1997 (9) TMI 580 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of levy of interest under section 35-A of the Assam Sales Tax Act in conjunction with section 9(2) of the Central Sales Tax Act.
2. Constitutionality of section 35-A of the Assam Sales Tax Act in relation to article 14 of the Constitution of India.
3. Legislative competence of the State Legislature to enact section 35-A of the Assam Sales Tax Act.
4. Applicability of section 9(2-A) of the Central Sales Tax Act to the assessment, reassessment, collection, and enforcement of Central sales tax.
5. Impact of the Supreme Court judgment on the levy of interest under section 35-A of the Assam Sales Tax Act.

Analysis:
The judgment by the High Court of Gauhati pertains to a writ petition challenging an order of assessment that upheld the levy of interest on a registered dealer under the Central Sales Tax Act for delayed payment of taxes. The petitioner contended that section 9(2) of the Central Sales Tax Act does not authorize the imposition of interest, and section 35-A of the Assam Sales Tax Act, under which interest was levied, was discriminatory and beyond the legislative competence of the State Legislature.

The petitioner argued that the interest rate of 24% under section 35-A was disproportionate compared to the 6% maximum rate on refunds, violating article 14 of the Constitution of India. The State, represented by the Additional Senior Government Advocate, defended the levy of interest as part of the tax machinery, within the State Legislature's competence. It was also argued that section 9(2-A) of the Central Sales Tax Act could be applied to enforce the payment of interest, despite the absence of a specific provision for interest in the Central Act.

However, the Supreme Court's judgment in a related case clarified that there was no substantive provision in the Central Act for the payment of interest on Central sales tax. The Court held that States' sales tax authorities could not charge interest on Central sales tax unless the Central Act provided for it explicitly. Consequently, the High Court, following the Supreme Court's ruling, set aside the orders levying interest under section 35-A of the Assam Sales Tax Act.

In light of the Supreme Court's decision, the High Court allowed the writ petitions challenging the levy of interest on delayed payment of Central sales tax, as the realisation of Central sales tax in aid of section 35-A was deemed unsustainable. The orders of assessment imposing interest were set aside, and costs were not awarded. The judgment clarified the legal framework surrounding the levy of interest on taxes and the limits of State legislative competence in this context.