Full Judgment Text
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PETITIONER:
HAJI LAL MOHD. BIRI WORKS ALLAHABAD THROUGHABDUL HAMID
Vs.
RESPONDENT:
THE STATE OF U.P. AND OTHERS
DATE OF JUDGMENT23/04/1973
BENCH:
KHANNA, HANS RAJ
BENCH:
KHANNA, HANS RAJ
HEGDE, K.S.
CITATION:
1973 AIR 2226 1974 SCR (1) 25
1974 SCC (3) 137
CITATOR INFO :
F 1977 SC 533 (4)
R 1983 SC 586 (15)
RF 1991 SC 971 (5)
RF 1991 SC1737 (5)
ACT:
U.P. Sales Tax Act, 1948 as amended by Act 3 of 1964-
Interest on Sales Tax arrears to be treated as tax under new
s. 8(1-A) introduced by 1964 amendment-Whether separate
assessment order and notice of demand necessary in case of
interest-Amount of interest whether must be specified in
recovery certificate-Amendment Act when came into force-
Interest whether may be charged for period during which
recovery of tax is stayed.
HEADNOTE:
The appellant firm was assessed to sales-tax for the
assessment years 1957-58 and 1958-1959. On an application
made by the appellant for the composition of tax the
recovery of the tax for 1957-58 was stayed. The stay order
was vacated oh September 25. 1967. Thereafter the sales-tax
officer issued a certificate to the Collector for the
recovery of arrears of sales-tax for the said assessment
years. In the certificate it was mentioned that 8% interest
per annum on the arrears of tax was also to be recovered as
arrears of land revenue in terms of the provisions of
section 8(1-A) of the U.P. Sales Tax Act,’ 1948 as amended
by Act 3 of 1964. in a writ petition under article 226 of
the Constitution the appellant challenged the recovery of
interest mainly on the ground that there was no assessment
order in regard to the interest and no notice of demand had
been issued. The High Court dismissed the petition. Appeal
in this Court was filed with certificate. Dismissing the
appeal,
HELD : (i) The provision in sub-section (1-A) of section 8
according to which interest shall be added’ to the amount of
tax and shall be deemed for all purpose to be part of tax
has been added only for the purpose of recovery. The object
apparently was that the amount of interest should be
recovered in the same manner as the amount of sales-tax.
The amount of sales-tax and other dues under sub-section (8)
of section 8 can be recovered as arrears of land revenue.
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It was with a view to nut the matter beyond any pale of
controversy and to obviate any objection that the interest
on sales-tax cannot be recovered as land revenue that sub-
section (1-A) provided that the interest shall be added to
the amount of tax and be deemed for all purposes to be a
part of the tax. It is a matter of mere arithmetical
calculation to arrive at the figure of interest. There is
nothing in any of the provisions of the Act as may warrant
making of another assessment order by the sales-tax officer
regarding the amount of interest or making it obligatory for
him to issue a demand notice in respect of the interest
before sending the recovery certificates to the Collector.
[28G-29C]
(ii)The argument that the sales-tax officer should specify
the amount of interest in the recovery certificate could not
be@ accepted. As the amount of interest would go on
increasing every day till the recovery of the sales-tax it
is plainly not possible to specify the exact amount of
interest in the recovery certificate. [29D]
(iii)According to clause (b) of subsection (1) of
section 5 of the U.P. General Clauses Act, 1904 where any
U.P. Act is not expressed to come into force on a particular
day than in the case of a U.P. Act made’ after the commence-
ment of the Constitution it shall come into operation on the
date on which the assent thereto of the Governor or the
President as the case may require is-first published in the
official gazette. In the present case the President’s
assent to U.P. Act 3 of 1964 was published in the official
Gazette on February 1, 1964 and hence it must be held to
have come into force on that day and not on the date on
which the President’s assent was given, [29F]
(iv)There is nothing in the language of section 8(1-A) of
the Act which prevents the running of interest because of,
the operation of any stay order. Indeed the liability to
pay interest is created by the statute and the Sales-tax
Officer has no discretion to grant any exemption from the
payment of interest. [30A]
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JUDGMENT:
CIVIL APPELLATE JURISDICTION: C.A. 1 No. 543 (NT) of 1970.
