessment order, the assessee has deposited the entire amount of tax amounting to Rs. 15,236.98 paise on 30-8-1986 and Rs. 2,817/- on 26-6-1982. However, on 30-7-1990, the assessing authority passed an order imposing interest against the respondent. Thus the demand was after nearly four years. There was no demand of interest in the assessment order which, in our opinion, form part of the assessment order. As the assessment order did not include a claim for interest, the demand for interest had to be made within a reasonable period thereafter. To be noted that for rectification of the assessment order, a limitation period of three years is laid down. Since the demand of interest was made after almost four years, we hold that the demand is not within a reasonable period and the assessee is not liable to pay the interest as demanded. The Department is not entitled to recover the interest from the assessee-respondent but is at liberty to recover the amount of interest demanded from the Assessing Officer concerned who have not taken steps for four years. 18.We are in entire agree ..... 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