Full Judgment Text
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PETITIONER:
FOOD CORPORATION OF INDIA
Vs.
RESPONDENT:
STATE OF HARYANA & ANR.
DATE OF JUDGMENT: 16/02/2000
BENCH:
N.S.Hegde, Ruma Pal
JUDGMENT:
SANTOSH HEGDE, J.
When the State of Haryana tried to impose sales-tax on
levy transactions undertaken by the appellant in the year
1973, the same was challenged by the appellant before the
Punjab & Haryana High Court on the ground that the said
transactions did not amount to either purchase or sale. The
High Court of Punjab as per its judgment dated 17th May,
1975 following a judgment of this Court in the case of
M/s.Chitter Mal Narain Dass v. C.S.T. (1971 (1) SCR 671),
allowed the said writ petition and declared that the State
of Haryana did not have the constitutional authority to
impose sales-tax on levy transactions, consequently, it
quashed the assessment orders and demand notices issued by
the State. This judgment was not challenged by the State of
Haryana, hence, remained to be the declared law so far as
the State of Haryana is concerned. Subsequently, in the
year 1982 even though the above referred judgment of the
Punjab & Haryana High Court remained to be a good law, the
State of Haryana again issued a demand notice to the
appellant levying sales-tax on the turn over involving levy
transactions. A challenge to the said demand notice by the
appellant came to be rejected by the Punjab & Haryana High
Court on the ground the appellant should first avail the
statutory remedy available to it without deciding the
validity of the notice. The appellant challenged the said
demand order before this Court which challenge was admitted
by this Court by grant of special leave. This Court also
issued interim orders restraining the respondent-State from
enforcing the demands. Once again, during the pendency of
the appeal of the appellant before this Court, the
respondent-State issued further demand notices in the year
1986 which again came to be challenged by the appellant
before the Punjab & Haryana High Court and the said
challenge came to be upheld following the earlier judgment
dated 17th May, 1975 and the demand notices were quashed.
Against this judgment of the High Court, the State preferred
an appeal before this Court in which the leave was granted
but no interim order was granted. The appeal of the
appellant and the State of Haryana filed before this Court
came to be heard by this Court in the year 1997 along with
many other appeals involving similar questions and this
Court as per its judgment dated 6th of January, 1997
declared the law as follows : We, therefore, answer the
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principal common point holding that the levy procurement is
a sale/purchase and, therefore, falls within the purview of
Entry 54 List II of the Seventh Schedule to the
Constitution. The States were competent to levy
sales/purchase tax on such transactions.
It also ultimately dismissed the appeal of the
appellant and allowed the appeal filed by the State of
Haryana along with other States. By the above judgment, the
authority of the State to impose sales-tax on levy
transactions came to be restored. After the judgment of
this Court, referred to above, the State issued another
demand notice for the assessment years 1975-76, 1982-83,
1983-84 and 1984-85 dated 20th of February, 1997, out of
these the demands for the year 1975-76 was for a sum of
Rs.89,39,947/-. It is submitted before us that the
appellant has paid the amount so demanded in the month of
March, 1997 itself. However, on 25th of April, 1997 the
appellant was issued a further notice purported to be under
Section 59 of the Haryana General Sales Tax Act, 1973 ( the
Haryana Act) demanding a sum of Rs.2,26,01,400/- towards
the interest payable on the belated payment of
Rs.89,39,947/- which was the principal tax due from the
appellant for the assessment year 1975-76. The appellant
challenged this levy of interest before the Punjab and
Haryana High Court but the same came to be rejected by an
order of the said High Court dated 18th of January, 1998
against which the above appeal is preferred. The question
that arises for our consideration in this appeal is whether
the State of Haryana is justified in demanding interest from
the appellant on the tax due by it for the assessment year
1975-76. We have heard learned counsel for both the
parties. The answer to the question that falls for
consideration by us depends upon the fact whether there was
a valid demand notice in the year 1982 (the year from which
the interest is demanded) which obligated the appellant to
pay the tax demanded under the said notice. As we have
noticed herein above, so far as the State of Haryana is
concerned during the period between 17th of May, 1975 to 6th
of January, 1997, the law declared by the High Court was
that the State of Haryana did not have the constitutional
authority to impose sales-tax on levy transactions. This
declaration of law was not challenged by the State per
contra the State of Haryana accepted the declaration of law
made by the High Court, therefore, until the position of law
stood changed from 6th of January, 1997, the State of Hayana
could not have made a demand for the payment of sales-tax on
levy transactions. The demand notice by which the State
claimed the tax for the assessment year 1975-76 was of the
year 1982 which fell within the period when the law did not
permit the State of Haryana to impose sales-tax on levy
transactions. Therefore on that day when the notice of
demand was issued for payment of sales-tax for the
assessment year 1975-76, the demand was without authority of
law. Subsequently, the State of Haryana could have made
such demand only after the judgment of this Court which was
delivered on 6th of January, 1997. There is no doubt that
by the judgment of this Court, the right of the State of
Haryana to collect sales-tax would date back to 1975 but
that is not the same as saying that during the said period
when the law was adverse to the State of Haryana it could
still have made a legitimate demand, because, as stated
above, during the period between 1975-77, the States
authority to make a demand was eclipsed because of the law
declared by the High Court. The declaration of law made by
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this Court now empowers the State to raise a demand even for
the assessment year 1975-76 and the appellant is bound to
satisfy the said demand, but the duty of the assessee to
satisfy that demand would arise only when a fresh and valid
demand after the judgment of this Court is made by the
State. If the assessee fails to pay after the fresh demand
is made then as contemplated under Section 59 of the Haryana
Act, the assessee becomes liable to pay the interest also.
Facts in this case show that after the judgment of this
Court, the respondent-State issued a demand notice dated
20th of February, 1997 specifically stating as follows :
The Honble Supreme Court of India has disposed of the
Civil Appeal No.1130 of 1987 and 1995 of 1987 vide orders
dated 28.1.1997 and a copy of the order has also been sent
to you. After the disposal of the Civil Appeal tax on levy
rice and on wheat is payable. (Emphasis supplied). As per
the statement submitted by you and record of this office,
following amount for the years shown against each is payable
by you;..
From the above extract of the demand notice issued to
the appellant, it is clear that a fresh demand was made
pursuant to the judgment of this Court which according to us
is the right step to be taken consequent to the declaration
of law made by this Court. The further question, therefore,
is whether on the demands now made by the respondents on the
appellant, can the State also claim interest ? We have
noticed that the power of the State to collect interest
arises under Section 59 of the Act. The said section
authorises the State to collect interest on belated payment
of tax demanded but this payment of interest can be levied
on such belated payment of tax which is legally payable for
which a valid demand is condition precedent. As has been
noticed by us, the demand notice of the year 1982 which was
issued during the period when the State had no authority to
levy sales-tax cannot be said to be a valid demand based on
which interest could be claimed. A valid demand for the
assessment year 1975-76 could have been made by the State of
Haryana only after the judgment of this Court i.e. from 6th
of January, 1997 and on such a demand being made on 20.2.97,
the appellant has satisfied the said demand within the
period available to it. If that be so, in our opinion, the
State could not have demanded interest on the tax due for
the assessment year 1975-76 based on its earlier demand
notice. We are of the opinion that the interest demanded by
the State of Haryana on the amount due from the appellant
for the assessment year 1975-76 cannot be sustained.
Therefore, the said demand of interest, impugned in the
appeal is quashed. For the reasons stated above, this
appeal is allowed, the judgment and order of the High Court
of Punjab & Haryana impugned in the above appeal is set
aside. No costs.
.J. (S.P.Bharucha)