2009 (5) TMI 874 - HC - VAT and Sales Tax

Whether, in the facts and circumstances of the case, interest under section 59 of the Haryana General Sales Tax Act, 1973, is chargeable even on the demands which are quashed in appeal? Whether, in the facts and circumstances of the case, the interest under section 59 chargeable even without service of demand notice? Held that - It is necessary to point out that question No. 1 is based on the fact that some demand of tax has been quashed and interest has been claimed on that demand of tax. Merely because at one forum demand was quashed, that would not absolve the assessee-petitioner from payment of tax if finally it has been found due. If tax is payable then interest would also be payable as per statutory provision. The provisions governing the payment of interest are entirely different from section 59 of the HGST Act. For example, in none of these cases a provision has been made which may be equivalent to first proviso to section 59 of the HGST Act, which in unmistakable terms provides that recovery of any tax or penalty shall be made with interest even when there is a stay order by the Appellate Authority or by the High Court or by the Supreme Court, provided the amount is ultimately found due. The interest payable on such amount has to be assessed from the date when tax or penalty first becomes due.Therefore, both the questions of law have to be answered against the assessee-petitioner and in favour of the Revenue.

Summary

Issues Involved:
1. Whether interest under section 59 of the Haryana General Sales Tax Act, 1973, is chargeable on demands quashed in appeal.
2. Whether interest under section 59 is chargeable without service of a demand notice.

Issue-wise Detailed Analysis:

1. Interest on Quashed Demands:

The court examined whether interest under section 59 of the Haryana General Sales Tax Act, 1973 (HGST Act), is chargeable on tax demands quashed in appeal. The petitioner contended that interest should not be levied as the tax demands were quashed and stay orders were in place from higher courts. However, the court noted that interest is automatic under section 59 and arises by operation of law. The court emphasized that the first appellate authority's direction to charge interest was neither illegal nor wrong. The Tribunal's decision to remand the matter to the Assessing Authority was upheld, and it was determined that interest is chargeable from the date the tax first became due, despite the stay orders. The court concluded that the petitioner cannot be absolved from liability to pay interest on the delayed payment of tax, as the liability to pay interest is created by the statute and is not contingent on the issuance of a demand notice.

2. Interest Without Demand Notice:

The court considered whether interest under section 59 is chargeable without the service of a demand notice. The petitioner argued that no interest or penalty could be levied in the absence of a demand notice. The court referred to section 59, which presupposes the issuance of a demand notice for payment of tax or penalty. However, the court clarified that the charging of interest is automatic and does not require a separate assessment or notice by the Assessing Authority. The court cited the Supreme Court's judgment in Haji Lal Mohd. Biri Works v. State of U.P., which held that the liability to pay interest is statutory and does not necessitate a demand notice. The court reiterated that interest is deemed as tax for the purposes of collection and recovery under section 59(2) of the HGST Act. The first proviso to section 59(1) explicitly states that interest is recoverable even if the recovery of tax or penalty was stayed by higher courts, provided the amount is ultimately found due.

Conclusion:

The court answered both questions in favor of the Revenue and against the petitioner. It held that interest under section 59 of the HGST Act is chargeable on demands quashed in appeal and is also chargeable without the service of a demand notice. The court emphasized that the statutory provisions make the charging of interest automatic and not contingent on the issuance of a demand notice or the presence of a stay order. The reference was accordingly disposed of, affirming the Revenue's right to charge interest on delayed tax payments.