Om Prakash, J.
1. In this writ petition filed by the assessee, referred to as the petitioner hereinafter, a prayer has been made that the orders dated 28th April, 1980 relating to the assessment years 1964-65 and 1965-66 (annexures 11 and 12 respectively) for charging interest for non-payment of tax be quashed.
2. The facts, as briefly stated, are that the petitioner returned turnover of the chains and straps meant for watches and admitted tax liability thereon @ 2 per cent, applicable to unclassified items. The Sales Tax Officer, however, treated the sales of chains and straps as the sales of accessories, and therefore, levied a tax @ 10 per cent on their turnover. The demand was accordingly raised by the Sales Tax Officer. The petitioner, then had deposited the entire excess amount of sales tax amounting to Rs. 8,027.84 for the assessment year 1965-66 and half of the excess amount for the assessment year 1964-65 and obtained a stay order for the remaining half amount. The petitioner then appealed to the Assistant Commissioner (Judicial), who by the orders dated 19th June, 1972 and 1st November, 1971 allowed the appeals for the assessment years 1964-65 and 1965-66 respectively. It was held by him that the chains and straps of watches were unclassified items and not the accessories. Accordingly, he modified the assessment orders holding that on the turnover of the chains and straps, tax was payable @ 2 per cent only and not @ 10 per cent. The Assistant Commissioner (Judicial) directed the assessing officer that the amount deposited in excess of the amount of tax due, would be refunded to the petitioner. Aggrieved by the order of the appellate authority, the Commissioner of Sales Tax filed a revision under Section 10 of the Sales Tax Act, 1948 (for short the Act, 1948) before the Additional, Judge (Revisions), Sales Tax, who affirmed the order of the Assistant Commissioner (Judicial). Thus the revisions of the Revenue for both the years were dismissed. The orders of the revisional authority for the assessment years 1965-66 and 1964-65 are annexures V and VI respectively. Then the Commissioner of Sales Tax filed application under Section 11(1) of the Act, 1948 before the revisional authority, for referring question of law to this Court. The question sought to be referred in both the applications was as follows :
Whether straps and chains of watches were taxable as accessories thereof and liable to tax at the rate of 10 per cent under the notification relevant for the year in question
3. This Court answered the aforementioned question in affirmative by the order dated 16th May, 1979 (annexure 7). Then the revisional authority passed an order under Section 11(8) conforming to the order of this Court. The result of the order was that liability for excess tax was determined, as this Court took the view that sales of the chains and straps being sales of accessories, were liable to tax @ 10 per cent. Thereupon, the petitioner deposited the entire amount of Rs. 8,027.84 for the assessment year 1965-66. This amount had been deposited earlier also by the petitioner, but then after the order of the Assistant Commissioner (Judicial), it was refunded and was adjusted towards the demand due for the assessment year 1964-65. The Sales Tax Officer issued notices for the two years on 1st March, 1980 on recomputation of the demand, conforming to the orders passed under Section 11(8) and thereby the petitioner was required to pay a sum of Rs. 2,967.36 for the assessment year 1964-65 and Rs. 8,027.84 for the assessment year 1965-66 plus interest. It is this demand of interest that has been challenged by the petitioner in this writ. When the petitioner was called upon to pay interest, it made an application on 17th April, 1980 to the Sales Tax Officer that after the order of the Assistant Commissioner (Judicial), there was no liability of any tax, and therefore no default was committed by the petitioner with regard to the payment of tax. It was, therefore, contended that no interest, which is payable for non-payment of tax, could be demanded from the petitioner. The said application was rejected by the Sales Tax Officer by the order dated 28th April, 1980. Identical orders were passed for both the years on the applications of the petitioner, which are annexures 11 and 12 for the assessment years 1964-65 and 1965-66 respectively. The view taken by the Sales Tax Officer was that as a result of the order of the High Court, passed on reference of the Revenue, the order of the assessing officer stood revived, and therefore, there was a default on the part of the petitioner in the payment of taxes. The orders dated 28th April, 1980 are said to be illegal by the petitioner, inasmuch as the Sales Tax Officer demanded interest, when according to the petitioner, there was no default on its part in respect of the payment of taxes.
4. So, the question for consideration in this writ petition is whether the demand of interest is illegal. In the counter-affidavit, the Revenue stated that after the order of the High Court, the orders of the assessing authority stood revived and the petitioner having not paid the taxes as per the orders of the assessing authority, there was a default on the part of the petitioner, and therefore, interest became payable, therefrom. The short contention of the petitioner is that there was no default on its part, as the demand notices issued by the assessing authority soon after the orders were passed and the demand notices issued pursuant to the orders passed under Section 11(8) were fully complied with. There being no non-compliance of the demand notices, the petitioner contended that the demand of interest was illegal.