Appeal by certificate from the Judgment and order dated
December 2, 1969 of the Allahabad High Court in Civil Misc.
No. 955 of 1969.
A.K. Sen, Yogeshwar Prasad, S. K. Bagga, Shakeel Ahmed
and Mrs. S. Bagga for the appellant.
S. C. Manchanda and O. P. Rana for the respondents.
The Judgment of the Court was delivered by
KHANNA, J.-This appeal on certificate is directed against
the Full Bench decision of Allahabad High Court whereby that
court answered by a majority of two to one the following
question referred to it by a Division Bench in the negative
against the assessee-appellant :
"Whether, in order to recover interest under
section S. (1-A) of the U.P., Sales Tax Act,
it is necessary- for the Sales Tax Officer to
make an assessment order in respect of the
interest and to issue a notice of demand in
respect of such interest.",
The appellant, a partnership firm, is a large-scale
manufacturer of biris. The Appellant was assessed to tax
under the (U.P. Sales Tax Act, 1948 (U.P. Act No. 15 of
1948) ( hereinafter referred to as the Act) for the
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assessment years 1957-58 and 1958-59 as per assessment
orders dated June 10, 1959 and February 12, 1963
respectively. On an application sent by the appellant to
the Minister of Finance, U.P. Government requesting for
compounding of tax, an order was issued on May 6, 1959
staying the recovery of tax due from the appellant. The
stay order was vacated by order dated September 25. 1967.
On October 9, 1967 the Sales Tax Officer sent a recovery
certificate to the Collector Allahabad for a sum of Rs.
1965,684.43 for the recovery of arrears of sales tax for the
year 1957-58. The recovery certificate also mentioned that
interest at the rate 1 of 18 per cent per annum calculated
on the amount of tax with effect from February 1, 1964 till
the date of final payment should also be recovered as
arrears of land revenue in terms of the provisions of
section 8(1-A) of the Act. On October 25, 1967 another
recovery certificate for recovering a sum of Rs. 26,238.08
in respect of the year 1958-59 on account of arrears of
sales tax was sent by the Sales Tax Officer to the Collector
Allahabad. It was mentioned in the certificate that the
aforesaid amount would carry interest at the rate of 18 per
cent per annum calculated with effect from February 1, 1965
till the date of final payment and the same too should be
recovered as arrears of land revenue in terms of the
provisions of section 8(1-A) of the Act.
The case of the appellant firm is that the amount of the
sales’ tax mentioned in the two recovery certificates was
paid by it. The appellant, however, contested its liability
to pay interest amounting to Rs. 1,36,000 on the amount of
sales tax under section 8(1-A) of the Act. A petition under
article 226 of the Constitution was consequently filed fly
the appellant in the High Court challenging the recovery of
the interest amounting to Rs. 1,38,000. The main ground
which was taken by the appellant in this,connection was that
without making an assessment order and without issuing a
notice of demand
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the Sales Tax Officer had no jurisdiction to initiate
proceedings for the recovery of interest. Reliance in this
connection was placed on behalf of the appellant upon an
earlier Division Bench decision in the case of Beni Ram Mool
Chand v. The Sales Tax Officer(1) wherein the Division Bench
had held that issuance of a notice of demand was it
condition precedent to the recovery of penal interest. As
the correctness of that decision was challenged, the
Division Bench hearing, the writ petition of the appellant
referred the question reproduced earlier to the Full Bench.
The Full Bench by a majority of two to on,-, as already
mentioned, answered the question in the negative and against
the appellant.
