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Karam Chand Thapar and Brothers(Coal Sales) Limited Vs. the Deputy Collector (Collections),sales Tax and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAllahabad High Court
Decided On
Case NumberCivil Miscellaneous Writ No. 344 of 1977
Judge
Reported in[1983]54STC37(All)
AppellantKaram Chand Thapar and Brothers(Coal Sales) Limited
RespondentThe Deputy Collector (Collections),sales Tax and ors.
Appellant AdvocateBharatji Agrawal, Adv.
Respondent AdvocateStanding Counsel
DispositionPetition dismissed
Cases ReferredKaram Chand Thapar and Brothers v. State of U.P.
Excerpt:
.....in respect of certain matters which were not clearly brought out in clause (c) as it originally stood. 15. for the foregoing reasons, we are clearly of the view that the running of interest in respect of that amount of tax for the assessment year 1968-69, the payment of which was stayed by an appellate order, did not stop on account of the stay order. the claim for interest on the outstanding amount which was not paid within the time prescribed by law from the date of service of the notice of demand, namely, 18th april, 1973, is legally well-founded. thus this petition in regard to the claim for interest for the assessment year 1968-69 has no merit and must fail. sales tax act as they stood in the year 1974 and has urged that the expression 'tax assessed' in sub-section (1) includes..........with the directions of the high court. it was not necessary for the assessing authority to serve a fresh notice on the petitioner in respect of interest. the petitioner was liable to pay interest.8. the plea that no interest could be claimed on any outstanding tax liability because there was no provision for payment of interest under the central sales tax act, is, in our view, not tenable. sub-section (2) of section 9 of the central sales tax act was amended by the central sales tax (amendment) act, 1976 (act no. 103 of 1976), with retrospective effect and charging of interest on the assessed tax in accordance with the provisions of the state law, was validated. this has been held by a division bench of this court in him lal jain & co. v. sales tax officer 1981 atj 416. we are in.....
Judgment:

R.B. Lal, J.

1. By this petition under Article 226 of the Constitution the petitioner has prayed for quashing the recovery proceedings for realisation of amount of interest for the assessment years 1968-69 and 1969-70.

2. The petitioner is a public limited company and has its branches registered under the U.P. as well as Central Sales Tax Acts, at Allahabad, Kanpur, Vara-nasi, Gorakhpur, Lucknow and Moradabad.

3. The Sales Tax Officer, Allahabad, assessed the petitioner for the assessment year 1968-69 under the Central Sales Tax Act and determined the tax at Rs. 1,58,902.83 by order dated 31st March, 1973. The assessment order and the notice of demand were served on the petitioner on 18th April, 1973. The petitioner preferred an appeal against the said order before the Assistant Commissioner (Judicial), Sales Tax, Allahabad Range. The petitioner deposited certain sums towards the assessed tax on 1st June, 1973 and 25th July, 1973. The outstanding balance of Rs. 1,05,000 was paid by the petitioner in December, 1976 and January, 1977.

4. In respect of the assessment year 1969-70 the Sales Tax Officer, Allahabad, passed an assessment order on 29th March, 1974, under Section 9 of the Central Sales Tax Act and determined the sales tax at Rs. 2,21,899.68. This tax was in respect of the six branches of the petitioner. The Commissioner of Sales Tax by his order dated 22nd December, 1972, had transferred the pending cases of the petitioner to the Sales Tax Officer, Allahabad and consequently, the Sales Tax Officer had made the assessment. The petitioner filed Writ Petition No. 2278 of 1974 and challenged the validity of the assessment order dated 29th March, 1974. This writ petition was allowed in part by this Court on 8th October, 1974 and the Sales Tax Officer was directed to modify the assessment order. In compliance with this order the Sales Tax Officer determined the total taxable turnover and the amount of tax by his order dated 1st September, 1976. He fixed the amount of tax at Rs. 1,50,831.61. A copy of this order was served on the petitioner in the first week of December, 1976.

