1985 (8) TMI 360 - HC - VAT and Sales Tax

Summary

Issues:
- Interpretation of section 11B of the Rajasthan Sales Tax Act, 1954 regarding the levy of interest for default in tax payment for part of a month.
- Consistency of interpretation by the Board of Revenue over a long period.
- Comparison with provisions of the Income-tax Act for penalty imposition.

Detailed Analysis:
The judgment of the Rajasthan High Court involved the interpretation of section 11B of the Rajasthan Sales Tax Act, 1954, concerning the imposition of interest for default in tax payment for part of a month. The court considered two cases and noted that the Board of Revenue had consistently held that interest could only be charged for completed months and not for periods less than a month. The court examined the language of the provision, which specified the rate of interest per month for defaults in tax payment. The court acknowledged arguments from both the department and the assessees regarding the interpretation of the crucial words "during the time" in the provision. The court also highlighted the historical context of the provision, noting its evolution from penalty provisions prior to the insertion of section 11B in the Act.

The court further analyzed the decisions of the Board of Revenue on the issue, citing various cases where the Board consistently held that interest could not be imposed for periods less than a month. The court referenced cases such as Premier Vegetable Products, Nagpal Bros., National Engineering Industries Ltd., Jaipur Bottling Co., and others, where the Board maintained a uniform stance on the matter. The court also considered the provisions of the Income-tax Act, specifically section 271(1)(a), which indicated that penalties could only be imposed for completed months of default, drawing a parallel to the interpretation of section 11B of the Sales Tax Act.

Moreover, the court deliberated on the principle of consistency in interpreting tax laws, citing a Supreme Court decision Commissioner of Income-tax, West Bengal III v. Balkrishna Malhotra. The court emphasized the importance of maintaining stability in legal interpretations, especially in tax matters, to avoid unsettling established practices. Considering the long-standing interpretation by the Board of Revenue and the subsequent amendment of section 11B, the court concluded that interest could only be charged for completed months under the repealed provisions of the Act. The court held that fractions of a month should be disregarded for calculating interest on default tax payments, aligning with the consistent interpretation upheld by the Board of Revenue.

In conclusion, the court dismissed the reference applications, deemed as revision petitions, under the amended provisions of the Act. The parties were left to bear their own costs, and the court affirmed that interest for default in tax payment could only be levied for completed months, in line with the historical interpretation by the taxing authorities.