Before dealing with the contentions advanced in this Court,
we may refer to the relevant provision of the Act. Section
3 of the Act creates liability to sales tax. Under this
section every dealer is liable to pay tax on the turnover
which shall be determined in such manner as may be
prescribed. Section 7 provides for determination of
turnover and assessment of tax. Section 8 deals with
payment and recovery of tax. ’Sub-sections (3), (1-A) and 6
of section 8 read as under
"8. Payment and recovery of tax.-(1) The tax
assessed under this Act shall be paid in such
manner and in such instalments, if any. and
within such time, not being less. than fifteen
days from the date of service of the notice of
assessment and demand, as may be specified in
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the notice.In default of such payment, the
whole of the amount then, remaining due shall
become recoverable in accordance with sub-
section (8).
(1-A) If the tax payable under sub-section
(1) remains unpaid for six months after the
expiry of the time, specified. in the notice
of assessment and demand, or the commencement
of the Uttar Pradesh BikriKar (Dwitiya
Sanshodhan) Adhiniyam, 1963, whichever, is
later, then without prejudice to any other
liability or penalty which the defaulter may,
in consequence of such non-payment, incur
under this Act, simple interest at the rate of
eighteen per cent per annum shall run on the
amount then remaining. due from the date of
expiry of the time specified in the said
notice, or from the commencement of the said
Adhiniyam, as the case may be, and shall be
added to the amount of tax and be deemed for
all purposes to be part of the tax
Provided that where as a result of appeal, revision or
reference, or of any other order of a
competent court or authority, the amount of
tax is varied, the interest shall. be
recalculated accordingly
Provided further that the interest on the
excess amount of tax payable under an order of
enhancement shall run from the date of such
order if such excess remains unpaid for six
months after the order.
x x x x
(1) (1969) 23 S.T.C. 423.
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(8) Any tax or other dues payable to the State
Government under this Act, or any amount of
money which a person is required to pay to the
assessing authority under sub-section (3) or
for which he is personally liable to the
assessing authority under sub-section (6)
shall be recoverable as arrears of land
revenue."
It may be mentioned that sub-section (1-A) of
section 8 reproduced above was added by U.P.
Sales Tax (Second Amendment) Act, 1963 (U.P.
Act 3 of 1964). The above provision was
apparently added with a view to tighten up the
machinery for collection of sales tax and as a
deterrent measure so that. the dealers may not
evade or delay the payment of tax, U.P. Act 3
of 1964 also added section 33 to the Act. The
material part of section 33 reads as under
"In respect of any sum recoverable under this
Act as arrears of land revenue the assessing
authority may forward to the Collector a
certificate under his signature specifying the
sum due. Such certificate shall be conclusive
evidence of the existence of the liability, of
its amount, and of the person who is liable,
and the Collector on receipt of the
certificate shall proceed to recover from such
person the amount specified therein as if it
were an arrear of land revenue;
Mr. Sen on behalf of the appellant has argued that it was
essential -for the Sales Tax Officer to make an assessment
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order in respect of the interest before he could issue
recovery certificate against the appellant. In any case,
according to Mr. Sen, recovery certificate in respect of the
interest could not be issued till such time a notice of
demand in respect of the interest had been issued by the
Sales Tax Officer to the appellant-firm. These contentions,
in our opinion, are not well founded. There is no provision
in the Act which makes it obligatory on the part of the
Sales Tax Officer to make an assessment in respect of the
interest which the amount of sales tax would carry under
section 8(1-A) of the Act. There is also no provision in
the Act which requires the issue of a notice of demand in
respect of the interest by the Sales Tax Officer to the
assessee before the Sales Tax Officer forwards recovery
certificate to the Collector. Reference has been made by
Mr. Sen to sub-section (1 A) of section B, according to
which interest shall be added to the amount of tax and shall
be deemed for all purposes to be part of the tax. The above
deeming provision, in our opinion, has been added only for
the purpose of recovery. The object apparently was that the
amount of interest should be recovered in the.same manner as
the amount of sales tax. The amount of sales tax and other
dues under sub-section (8) of section 8 can be recovered
’beyond any pale of controversy and to obviate any objection that
the interest on sales tax cannot be recovered as land
revenue that subsection (1-A) provided that the interest
shall be added to the amount of tax and be deemed for all
purposes to be a part of the tax,
29
According to section 8(1-A), simple interest at the rate of
18 per cent per annum shall run on the amount of arrears of
sales tax. from the date specified in that sub-section. It
would thus appear that the liability to pay interest is
automatic and arises by operation of law. The amount of
interest on the date of payment of tax is not constant but
increases from day to day. The amount of interest can,.
