1991 (10) TMI 277 - HC - VAT and Sales Tax

Summary

Issues: Recovery proceedings based on non-payment of tax and interest under U.P. Sales Tax Act, 1948.

Analysis:
The judgment of the Allahabad High Court pertains to a writ petition arising from recovery proceedings initiated against the petitioner for non-payment of tax and interest under the U.P. Sales Tax Act, 1948. The petitioner, a partnership concern registered under the Act, had submitted its return for the relevant period and deposited the tax due through a cheque. However, the cheque was not presented for encashment by the department, leading to the initiation of recovery proceedings. The petitioner contended that it should not be held liable for interest as it had made the payment through the cheque, which is considered payment unless dishonored. The Court considered the petitioner's submissions and found merit in them, emphasizing that the department's failure to encash the cheque promptly could not be attributed to the petitioner. The Court highlighted the provisions of the Act allowing payment through cheques and ruled that the petitioner should not be held responsible for interest due to the department's inaction in realizing the cheque amount promptly.

The Court referred to legal principles establishing that a cheque is considered payment unless dishonored, and the obligation is discharged upon acceptance of the cheque. It noted that the Revenue did not claim the cheque was dishonored, indicating the petitioner's offer of payment through the cheque was valid. The Court highlighted the correspondence between the petitioner and the Sales Tax Officer regarding the cheque deposit, emphasizing that the petitioner had made efforts to rectify any delay in payment. The Court concluded that it would be unjust to hold the petitioner liable for interest when the department failed to realize the cheque promptly. The Court ruled in favor of the petitioner, quashing the demand for interest and recovery certificate, thereby restraining the respondents from demanding or recovering the amount from the petitioner.

In summary, the judgment delves into the intricacies of payment through cheques under the U.P. Sales Tax Act, emphasizing that the petitioner should not be penalized for the department's failure to encash the cheque promptly. The Court's decision highlights the importance of attributing responsibility for delays in payment and underscores the legal principles governing payment obligations.