2004 (3) TMI 408 - SC - VAT and Sales Tax

Whether the assessee could be considered to be a defaulter and liable to pay interest? Held that - Appeal allowed. As the original assessments have been set aside and it has been directed that there should be recomputation, the original orders cease to exist. After recomputation fresh notices have been issued. The liability is to pay the amount before the date set out in the fresh notices. Thus, the appellants cannot be said to be defaulters unless they have not paid the dues within the time specified in those fresh notices. In such cases interest cannot be demanded for an earlier period.

Summary

Issues involved:
1. Assessment orders under Bengal Finance (Sales Tax) Act, 1941 and West Bengal Sales Tax Act, 1954.
2. Fresh demand notices issued by respondents claiming interest.
3. Question of whether the assessee could be considered a defaulter and liable to pay interest.

Analysis:
1. The appellants filed returns under the Bengal Finance (Sales Tax) Act, 1941 and the West Bengal Sales Tax Act, 1954, leading to additional demands in assessment orders. Appeals were filed against these orders, with stay of recovery granted but with directions to deposit certain amounts. Subsequently, in one appeal, an order directed recomputation, while in the other, the tax due was reduced. Fresh demand notices were issued by the respondents claiming interest from a specific period. The main issue before the Court was whether the assessee could be deemed a defaulter and be liable to pay interest.

2. The relevant sections of the 1941 Act and the 1954 Act were analyzed, particularly focusing on the provisions related to interest payable by dealers for default in payment. The Court referred to similar provisions in both Acts and highlighted the circumstances under which interest is payable, including failure to furnish returns on time or make payments as assessed. The Court examined the legal framework to determine the assessee's liability for interest under the given circumstances.

3. The Court referred to a previous decision in the case of Income-tax Officer v. Seghu Buchiah Setty, where it was established that in cases where an assessment is reduced or altered, a fresh demand notice is necessary for the party to be considered a defaulter. The Court emphasized that liability can only arise from the date of a fresh demand notice if the assessment is modified. Relying on this precedent, the Court concluded that the original assessments being set aside required recomputation and issuance of fresh notices, and the appellants could not be deemed defaulters unless they failed to pay within the specified time in the new notices. Therefore, interest could not be demanded for a period prior to the issuance of fresh notices.

4. In contrast, a reference was made to the case of Calcutta Jute Manufacturing Co. v. Commercial Tax Officer, where the Court held that interest was payable even for periods during which a stay had been obtained, indicating non-compliance with certain provisions. However, the Court distinguished this case from the present situation, emphasizing the need for fresh demand notices after assessments are set aside for recomputation. Consequently, the Court set aside the impugned order, allowing the appeals and ruling in favor of the appellants.