5. The petitioner had deposited a sum of Rs. 1,12,949.84 by the end of May, 1974. The balance was deposited on 17th December, 1976, i. e., within one month of the service of the final order passed by the Sales Tax Officer.

6. The petitioner submitted that on 9th August, 1977, it was served with a notice issued by the Deputy Collector (Collections), Sales Tax, Allahabad, for realisation of Rs. 82,165.76 on account of interest for late payment of taxes. Rs. 63,620.40 as interest was demanded for the assessment year 1968-69 and Rs. 19,145.36 was demanded for the assessment year 1969-70. The petitioner has challenged the validity of this realisation. He has urged that there was no provision for payment of interest on any outstanding tax liability under the Central Sales Tax Act. Further, a notice of demand for the amount of interest was not issued. The petitioner has also urged that since the original assessment order dated 29th March, 1974, was modified by the Sales Tax Officer on 1st September, 1976, it shall be deemed to be a new demand and since the notice of the same was served in the first week of December, 1976, the payment of the balance within one month was within the time prescribed by law and there was no question of payment of any interest. For these reasons the petitioner has prayed for quashing the recovery proceedings.

7. The respondents have resisted the writ petition. It has been pointed out that the appeal filed in respect of the assessment year 1968-69 was dismissed on 17th November, 1976 and the order became final. The assessment order and the notice of demand in respect of the assessment year 1969-70 were served on the petitioner in the first week of April, 1974. The subsequent order dated 1st September, 1976, passed by the Sales Tax Officer, Allahabad, only modified the demand in accordance with the directions of the High Court. It was not necessary for the assessing authority to serve a fresh notice on the petitioner in respect of interest. The petitioner was liable to pay interest.

8. The plea that no interest could be claimed on any outstanding tax liability because there was no provision for payment of interest under the Central Sales Tax Act, is, in our view, not tenable. Sub-section (2) of Section 9 of the Central Sales Tax Act was amended by the Central Sales Tax (Amendment) Act, 1976 (Act No. 103 of 1976), with retrospective effect and charging of interest on the assessed tax in accordance with the provisions of the State law, was validated. This has been held by a Division Bench of this Court in Him Lal Jain & Co. v. Sales Tax Officer 1981 ATJ 416. We are in respectful agreement with this view. This plea of the petitioner is overruled.

9. First we take up the claim for interest in respect of the assessment year 1968-69. The facts are not in dispute. The petitioner had paid a portion of the tax assessed within the time prescribed by law. The recovery of the remaining amount appears to have been stayed by an order passed in the appeal which was preferred by the petitioner. After the dismissal of the appeal, the balance was paid in the months of December, 1976 and January, 1977.

10. A new Sub-section (2) was inserted in Section 8 of the U.P. Sales Tax Act by the U.P. Sales Tax (Amendment) Act, 1973. The sub-section was as under :

(2) Where realisation of any tax remained stayed by any order of any court or authority and such order of stay is subsequently vacated, the interest referred to in Sub-section (1-A) shall be payable also for any period during which such order remained in operation.

11. This sub-section was slightly amended by the U.P. Sales Tax (Amendment and Validation) Act, 1975, which came into force from 22nd August, 1975. However, the main import of this sub-section remained intact. This sub-section makes it clear that interest shall be payable also for the period during which the stay order has remained in operation.

12. Sub-section (9) was added to Section 8 of the U.P. Sales Tax Act with effect from 1st October, 1970. Clause (c) of this sub-section ran thus at that time :

(c) no fresh notice shall be necessary in any case where the amount of the tax or other dues is not varied as a result of such appeal, revision or other proceeding.

13. It appears that Clause (c) underwent modification by amendment in the year 1979 (sic), but we are not concerned with that amendment here. However, this much may be observed that that amendment only clarified the intention of the legislature in respect of certain matters which were not clearly brought out in Clause (c) as it originally stood. In view of Clause (c) it was not necessary for the assessing authority to issue a fresh notice of demand to the petitioner after dismissal of the appeal.

