1998 (12) TMI 526 - SC - VAT and Sales Tax

Classification of the assessee s products - Held that - Appeal dismissed. Such classification dispute is ordinarily resolved in assessment proceedings and, if resolved against the assessee, the assessee has to make payment of the differential amount of tax as required by sub-section (1-A) failing which the provisions of sub-section (1-B) apply. The requirement of sub-section (1) is that the assessee must pay tax on the amount of his turnover as particularised in the Explanation thereto. Interest under the provisions of sub-section (1) cannot be levied in respect of a dispute such as a classification dispute which is resolved only by the assessment. Sub-section (1) has no application to such a situation. Having regard to the conclusion that we reach upon the plain words of section 8, it is unnecessary to go into the assessee s contention that a substantial part of the amount claimed by the Revenue as and by way of interest is under the provisions of the Central Sales Tax Act, 1956 and under that Act no interest is leviable.

Issues Involved:
1. Liability to pay interest under Section 8(1) of the U.P. Sales Tax Act, 1948.
2. Interpretation of the term "tax admittedly payable" under Section 8(1) of the Act.
3. Applicability of interest on tax disputes regarding classification of goods.
4. Maintainability of appeals against orders imposing interest under Section 8 of the Act.

Detailed Analysis:

1. Liability to Pay Interest under Section 8(1) of the U.P. Sales Tax Act, 1948:
The primary issue was whether the assessee, Hindustan Aluminium Corporation (Hindalco), was liable to pay interest on the differential tax amount from the date of filing the return until the date of payment, following the Supreme Court's decision on the tax rate. The Tribunal had upheld the Revenue's case, but the High Court overturned this decision, leading to the Revenue's appeal to the Supreme Court.

2. Interpretation of the Term "Tax Admittedly Payable":
The explanation to Section 8(1) defines "tax admittedly payable" as the tax payable on the turnover as disclosed in the accounts maintained by the dealer or admitted by him in any return or proceeding under the Act, whichever is greater. The High Court emphasized that "tax admittedly payable" refers to the tax amount admitted by the dealer, not the amount claimed by the department. The Supreme Court supported this interpretation, stating that the dealer is only required to pay the tax he admits to be payable on his turnover and the rate he admits to be applicable.

3. Applicability of Interest on Tax Disputes Regarding Classification of Goods:
The dispute in this case revolved around the classification of Hindalco's products and the applicable tax rate. The High Court and the Supreme Court both concluded that interest under Section 8(1) could not be levied on the differential tax amount arising from such classification disputes, which are resolved only through assessment proceedings. The Supreme Court clarified that Section 8(1) does not apply to situations where the tax rate or classification of goods is disputed and later resolved by a higher judicial authority.

4. Maintainability of Appeals Against Orders Imposing Interest:
The High Court addressed the maintainability of appeals against orders imposing interest under Section 8 of the Act. It concluded that such orders are appealable under Section 9 of the U.P. Sales Tax Act, which allows appeals against any order made by the assessing authority, except those mentioned in Section 10-A. The High Court supported its conclusion by referencing previous decisions, including the Division Bench decision in Hind Lamps Ltd. v. State of U.P. (1986 UPTC 54).

Conclusion:
The Supreme Court dismissed the Revenue's appeals, affirming the High Court's decision that interest under Section 8(1) of the U.P. Sales Tax Act, 1948, could not be levied on the differential tax amount arising from disputes over the classification of goods. The Court emphasized that "tax admittedly payable" refers to the amount admitted by the dealer, and interest cannot be imposed on amounts disputed and later resolved by judicial authorities. The judgment clarifies the interpretation of Section 8(1) and the conditions under which interest is applicable, providing significant guidance on handling similar tax disputes in the future.

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