2011 (4) TMI 1053 - SC - VAT and Sales Tax

Whether the appellant is liable to pay interest on the tax due under section 8(1) of the Act i.e. at two per cent per mensem from the date the tax was due or under section 8(1B) i.e. at 1.5 per cent per mensem from the date of the assessment order and demand notice - Held that - where a dealer fails to pay tax at the correct rate because he claimed not to know the revision in the rate the dealer remains liable to pay interest at a higher rate the penal rate under section 8(1) from the date when the tax became due and payable. In such a case the dealer cannot claim that he is liable only from the date of the assessment order fixing the correct rate of tax. Similarly in a case where the dealer has taken a chance and it has been held that the tax is payable under Act the same becomes payable from the date when it was due appeal dismissed

Summary

Issues:
1. Liability of the appellant to pay tax on turnover from rentals of glass bottles and crates.
2. Interest payable on the tax due under section 8(1) or section 8(1B) of the U.P. Trade Tax Act, 1948.

Analysis:
1. Liability to Pay Tax on Turnover from Rentals:
The appellant disputed the liability to pay tax on turnover from rentals of glass bottles and crates. However, the High Court and lower forums confirmed that tax is payable on such turnovers under the Act. The appellant had initially raised issues regarding the transfer of rights of users and terms of agreements, but these were dropped following a previous judgment by the Supreme Court. The court affirmed that containers for goods that cannot be sold without containers are eligible for sales tax, as established in previous cases.

2. Interest Payable under Section 8(1) or Section 8(1B):
The main issue in the appeal was whether the appellant is liable to pay interest on the tax due under section 8(1) or section 8(1B) of the Act. The appellant argued that interest should be charged only from the date of the assessment order, not from the filing of returns, as they disputed the tax liability in good faith. However, the respondent contended that a dealer cannot avoid tax liability by raising false disputes and should pay penal interest under section 8(1) if necessary.

3. Interpretation of Section 8 of the Act:
The court examined the provisions of section 8(1) and section 8(1B) of the Act. Section 8(1) mandates payment of interest at a rate of two per cent per month on the unpaid tax amount. The court clarified that interest under section 8(1) is applicable when the tax liability is admitted by the dealer, either in accounts or returns. In contrast, section 8(1B) imposes a lower interest rate of 1.5 per cent per month if the tax assessed is not paid within the specified period.

4. Precedent and Legal Interpretation:
The court referred to precedents to support its decision. In cases where a dealer fails to pay tax at the correct rate or disputes tax liability, they remain liable to pay interest under section 8(1) from the date the tax became due. The court emphasized that once it is established that tax is payable under the Act, the interest is payable under section 8(1) and not section 8(1B).

5. Conclusion:
The court dismissed the appeal without costs, upholding the liability of the appellant to pay tax on turnover from rentals of glass bottles and crates. The court clarified that interest is payable under section 8(1) of the Act, emphasizing the importance of complying with tax obligations once they are confirmed by judicial verdicts.