14. The learned counsel for the respondents has referred to the Supreme Court decision in Haji Lal Mohammed Biri Works v. State of U.P. 1973 UPTC 690 (SC). This judgment was delivered by their Lordships of the Supreme Court on 23rd April, 1973. Without referring to Sub-section (2) of Section 8 of the U.P. Sales Tax Act, which had come into force with effect from 1st March, 1973, their Lordships on a consideration of the provisions of Section 8(1-A) held that the operation of any stay order did not have the effect of preventing the running of interest. The liability to pay interest was created by the statute. This position is now reinforced by the provisions of Sub-section (2) which we have discussed above.

15. For the foregoing reasons, we are clearly of the view that the running of interest in respect of that amount of tax for the assessment year 1968-69, the payment of which was stayed by an appellate order, did not stop on account of the stay order. The assessing authority was not under an obligation to issue a fresh notice of demand after the dismissal of the appeal by the appellate authority. The claim for interest on the outstanding amount which was not paid within the time prescribed by law from the date of service of the notice of demand, namely, 18th April, 1973, is legally well-founded. The learned counsel for the petitioner has not challenged the correctness of the amount of interest. Thus this petition in regard to the claim for interest for the assessment year 1968-69 has no merit and must fail.

16. Now, we turn to the claim for interest for the assessment year 1969-70.

17. The learned counsel for the petitioner has referred to a Division Bench decision of this Court reported as Hukam Chand v. State of U.P. 1974 UPTC 317 (printed at page 43 infra.) He has urged that in that case also there was a reduction in the amount of the tax assessed. The Sales Tax Officer had claimed penal interest notwithstanding the fact that the amount was paid within 30 days from the date of the service of the rectification order. The demand for interest was quashed by the High Court. This decision is distinguishable. The Sales Tax Officer had determined the tax at a certain amount, but later on, by an order of rectification, he reduced that amount. In the rectification order, 30 days' time was specifically granted for payment of the outstanding amount from the date of its service. The assessee deposited the amount within that period. In these circumstances, the Bench held that penal interest would not run up to the date of expiry of thirty days allowed by the rectification order. In the instant case, the Sales Tax Officer did not grant any time in his order dated 1st September, 1976, for payment of the outstanding amount by the petitioner. The effect of the provisions of Sub-section (9) of Section 8 of the U.P. Sales Tax Act was not considered by the Bench because that point does not seem to have been canvassed before it. The decision turned on the effect of the time which was specifically granted in the rectification order for payment of the outstanding amount. For these reasons, Hukam Chand's case 1974 UPTC 317 (printed at page 43 infra) cannot help the petitioner.

18. The learned counsel for the petitioner has referred to the provisions of Sub-section (1) and Sub-section (1-A) of Section 8 of the U.P. Sales Tax Act as they stood in the year 1974 and has urged that the expression 'tax assessed' in Sub-section (1) includes tax assessed by the appellate or the revising authority as well. The order of the assessing authority merges in the order of the appellate authority or the order of the revising authority. Whenever there is a variation in the amount of tax as a result of appeal or revision, it becomes necessary to serve a fresh notice of demand on the assessee. For this proposition the learned counsel has placed reliance on the decision in Firm Parskuram Rameshwar Lal v. State of U.P. [1974] 33 STC 540; 1974 UPTC 65. This submission of the learned counsel is not well-founded. No doubt at one place the learned Judges who decided Parshuram's case 1974 UPTC 65 observed that whenever there is variation in the amount of tax as a result of appeal or revision, it becomes necessary to serve a fresh notice of demand on the assessee, but at another place they observed that the position has been modified to some extent by Sub-section (9) of Section 8 of the Act which was introduced by U.P. Act No. 3 of 1971. As a result of the addition, it is no longer necessary for the department to issue a fresh notice of demand where the tax assessed by the Sales Tax Officer is not varied in appeal or revision, or where it is reduced. The learned Judges held the case before them as one of enhancement and therefore took the view that a fresh notice of demand was necessary. The instant case is admittedly one where the tax assessed was reduced in pursuance of the order of this Court passed in writ jurisdiction. Thus, even according to the view taken in Parshuram's case 1974 UPTC 65, it was no longer necessary to issue a fresh notice of demand in the instant case. The decision relied upon by the learned counsel cannot help him.

