1973 (10) TMI 43 - HC - VAT and Sales Tax

Summary

Issues:
Recovery of interest under section 8(1-A) of the U.P. Sales Tax Act during the period of stay order issued by the High Court.

Detailed Analysis:

The judgment by the High Court of Allahabad addressed the issue of recovery of interest under section 8(1-A) of the U.P. Sales Tax Act during the period of a stay order issued by the court. The petitioners, who were liquor dealers, had challenged the assessment and tax demand made by the Sales Tax Officer for the assessment year 1969-70 through writ petitions. The court had initially issued interim orders restraining the tax recovery, but ultimately dismissed the petitions upholding the taxation as valid. Subsequently, the authorities sought to recover the tax and interest under section 8(1-A) of the Act. The petitioners contested the recovery of interest for the period during which the tax recovery was stayed under the court orders.

The petitioners argued that the stay order prevented them from being in default, thus no interest should be due under section 8(1-A). However, the court rejected this argument citing a Supreme Court decision in the case of Haji Lal Mohammad Biri Works, where it was held that the running of interest is not affected by a stay order. The Supreme Court had explicitly stated that the Sales Tax Officer has no discretion to exempt the payment of interest, and interest accrues automatically by law under section 8(1-A) of the Act.

The High Court emphasized that the Supreme Court's decision constituted a declaration of law under Article 141 of the Constitution, which meant that no stay order, whether by the Government or any authority including the High Court, could halt the accrual of interest under section 8(1-A). The court clarified that once interest accrues, it becomes a liability dischargeable by the assessee, akin to a tax liability. Therefore, the petitioners were held liable to pay the interest that accrued during the period of the stay order.

Additionally, the court addressed a separate argument raised by one petitioner regarding the refusal of tax payment acceptance by the respondents. The court found this argument vague and unsupported by evidence, stating that if the petitioner had deposited the tax amount in the Government treasury, the respondents could not have prevented the payment. Ultimately, all petitions challenging the recovery of interest during the stay period were dismissed, and the petitioners were directed to pay the accrued interest along with costs.

In conclusion, the judgment clarified that the accrual and recovery of interest under section 8(1-A) of the U.P. Sales Tax Act are not affected by stay orders, and once interest accrues, it becomes a liability dischargeable by the assessee. The decision of the Supreme Court in a similar matter was deemed as a declaration of law, reinforcing the obligation of the petitioners to pay the accrued interest despite the stay order.