R.L. Gulati, J.
1. This is a petition under Article 226 of the Constitution.
2. By this petition the petitioners have challenged the proceedings for the recovery of penal interest on arrears of sales tax due from them.
3. In respect of the assessment year 1955-56, the petitioners were assessed to sales tax under the U. P. Sales Tax Act in the sum of Rs. 39,753.42. As the petitioners had already deposited a sum of Rs. 30,491.05 along with the quarterly return a notice of demand for the balance of Rs. 9,262.37 was served upon them. The petitioners filed an appeal against the assessment order and also approached the Commissioner of Sales Tax for the stay of the tax demanded from them.
4. It appears from the counter-affidavit of Sri H. D. Gupta that on 15th September, 1960, the Commissioner passed an order staying the realisation of tax till the decision of the petitioners' appeal. Later, on 29th November, 1960, another order was passed by the Commissioner granting stay 'till further orders'. The petitioners' appeal was dismissed on 25th July, 1962. The petitioners then filed a revision petition which was also disposed of on 17th October, 1964. However, no order vacating the stay order was passed by the Commissioner until August, 1967. On 21st January, 1969, the Sales Tax Officer issued a recovery certificate for the realisation of the arrears of tax amounting to Rs. 6,262.36. In the aforesaid recovery certificate it was further mentioned that in case the aforesaid amount was not fully recovered by 1st August, 1964, interest at the rate of 18 per cent, per annum on the amount then remaining due may be charged with effect from 1st February, 1964. In pursuance of this certificate, the Collector, Kanpur, the second respondent, realised from the petitioners the arrears of tax amounting to Rs. 6,262.36 on 30th August, 1969. He also realised penal interest amounting to Rs. 2,300 from the two partners of the petitioner-firm. A further sum of Rs. 720 was also realised towards penal interest by way of adjustment of refund due to the petitioners for the assessment years 1954-55 and 1955-56. A further sum of Rs. 3,993.31 is still being claimed from the petitioners on account of penal interest and the second respondent has issued a warrant of arrest against Ram Chandra, a partner of the petitioner-firm.
5. The petitioners' contention is that they were not defaulters during the period the Commissioner's order of stay remained in operation and no penal interest could be charged in respect of that period.
6. Now, penal interest is payable under Clause (1-A) of Section 8 of the U. P. Sales Tax Act at the rate of 18 per cent, on the sales tax arrears with effect from 1st February, 1964. A persual of Clause (1-A) of Section 8 shows very clearly that penal interest at the rate of 18 per cent, is chargeable from a defaulter, if the tax mentioned in the notice of demand issued under Sub-section (1) of Section 8 remains unpaid for six months after the expiry of time specified in the notice of demand. If an assessee is not a defaulter, no penal interest can be charged from him.
7. Under Sub-section (4) of Section 8, the assessing authority may, at any time or from time to time, amend or revoke any notice of demand or extend the time for making the payment in pursuance of the notice. The Sales Tax Officer is an assessing authority. Thus, if the Sales Tax Officer extends the time for payment the assessee cannot be said to be in default for purposes of levy of penal interest until the expiry of six months from the extended time. Under Rule 80 of the U. P. Sales Tax Rules, the Commissioner of Sales Tax exercises all the powers of a Sales Tax Officer. It follows, therefore, that the Commissioner of Sales Tax may also, under Sub-section (4) of Section 8, extend the time for making the payment of tax. There is no other provision authorising the Commissioner to stay the recovery of tax. The Commissioner may extend the time to a particular date or until the decision of an appeal or revision or until further orders. In the instant case, the Commissioner first extended the time until the disposal of the appeal. But later on, he superseded that order and passed a fresh order staying the recovery of tax until further orders. The petitioners, therefore, could not be said to be in default during the period that the Commissioner's order remained operative. As stated earlier, the Commissioner revoked the order of stay in August, 1967. Thus, the petitioners could not be said to be in default until that date. The penal interest could be charged if the demand remained unpaid for six months after the Commissioner had withdrawn the order of stay.
8. It is contended on behalf of the respondents that the order of the Commissioner shall be deemed to have come to an end automatically after the petitioners' appeal had been decided or, at any rate, after their revision had been disposed of. This contention is not correct. If the Commissioner passes an order of stay during the pendency of an appeal or revision, such an order would certainly come to an end on the decision of the appeal or the revision. But the Commissioner under Section 8(4) may extend the time for payment of sales tax, even if no appeal or revision is pending. The order passed in the instant case by the Commissioner was to remain in force until further orders. It is thus clear that the stay order passed by the Commissioner on 29th November, 1960, remained in operation until it was revoked by the Commissioner in August, 1967. During the intervening period the petitioners were not defaulters and were not liable to pay penal interest.
9. The petition succeeds and is allowed to the extent that the respondents are restrained from realising penal interest from the petitioners in respect of the period during which the stay order of the Commissioner, Sales Tax, U.P., Lucknow, remained in operation. There will be no order as to costs.