PETITIONER:
SALES TAX OFFICER, SECTOR I KANPUR & ANR.
Vs.
RESPONDENT:
M/S. DWARIKA PRASAD SHEO KARAN DASS
DATE OF JUDGMENT19/11/1976
BENCH:
KHANNA, HANS RAJ
KRISHNAIYER, V.R.
CITATION:
1977 AIR 533 1977 SCR (2) 133
1977 SCC (1) 22
ACT
Uttar Pradesh Sales Tax Act, 1948--Sec. 8(9),
8(1A)--Demand notice for tax assessed--Subsequent reduction
in tax liability in appeal and revision.If fresh demand
notice necessary--Liability to pay interest on tax due.
HEADNOTE
The respondent firm was assessed to sales tax under the
Uttar Pradesh Sales Tax Act 1948 for the assessment year
1958-59. On an appeal filed by the respondent the quantum
of tax was reduced. On a revision filed by the respondent
made various payments towards the amount of tax found due
from time to time. ’the Revenue initiated proceedings for
recovering the balance of the tax and realising interest at
the rate of 18 per cent. The Revenue did not issue any
fresh notice of demand after the tax was reduced but origi-
nally demand notice for the entire sum for which the re-
spondent was assessed was issued.
In a Writ Petition filed by the assessee the High Court
quashed the recovery proceedings on the ground that a fresh
notice of demand should have been issued to the respondent
in respect of the amount as reduced in appeal and the revi-
sion.
Allowing the appeal by special leave,
HELD: (1) Section 8 of the Act was amended by adding
sub-section (9) thereto by U.P. Sales Tax Amendment Act (3
of 1971). The said sub-section provides that notwithstand-
ing any judgment, decree etc. where any notice of assessment
and demand in respect of any tax or other dues is served
upon a dealer by an Assessing Authority and where as a
result of appeal or revision filed by the assessee the
amount of tax is reduced it shall not be necessary for the
Assessing Authority to serve upon the dealer a fresh notice.
The High Court judgment was, therefore, erroneous. [135F, H,
136 A-E]
Firm Parshuram Rameshwar Lal v. State of U.P. 33, STC 540
approved.
(2) Section 8(1A) of the Act provides for payment of
interest at the rate of 18 per cent on the tax amount re-
maining due from the expiry of the time specified in the
notice of demand, till the. date of payment. The court in
Haji Lal Mohammad vs. State of U.P. has held that the li-
ability to pay the interest under section 8(IA) is automatic
and arises by operation of law and that it is not necessary
to mention the amount of interest in the recovery certifi-
cate.
[134 E-H, 135 A-E]
Haji Lal Mohd. Biri Works v. State of U.P., 32 STC 496
followed.
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2061/1971.
(From the Judgment and Order dated the 13th May, 1970 of
the Allahabad High Court in Civil Misc. Writ No. 1249 of
1970).
S.C. Manchanda and O.P. Rana, for the Appellant.
J. Ramamurthi, (amicus curiae) for Respondents.
The Judgment of the Court was delivered by
134
KHANNA, J. This appeal on certificate is against the
judgment of Allahabad High Court whereby the High Court
accepted petition under article 226 of the Constitution of
India filed by the respondent and quashed the recovery
proceedings initiated by the appellant.
The respondent-firm was assessed to sales tax under the
U.P. Sales Tax Act, 1948 (hereinafter referred to as the
Act) for the assessment year 1958-59. The respondent went
up in appeal and the tax demand was reduced in appeal.
On revision filed by the respondent the total demand of
sales tax was further reduced. The respondent made various
payments towards the amount of tax found due from him. The
sales tax authorities initiated proceedings for’ recovering’
the balance of the tax and realising interest at the rate of
18 per cent from February 1, 1964 on part of the tax demand.
These recovery proceedings were challenged by the respondent
by means of writ petition on the ground that a fresh notice
of demand should have been issued to him in respect of the
amount as reduced in appeal and revision. Unless that
was done, the respondent could not be treated as a default-
er. The liability for payment of interest of the respond-
ent was also questioned. The High Court accepted the first
contention and quashed the recovery proceedings.
