1993 (3) TMI 304 - SC - VAT and Sales Tax

Revision filed by the assessee allowed by High Court - Held that - Appeal allowed. Unable to see any relevance of the mala fides in this case. Section 8(1) does not say that the non-payment should be mala fide. This is also not a case where the rate of tax applicable was in dispute or disputed by the dealer. This is simply a case where the dealer calculated the tax at an inapplicable rate. He did not and could not plead ignorance of the change in rate of tax effected two years earlier. In the circumstances, the concept of mala fides was not relevant in the context. That the learned single Judge was not justified in deleting the interest levied by the authorities. The appeal is accordingly allowed and the order of the learned single Judge is set aside.

Summary

Issues:
Interpretation of Section 8(1) of the U.P. Sales Tax Act regarding payment and recovery of tax, Calculation of interest on unpaid tax, Consideration of mala fides in non-payment of tax, Relevance of dealer's knowledge of applicable tax rate, Application of legal principles in determining liability for interest payment.

Analysis:
The Supreme Court heard an appeal against a judgment of the Allahabad High Court concerning the interpretation of Section 8(1) of the U.P. Sales Tax Act, 1948, which pertains to the payment and recovery of tax. The section stipulates that tax admittedly payable must be deposited within the prescribed time or by a specified date, failing which simple interest becomes due. The explanation within the section defines "tax admittedly payable" based on the turnover of sales or purchases disclosed by the dealer. In this case, the dealer filed a return for the assessment year 1975-76, but calculated the tax at a lower rate applicable to unspecified goods before a rate revision. Authorities held that the dealer failed to comply with Section 8(1) by not paying the tax at the revised rate, resulting in the levy of interest.

The appellate authority and Tribunal upheld the interest levy, leading to a revision before the High Court. The High Court judge allowed the revision, emphasizing the absence of findings regarding mala fides in the dealer's actions. However, the Supreme Court noted that Section 8(1) does not require mala fides for non-payment and highlighted the dealer's awareness of the revised tax rate. The Court rejected the relevance of mala fides in this context, stating that the dealer's calculation error did not absolve the liability for interest payment.

The respondent-assessee cited a Division Bench judgment from the Allahabad High Court, suggesting that a dealer disputing taxability or tax rates may avoid interest payment if the calculation is honest and fair. However, the Supreme Court found this principle inapplicable to the present case, as there was no dispute over goods classification or tax rate. Consequently, the Court held that the High Court erred in deleting the interest levy, reinstating the assessing authority's order under Section 8(1) and allowing the appeal. The judgment underscores the importance of complying with tax laws and rates to avoid interest liabilities, irrespective of mala fides or honest calculations.