5. To understand the scheme of the Act regarding recovery of interest, complete understanding of Section 8 of the Sales Tax Act, 1948 for short the Act, 1948 is necessary. Sub-section (1) of Section 8 enjoins upon the assessee to deposit the admitted tax. Tax admittedly payable means the tax which is payable on the turnover of sales and/or purchases, as disclosed in the accounts of the assessee within the meaning of explanation to Sub-section (1) of Section 8. So, Section 8, Sub-section (1), relates to the pre-assessment stage. Then comes the stage of the assessment. Sub-section (1-A) of Section 8 provides that the tax assessed shall be deposited in the manner specified within 30 days of the service of the notice of assessment and demand. Then Sub-section (1-B) of Section 8 says if the tax assessed, reassessed or enhanced by any authority remains unpaid for 3 months after the expiry of the period specified in the notice of demand, simple interest on the unpaid amount calculated from the date of such expiry, shall become due and be payable as specified in the Act. It is this subsection which raises a liability of payment of interest in the circumstances stated therein. So, the controversy arising out of this petition centres round the interpretation of the expression 'unpaid amount', occurring in Sub-section (1-B) of Section 8. The question is what is the true and correct import of the words 'unpaid amount'. The submission of Sri Bharatji, learned Counsel for the petitioner, is that there was no unpaid tax on the part of the petitioner within the meaning of Sub-section (1-B) inasmuch as the demand notices issued twice--one soon after making assessment and the other after the order under Section 11(8) was passed by the revisional authority, were fully complied with by the petitioner. The question for consideration is whether on the facts and circumstances of this case, it can be said that there remained any unpaid amount. Admittedly, the demand notices were issued twice after making the assessment and after the order under Section 11(8) was passed by the revisional authority, conforming to the order of the High Court given on reference. Both the demand notices were duly complied with by the petitioner. What the Revenue contended is that the tax paid by the petitioner in compliance with the notice of assessment and demand, was refunded to it after the direction was given by the Assistant Commissioner (Judicial). Admittedly, the latter accepted the plea of the petitioner and held that sale of chains and straps were not the sale of accessories and therefore, the assessee was liable to pay tax only @ 2 per cent and not @ 10 per cent. He, therefore, directed the assessing officer to refund the excess amount of tax paid by the petitioner. The refund was accordingly made. The same situation continued up to the stage of the revisional authority. When the matter came up to this Court on reference, then the orders of the revisional authority and the Assistant Commissioner (Judicial) were reversed and the orders of the assessing officer were restored. Then the revisional authority passed an order conforming to the order of the High Court under Section 11(8) and then the demand was again raised for the difference of 2 per cent, tax already paid by the petitioner and 10 per cent, payable by the petitioner under the order of the High Court. This demand notice was also complied with by the petitioner without delay. The question for consideration, therefore, is whether the difference of tax having already been paid by the petitioner pursuant to the notice of assessment and demand and that having been refunded to the petitioner pursuant to the direction of the Assistant Commissioner (Judicial), who accepted the plea of the petitioner that the tax was payable only @ 2 per cent, can lead to a conclusion that there was unpaid amount on the part of the petitioner within the meaning of Sub-section (1-B). I find substance in the submission of Sri Bharatji that on these facts, there was no unpaid amount and that there would have been unpaid amount only when the petitioner failed to comply with the notices of demand. When the demand notices were fully complied with and when the refund was made as per the direction of the higher authority, the petitioner could not be blamed for not having paid the tax in full. The position would have been different, had the petitioner not complied with the demand notices. No doubt, the order of the assessing officer taxing the petitioner @ 10 per cent stood revived by the order of the High Court passed on reference, but the effect of the High Court's order will not be the one that any tax remained unpaid on the part of the petitioner. If the tax demanded as per the assessment order or the order of any higher authority is not paid by any assessee, then only the question of unpaid amount will arise. In this case, there were no laches on the part of the petitioner and no demand was withheld by the petitioner on its own. Rather, the petitioner paid the tax as and when demanded. Interest can be charged from an assessee only when the tax demanded is withheld by him and he unlawfully uses the money, which if paid would have been used by the Government, to whom the amount was due. Interest is charged from an assessee because he withholds the amount in defiance Of law and is benefited by the use of the same. Interest is a sort of compensation, which is paid to the other party. The amount due to the other party is retained and used and therefore, the retainer becomes liable to compensate the other party, because the latter was deprived of the legitimate use of the amount. In the instant case, the Government was not deprived of the amount of tax by any action of the petitioner, but the money was refunded to the petitioner by the governmental authority itself, meaning thereby by the Assistant Commissioner (Judicial). On these facts there is no question of compensating the Government by paying interest.
6. I am, therefore, of the considered view that no interest is payable by the petitioner within the meaning of Sub-section (1-B) of Section 8 in this case. A decision of this Court in the case of Annapurna Biscuit Co. v. State 1980 UPTC 1320 decided along with other cases fully supports my view. In this authority also, the question of interpretation of Section 8 of the Act, 1948 was involved. The question was whether interest could be charged from the assessee who paid the tax as per the legal position and the interpretation prevailing at the time of filing return, but not as per the interpretation or the retrospective legislation that emerges subsequently. The view taken by this Court was that if the tax was paid by the assessee as per the legal position obtaining at the time of filing return, the assessee could not be blamed for not having deposited admitted tax, because of the subsequent developments when either the different interpretation of the provisions of the Act was made or the legal provision that was in force at the time of filing of return was subsequently amended. This Court in the said authority observed :
In such cases it is the bonafide of the assessee which shall have to be examined. So long as the calculation is honest and fair the dealer shall not incur any liability to pay interest.
7. So, interest is not chargeable from the assessee in all the cases when the amount of tax remained with the assessee and not with the Department. The facts and circumstances of each case shall have to be examined to come to the conclusion whether the Department was deprived of the use of the amount due from the assessee on account of the default of the assessee or due to the action of the Department itself. In the case of the former, the interest will be charged but not in the case of the latter.
8. For the reasons, the writ petition is allowed and the orders dated 28th April, 1980 passed for the assessment year 1964-65 and 1965-66 by respondent No. 2, which are annexures 11 and 12 respectively, are quashed. The parties will bear their own costs.