1997 (7) TMI 566 - SC - VAT and Sales Tax

Whether Section 9(2) of the Central Act did not visualise any payment of interest? Held that - Appeal allowed. Section 9(2-A) makes applicable to the assessment, reassessment, collection and enforcement of Central sales tax the provisions relating to offences and penalties contained in the State Acts as if the Central sales tax was a State sales tax. But section 9(2-A) makes no reference to interest. There is no substantive provision in the Central Act requiring the payment of interest on Central sales tax. There is, therefore, no substantive provision in the Central Act which obliges the assessee to pay interest on delayed payments of Central sales tax. Thus requirement of the 1st respondent s sales tax authorities that the appellants should pay interest at the rate of 24 per cent per annum on delayed payments of Central sales tax under the provisions of section 35-A of the State Act must, therefore, be held to be bad in law.

Issues Involved:
1. Liability to pay interest under Section 9(2) of the Central Sales Tax Act, 1956.
2. Conflict between Section 35-A of the Assam Sales Tax Act, 1947, and Section 15(a) of the Central Sales Tax Act.
3. Validity of Rule 42A of the Assam Sales Tax Rules, 1947.
4. Constitutionality of Section 35-A of the Assam Sales Tax Act under Article 14 of the Constitution.

Issue-wise Detailed Analysis:

1. Liability to Pay Interest Under Section 9(2) of the Central Sales Tax Act, 1956:
The primary issue was whether the appellants were liable to pay interest on delayed payments of Central sales tax under Section 9(2) of the Central Sales Tax Act, 1956. The appellants contended that Section 9(2) did not mention interest explicitly, and thus, they were not liable. The court referred to the Constitution Bench judgment in J.K. Synthetics Ltd. v. Commercial Taxes Officer, which held that provisions for charging interest are substantive law. The court concluded that interest could be levied only if the statute made a substantive provision for it. Since the Central Act did not contain such a provision, the appellants were not liable to pay interest.

2. Conflict Between Section 35-A of the Assam Sales Tax Act, 1947, and Section 15(a) of the Central Sales Tax Act:
The appellants argued that if interest were charged under Section 35-A of the Assam Sales Tax Act, it would violate Section 15(a) of the Central Sales Tax Act, which limits the tax payable to 4%. The court found that Section 9(2) of the Central Act authorizes State authorities to assess and collect Central sales tax as if it were State tax but does not extend to charging interest unless the Central Act explicitly provides for it. Therefore, the imposition of interest under Section 35-A of the Assam Act was invalid.

3. Validity of Rule 42A of the Assam Sales Tax Rules, 1947:
The appellants contended that Rule 42A, which provided for charging interest, was ultra vires Section 35-A of the Assam Sales Tax Act. The court did not find it necessary to delve into this issue in detail, as it had already concluded that the Central Act did not substantively provide for interest, rendering the application of Rule 42A moot in this context.

4. Constitutionality of Section 35-A of the Assam Sales Tax Act Under Article 14 of the Constitution:
The appellants challenged Section 35-A of the Assam Sales Tax Act as violative of Article 14 of the Constitution, arguing it was arbitrary and discriminatory. The court did not specifically address this constitutional challenge, as the primary basis for its decision was the lack of a substantive provision in the Central Act for charging interest.

Conclusion:
The court concluded that there was no substantive provision in the Central Sales Tax Act requiring the payment of interest on delayed payments of Central sales tax. Consequently, the State's sales tax authorities could not charge interest under the provisions of the Assam Sales Tax Act. The requirement to pay interest at 24% per annum on delayed payments was declared invalid, and the appeals were allowed, quashing the demands for interest.

Judgments Delivered:
The appeals were allowed, and the judgment and order under appeal were set aside. The demands for payment of interest on delayed payments of Central sales tax were quashed. No order as to costs.

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