therefore, be not predicated till such time as the arrears
of sales tax are paid and it is consequently not possible to
specify a definite figure in respect of the interest in the
recovery certificate. At the time the arrears of sales tax
are paid, there can be no difficulty in finding the amount
of interest which has. become due. The, amount of tax on
which interest is to accrue, the rate of interest, the date
from which interest is to commence and the date up to which
interest is to be counted are all known. It is, therefore,
a matter of more arithmetical calculation to arrive at the
figure of interest. We find nothing in any of the
provisions of the Act as may warrant making of another
assessment order by the Sales Tax.Officer regarding the
amount of interest or making it obligatory for him to issue
a demand notice in respect of the interest before sending
the recovery certificate to the Collector.
We are also not impressed by Mr. Sen’s argument that the
Sales Tax Officer should specify the amount of interest in
the recovery certificate. As the amount of interest would
go on increasing every day fill the recovery of the sales
tax, it is plainly not possible to specify the exact amount
of interest in the recovery certificate. The exact amount
of interest can only be known on the day the arrears of
sales tax are paid. No elaborate procedure is required for
determining the amount of interest because, as mentioned
earlier, it is a matter of simple arithmetical calculation.
There was some argument before us on the point as to when
U.P. Act 3 of 1964 came into force. This Act received the
assent of the President on January 25, 1964 but was
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published in the official Gazette on February 1, 1964. It
was submitted on behalf of the appellant that the Act came
into force on the date it received the assent of the
President. As against that, Mr. Manchanda on behalf of the
respondents stated that the Act came into force on February
1, 1964. the day it was published in the official Gazette.
The stand taken by Mr. Manchanda in this respect is
correct because according to clause (b) of sub-section (1)
of section 5 of the U.P. General Clauses Act, 1904 (U.P. Act
No. 1 of 1904) where any Uttar Pradesh Act is not expressed
to come into force on a particular day, then in the case of
an Uttar Pradesh Act made after the Commencement of the
Constitution, it shall come into operation on the day on
which the assent there to of the Governor or the President,
as the case may require, is first published in the official
Gazette. It may also be mentioned that in para 33 of the
writ petition filed in the High Court the appellant’ too had
taken the stand that the U.P. Act 3 of 1964 had come into,
force ’on February. 1, 1964.
Argument has also been advanced by Mr. Sen that the interest
on arrears of sales tax could not be realised for the period
during which-
30
the recovery of sales tax was stayed. We find it difficult
to accede to this contention because there is nothing in the
language of section 8(1-A) of the Act which prevents the
running of interest because of the operation of any stay
order. Indeed, the liability to pay interest is created by
the statute and the Sales Tax Officer has no discretion to
grant any exemption from the payment of interest.
Mr. Sen has pointed out that the amount of sales tax payable
by the appellant was reduced on appeal and the appellant is
entitled to a consequential relief on that account. This is
a matter which is outside the ambit of the question which
has been dealt with in the judgment under appeal. In case
the appellant is entitled to any relief on account of
reduction of the amount of sales tax in appeal, it would be
for him to agitate the matter in appropriate proceedings.
The appeal consequently fails and is dismissed with costs.
Appeal dismissed
31