19. The learned counsel for the petitioner has next urged that in Writ Petition No. 2278 of 1974 this Court had quashed a part of the assessment order. That the assessment order was a composite order in respect of the turnover relating to six branches of the petitioner. After a part of this assessment order relating to Moradabad branch was quashed, it had become necessary for the assessing authority to pass a fresh assessment order and to issue a fresh notice of demand.

20. The decision in the aforesaid writ petition has been reported as Karam Chand Thapar and Brothers v. State of U.P. 1975 UPTC 22. The operative portion of this decision reads thus :

In the result, the writ petition succeeds in part. The assessment order in so far as it includes the turnover of company's branch at Moradabad for the year 1969-70, is illegal and quashed. The Sales Tax Officer, Allahabad, is directed to modify the assessment order dated 29th March, 1974 and the demands following the same in accordance with law. In view of the divided success, the parties shall bear their own costs.

21. The assessment order dated 29th March, 1974, was not quashed as a whole. That order, in so far as it included the turnover of the Moradabad branch, was quashed. The notice of demand was not quashed. It was directed that the assessment order and the demand following the same be modified in accordance with law. The assessment order had taken into consideration the turnover of the six branches of the petitioner including the Moradabad branch. The assessment order relating to the turnover of the Moradabad branch was distinct and severable and therefore the quashing of the assessment order to that extent would not amount to quashing the assessment order relating to the remaining five branches. The effect of quashing a part of the assessment order was that the turnover of the Moradabad branch and the tax assessed thereon were to be excluded and the amount of the remaining tax was to be stated. There was no reopening or redetermination of the turnover of the remaining five branches and the amount of tax payable thereon. The order directed that the demand following the assessment order dated 29th March, 1974, be modified in accordance with law. The words 'in accordance with law' are significant and should be read in the light of Sub-section (9) of Section 8. Clause (b) of this sub-section provides that in the case of reduction no fresh notice need be served on the assessee, but only the reduced amount shall be realised. On the facts of this case it cannot be said that the quashing of a part of the assessment order had the effect of quashing the entire order. The assessment order relating to the turnover of the remaining five branches survived and remained intact. By his order dated 1st September, 1976, the Sales Tax Officer excluded the turnover relating to the Moradabad branch and indicated what was the remaining amount of turnover and the tax due on that amount. The notice of demand issued after the assessment order dated 29th March, 1974, remained in force despite this Court's order dated 8th October, 1974, in the writ petition. It was not necessary for the Sales Tax Officer to issue a fresh notice of demand when he had passed the order dated 1st September, 1976. For these reasons we are unable to accept the submission of the learned counsel for the petitioner and repel the same.

22. In the instant case the order dated 1st September, 1975, cannot be treated as a fresh assessment order and therefore it was not necessary to issue a fresh notice of demand. There was a reduction in the amount of tax by the order dated 1st September, 1976 and the case squarely fell within the ambit of Clause (b) of Sub-section (9) of Section 8.

23. The claim for interest for the assessment year 1969-70 has not been assailed on any other ground. We, therefore, hold that the demand of interest for the assessment year 1969-70 is legally well-founded and there is no reason to interfere with it.

24. In the result, this writ petition has no merit and is accordingly dismissed with costs. The stay order, if any, is discharged.


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