1970 (1) TMI 76 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of recovery certificate for interest under the U.P. Sales Tax Act.
2. Requirement of a fresh notice of demand after an appellate order.
3. Liability for interest if tax remains unpaid after the expiry of the time specified in the notice of demand.

Detailed Analysis:
1. The judgment dealt with a petition challenging the validity of a recovery certificate issued by the Sales Tax Officer for the recovery of interest under the U.P. Sales Tax Act. The petitioner, a Hindu undivided family, disputed its liability for interest amounting to more than Rs. 20,000, contending that it had paid the arrears of tax but disagreed with the interest calculation. The petitioner filed an objection before the Sales Tax Officer, which was rejected, leading to the filing of the petition.

2. The petitioner argued that after an appellate order reducing the tax liability, a fresh notice of demand should have been served. The absence of a fresh notice of demand meant that the petitioner could not be considered a defaulter, thus questioning the imposition of interest. Citing precedents, including Income-tax Officer v. Seghu Buchiah Setty, the court emphasized the necessity of a fresh notice of demand post-appellate order modification to require the assessee to pay the revised tax amount.

3. The court analyzed Section 8(1) and (1-A) of the Act regarding the payment of tax and interest. It highlighted that interest becomes payable only if the tax remains unpaid for six months after the expiry of the time specified in the notice of demand. The court clarified that tax is assessed when an assessment order is passed but becomes payable only upon the service of a notice of demand. Referring to Masitullah Khan and Others v. The Collector, Shahjahanpur, the court reiterated that interest is chargeable only from a person in default of payment as per the notice of demand.

In conclusion, the court allowed the petition, quashing the proceedings for the recovery of interest. The judgment emphasized the importance of a fresh notice of demand post-appellate order modification and clarified the conditions under which interest becomes payable under the U.P. Sales Tax Act.