1973 (4) TMI 78 - SC - VAT and Sales Tax

Whether, in order to recover interest under section 8(1-A) of the U.P. Sales Tax Act, it is necessary for the Sales Tax Officer to make an assessment order in respect of the interest and to issue a notice of demand in respect of such interest? Held that - Appeal dismissed. There is nothing in the language of section 8(1-A) of the Act which prevents the running of interest because of the operation of any stay order. Indeed, the liability to pay interest is created by the statute and the Sales Tax Officer has no discretion to grant any exemption from the payment of interest.

Summary

Issues:
1. Interpretation of section 8(1-A) of the U.P. Sales Tax Act regarding the recovery of interest.
2. Requirement of assessment order and notice of demand for the recovery of interest.
3. Applicability of U.P. Sales Tax (Second Amendment) Act, 1963.
4. Determination of the date of enforcement of U.P. Act 3 of 1964.
5. Liability for interest during the period of stay on sales tax recovery.
6. Entitlement to relief in case of reduction of sales tax amount on appeal.

Analysis:

1. The judgment dealt with the interpretation of section 8(1-A) of the U.P. Sales Tax Act regarding the recovery of interest on arrears of sales tax. The court emphasized that the liability to pay interest is automatic and arises by operation of law, with interest accruing at a specified rate from a particular date. The court clarified that the amount of interest is part of the tax and can be recovered in the same manner as sales tax under the Act.

2. The issue of whether an assessment order and notice of demand were necessary for the recovery of interest was also addressed. The court held that there is no statutory requirement for the Sales Tax Officer to issue a separate assessment order or notice of demand specifically for interest. The court explained that the interest amount is calculated based on a predetermined rate and date, making it a matter of simple arithmetic calculation.

3. The judgment discussed the applicability of the U.P. Sales Tax (Second Amendment) Act, 1963, which introduced section 8(1-A) regarding the payment of interest on unpaid tax amounts. The court highlighted that the provision was added to strengthen tax collection mechanisms and deter tax evasion, emphasizing the automatic nature of interest accrual under this provision.

4. The determination of the date of enforcement of U.P. Act 3 of 1964 was also addressed. The court clarified that the Act comes into operation on the day it is published in the official Gazette, as per the U.P. General Clauses Act, 1904. The court rejected the argument that the Act came into force upon receiving the President's assent.

5. The judgment considered the liability for interest during the period of stay on sales tax recovery. The court dismissed the contention that interest could not accrue during a stay order, emphasizing that the statutory liability to pay interest is not subject to the discretion of the Sales Tax Officer and continues to accrue despite any stay on tax recovery.

6. Lastly, the issue of entitlement to relief in case of a reduction in the sales tax amount on appeal was briefly discussed. The court noted that any relief due to a reduction in the tax amount on appeal should be pursued through appropriate legal proceedings separate from the issue addressed in the judgment.

In conclusion, the appeal was dismissed by the Supreme Court, upholding the majority decision of the Full Bench of the Allahabad High Court regarding the recovery of interest under section 8(1-A) of the U.P. Sales Tax Act.