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2000 (2) TMI 735 - SC - VAT and Sales TaxWhether the State of Haryana is justified in demanding interest from the appellant on the tax due by it for the assessment year 1975-76? Whether there was a valid demand notice in the year 1982 (the year from which the interest is demanded) which obligated the appellant to pay the tax demanded under the said notice? Held that - Appeal allowed. As has been noticed the demand notice of the year 1982 which was issued during the period when the State had no authority to levy sales tax cannot be said to be a valid demand based on which interest could be claimed. A valid demand for the assessment year 1975-76 could have been made by the State of Haryana only after the judgment of this Court i.e. from January 6 1997 and on such a demand being made on February 20 1997 the appellant has satisfied the said demand within the period available to it. If that be so in our opinion the State could not have demanded interest on the tax due for the assessment year 1975-76 based on its earlier demand notice. Thus the interest demanded by the State of Haryana on the amount due from the appellant for the assessment year 1975-76 cannot be sustained
Issues Involved:
1. Challenge to imposition of sales tax on levy transactions by the State of Haryana in 1973. 2. Rejection of challenge to demand notice for sales tax on levy transactions in 1982. 3. Validity of demand notices issued by the State of Haryana in 1986. 4. Appeal against judgment quashing demand notices by the State of Haryana. 5. Imposition of interest by the State of Haryana on tax due for the assessment year 1975-76. Issue 1: Challenge to imposition of sales tax on levy transactions in 1973 The appellant challenged the imposition of sales tax on levy transactions by the State of Haryana in 1973. The Punjab and Haryana High Court, following a precedent set by the Supreme Court, declared that the State of Haryana lacked constitutional authority to levy sales tax on levy transactions. This judgment remained unchallenged by the State of Haryana, establishing the law in the state until a subsequent change. Issue 2: Rejection of challenge to demand notice in 1982 Despite the earlier judgment, the State of Haryana issued a demand notice in 1982 for sales tax on levy transactions, which the appellant challenged. The Punjab and Haryana High Court rejected the challenge, stating the appellant should exhaust statutory remedies first. The appellant then appealed to the Supreme Court, which granted special leave and issued interim orders restraining the State from enforcing the demands. Issue 3: Validity of demand notices in 1986 Subsequently, in 1986, the State of Haryana issued further demand notices for sales tax on levy transactions. The appellant challenged these notices, and the Punjab and Haryana High Court upheld the challenge, quashing the demand notices. The State appealed this decision to the Supreme Court, where leave was granted but no interim order was issued. Issue 4: Appeal against judgment quashing demand notices The appeals of the appellant and the State of Haryana were heard by the Supreme Court in 1997. The Court declared that levy procurement constituted a sale/purchase falling under the purview of sales tax laws. The Court dismissed the appellant's appeal and allowed the State's appeal, restoring the State's authority to impose sales tax on levy transactions. Issue 5: Imposition of interest on tax due for the assessment year 1975-76 After the Supreme Court's judgment, the State of Haryana issued a demand notice in 1997 for taxes due in 1975-76, including interest. The appellant challenged the interest levy, arguing it was based on an earlier invalid demand notice. The Court held that the State could only claim interest on legally payable tax after a valid demand, which was made post the Supreme Court's judgment. As the appellant satisfied the valid demand promptly, the Court quashed the interest demand, ruling in favor of the appellant. This comprehensive analysis of the legal judgment highlights the series of events, challenges, and legal principles involved in the case, leading to a final decision by the Supreme Court regarding the imposition of sales tax on levy transactions and the validity of interest demands by the State of Haryana.
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