We have heard Mr. Manchanda on behalf of the appel-
lant. No one appeared on behalf of the respondent. Mr.
Ramamurthi, however, argued the case amicus curiae. After
giving the matter our consideration, we are of the opinion
that the judgment under’ appeal cannot be sustained.
Two questions arise for determination in this appeal.
The first question is whether the respondent is liable to
pay interest on the amount due from him as sales tax. The
answer to this question, in our opinion, should be in the
affirmative in view of the provisions of sub-section (1A) of
section 8 of the Act. The aforesaid sub-section as also
sub-section (1) and (8) of that section 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
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 Bikri-Kar
(Dwitiya Sanshodhan) Adhiniyam, 1963,
whichever is later, then, without prejudice to
any other liability or penalty which the de-
faulter may, in consequence of such non-
payment, incur under this Act, simple interest
at the rate of eighteen per cent for annum
shall run on the amount then remain-
135
ing 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 ......
(8) Any tax or other dues payable to the
State Government under tiffs 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."
This Court considered the above provisions in the case of
Haji Lal Mohd. Biri WOrks v. State of U.P.(1) and held that
the liability to pay interest under section 8(1-A) is auto-
matic and arises by operation of law. It was further ob-
served in that case that .it is not necessary for the sales
tax officer to specify the amount of interest in the recov-
ery certificate. We may add that there is no dispute in
the present case that the notice of assessment and demand
was served upon the assessee-respondent. The respondent
cannot, therefore, escape liability for payment of interest.
The second question which arises for consideration is
whether it was necessary for the sales tax authorities to
issue a fresh notice of demand to the respondent after the
tax assessed by the sales tax officer was reduced on appeal
and further reduced on revision. So far as this question is
concerned, we find that sub-section (9) has been added in
section’8 of the Act by the U.P. Sales Tax (Amendment) Act
(3 of 1971). The aforesaid sub-section reads as under:
"(9) Notwithstanding anything contained in
sub-section (1) and (1-A) and notwithstanding
any judgment, decree or order of any court,
tribunal or other authority, where any notice
of assessment and demand in respect of any tax
or other dues under this Act is served upon a
dealer by an assessing authority and an
appeal, revision or other proceeding is filed
in respect of such tax or dues, then-
(a) where as a result of such appeal,
revision or proceeding the amount of such tax
or other dues is enhanced, the assessing
authority shall serve upon the dealer a fresh
notice only in respect of the amount by which
such tax or other dues are enhanced and any
proceeding in relation
(1) 32 S.T.C. 496.
136
to the amount specified in the notice already
served upon him before the disposal of such
appeal, revision or other proceeding may be
continued from the stage at which it stood
immediately before such disposal;
(b) where as a result of such appeal,
revision or other proceeding the amount of
such tax or other dues is reduced,--
(i) it shall not be necessary for the
assessing authority to serve upon the dealer a
fresh notice;
(ii) if any recovery proceedings are
pending, the assessing authority shall-give
intimation of the fact of such reduction to
the Collector who shall thereupon take steps
for the recovery of only the reduced amount.;
and
(iii) any proceedings initiated on the
basis of the notice or notices served upon
the dealer before the disposal of such appeal,
revision or other proceeding, including any
recovery proceedings may be continued in
relation to the amount so reduced from the
stage at which it stood immediately before
such disposal;
(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."
It is apparent from clause (b) of sub-section (9) that where
as a result of appeal, revision or other proceedings the
amount of the tax or other dues is reduced, it shall not be
necessary for the assessing authority to serve upon the
dealer a fresh notice. The Allahabad High Court has also
taken the same view in the case of Firm Parshuram Rameshwar
Lal v. State of U.P.(3)
In view of the above, we accept the appeal, set aside
the judgment of the High Court and dismiss the writ petition
filed by the respondent. The parties in the circumstances
shall bear their own costs throughout.
P.H.P. Appeal al-
lowed.
(1) 33 S.T.C. 540
137