1990 (12) TMI 288 - SC - VAT and Sales Tax

Interest on the amount of arrears paid of sales tax - Held that - Appeal dismissed. Admittedly, the sales tax was in arrears against the petitioners when section 8(1-A) came into force and it remained unpaid after the expiry of six months from 25th of January, 1964, when the provision came into force. Interest, therefore, started automatically running on the arrears irrespective of the years to which they related. It is not disputed that the arrears of sales tax were paid by the appellants six months after the amending Act.

Summary

Issues:
1. Interpretation of Section 8(1-A) of the U.P. Sales Tax Act, 1948.
2. Liability of interest on arrears of sales tax.
3. Requirement of separate notice of demand for accruing interest.
4. Applicability of interest on arrears of sales tax paid voluntarily.

Analysis:

The judgment by the Supreme Court involved an interpretation of Section 8(1-A) of the U.P. Sales Tax Act, 1948. The case revolved around two notices served by the Sales Tax Officer for the recovery of interest on arrears of sales tax. The appellants, who inherited properties from their ancestors, were asked to pay the arrears. The appellants challenged the notices through a writ petition before the High Court, which was dismissed. The appellants contended that the amendment to Section 8(1-A) was not applicable to arrears of sales tax assessed before the amendment's enforcement date. However, the High Court rejected this contention, stating that interest started running automatically on the arrears once the provision came into force, regardless of the years to which they related. The Supreme Court upheld this reasoning, agreeing with the High Court's decision.

Another issue raised was the liability of interest on arrears of sales tax and the requirement of a separate notice of demand. The appellants argued that since they had voluntarily paid the arrears of sales tax, they should not be liable to pay interest. However, the High Court held that interest accrual is automatic under Section 8(1-A) if the arrears remain unpaid for six months after the amendment's commencement. The Supreme Court concurred with this view, citing a previous judgment and rejecting the appellants' contention. The Court emphasized that the interest becomes payable once the arrears remain unpaid for the specified period, irrespective of voluntary payment.

During the appeal in the Supreme Court, an interim stay was in place against the respondents. The Court granted the appellants six months to make the payment and directed that no coercive steps be taken for recovery during this period. Ultimately, the appeal was dismissed with no order as to costs. The judgment clarified the applicability of interest on arrears of sales tax, emphasizing the automatic nature of interest accrual under Section 8(1-A) and the lack of requirement for a separate notice of demand when arrears remain unpaid for the specified period.