1976 (11) TMI 170 - SC - VAT and Sales Tax

Whether the respondent is liable to pay interest on the amount due from him as sales tax? Whether it was necessary for the sales tax authorities to issue a fresh notice of demand to the respondent after the tax assessed by the Sales Tax Officer was reduced on appeal and further reduced on revision? Held that - Appeal allowed. There is no dispute in the present case that the notice of assessment and demand was served upon the assessee-respondent. The respondent cannot, therefore, escape liability for payment of interest. And it is apparent from clause (b) of sub-section (9) that where as a result of appeal, revision or other proceedings the amount of the tax or other dues is reduced, it shall not be necessary for the assessing authority to serve upon the dealer a fresh notice.

Summary

Issues:
1. Liability of the respondent to pay interest on sales tax amount.
2. Requirement of issuing a fresh notice of demand after reduction of tax amount on appeal and revision.

Analysis:
1. The Supreme Court addressed the first issue of whether the respondent is liable to pay interest on the sales tax amount due. The Court referred to section 8(1-A) of the U.P. Sales Tax Act, which mandates the payment of interest at a rate of eighteen per cent per annum if the tax remains unpaid for six months after the specified time. The Court relied on the case law of Haji Lal Mohd. Biri Works v. State of U.P. to establish that the liability to pay interest is automatic and arises by operation of law. It was emphasized that the notice of assessment and demand was served on the respondent, confirming the liability for interest payment.

2. The second issue revolved around the necessity of issuing a fresh notice of demand after the tax amount was reduced on appeal and revision. The Court examined section 8(9) of the Act, which was added by an amendment in 1971. This section outlines that if the tax amount is reduced due to appeal or revision, it is not mandatory for the assessing authority to issue a fresh notice of demand. The Court cited the case of Firm Parshuram Rameshwar Lal v. State of U.P. to support this interpretation. Consequently, the Court concluded that no fresh notice was required in the present case, and the recovery proceedings could continue based on the reduced amount.

In conclusion, the Supreme Court allowed the appeal, overturning the judgment of the High Court. The Court dismissed the writ petition filed by the respondent, stating that each party should bear their own costs throughout the legal proceedings.