HAJI LAL MOHD. BIRI WORKS ALLAHABAD TIIROUGH v. HE STATE OF U.P & Ors.

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 \Vas stayed. The stay order \\'as vacat ed on 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 ass~ssment years. ln the certificate it V..'cts mentioned that 8% interest per annum un the arrears of tax \Yas also to be recovered as arrears of land rev~nue in term-; of the provisions of section 8( 1-A) of the U.P. Sales Tax Act, 194b. as amen.Jed by Act 3 of 1964. appellant ch~llengcd the res;overy of interest n1ainly on the ground th~1t th!re was no assessment order in regard to the int'.:rest and no notice of dem~lrj had been issued. The High Court dismissed the petition. Appeal in this Court \Vas filed with certificate. Dismissing the appeal, In a writ petition under article 226 of the ConstitutiiJn HELD: (i) The provision in sub-section (1-A.) of section 8 according: which inteu·<;t 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 recoverr. The object apparently was that the amount of interest should be recovered i'1 same manner as the amount of sales-t;Lx. The amount of sales-tax nnd other dues under sub-section (8) of section 8 can be recoY~red as arrears cf land revenue. It was v,1ith a view to put the matter beyond any pale of cont~eoversy and to obviate any obiection that the in;.erest on sales-t<1X cannot be r~covered as land revenue that sub-section (1-A) pco\ided th:.i.t the interest shall Ce added to the amount of tax and b~ deemed for ;JI purposes to be a part of the tJX. It to arrive at the figure of interest. is a matter. of mere arithmetical calculation There is nothing in any of the rirovision" of the Act as may \Varrant m:::kiag 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 terest before sending the recovery certificates to the Collector. [2SG-29C) (ii) The argument that the sales-tax officer should specify the an1ount of ir terest in the recovery certificate could not be accented. As the amouat of interest \Vould go on increasing every day till the rec-overy of the sales-t3-K it is plainly not possible to specify the exact amount of interest in the reco\·,;ry cer tificate. [29D] (iii) According to clause (b) of sub-section (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 comrrience ment of the Constitution it shall come into operation on the date on· \\"hich the assent thereto of the Governor or the President as the case may require i;; first published in the official gazette. In the present case the President's assent to U.P. Act 3 of 1964 was DUblished in the official Gazette on Febrnary I, 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] H' (iv) There is nothing in the language of section 8( I-A) of the Act which prevents the running of interest because of the 09eration of any stay order. is created by the statute and the Sa!es-tax Indeed the liability to pay interest Officer has no discretion to grant any exempti'Jn the paym ?nt of interest. [JOA] 26 SUPREME COURT REPORTS ( 1974 j 1 S.C.R. CIVIL APPELLATE JURISDICTION : C.A. 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 0. P. Rana for the respondents. The Judgment of the Court was delivered by KHANNA, /.-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 mterest 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 !Wis. The appellant was assessed to tax under tfie (U.P. Sales Tax Act, 1948 (U.P. Act No. 15 of 1948) (hereinafter referred to as the A~t) for the assessment years 1957-58 and 1958-59 as per assessment order> dated June 10, 1959 and February 12, 1963 respectively. On an application sent by the appellant to the Minister of Finailce, U. P. Government requesting for compounding of tax, an order was issued on 1'foy 6, 1959 staying the recovery of tax due from the appellant. The stay order was vacated by order dated September 2~, 1967. On Octooor 9, 1967 the Sales Tax Officer sent a recovery certificate to the Collector Allahabad for a sum of Rs. 1,65,684.43 for the recovery of arrears of sales tax for the year 1957-58. The recovery certificate also mentioned .that interest at the rate of 18 per cent per annum calcu~ated on the amount of tax with effect from February 1, 1964 till the date of final payment should also be recovered as arrears of Ian~ revenue in terms of the provisions of section 8 0-A) of the Act. On October 25, 1967 another recovery certificate for reco~ring a sum of Rs. 26,238.08 in respect of the year 1958-59 on account o( arrears of sJ]es tax was sent by the Sales Tax Officer to the Collector It was mentioned in the certificate that the aforesaid Allahabad. amcunt 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 revenue in terms of the provisions of section 8 (I-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 appel amounting to contested its liability to pay interest lant, however, 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 conse quemly filed b_v the appellant in the High Court challenging 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 m2l:hg an assessment order and without issuing a notice of demand A B c D E F G H A c D F G H HAJI LAL v. U.P. STATE (Khanna, J.) 27 the Sales Tax Officer had no jurisdiction to initiate proceedings toc the recovery of interest. Reliance in this connection was placed un behalf of the appellant upon an earlier Division Bench decision in the case of Beni Ram Mool Chand v. The Sales Tax Officer( I) wherein the Division Bench had held that issuance of a notice of demand was a condition precedent to the recovecy of penal interest. As the cor rectness 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 cne, as already mentioned, answered the question in the negative and against the app~llant. Before dealing with the contentions advance<l in this Court, we mJy iefer to the relevant provision .of the Act. Section 3 of the·., Act creates liability to sales tax. Under this section every dealer is. liable tc pay tax on the turnover which shall be determined in such manner as may be prescribed. Section 7 provides for determim!tion 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 anv. and within such time, not being Jess 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 accoroance with sub-section ( 8). ( 1-A) If the tax payable uuuer sub-section (1) remains unpaid for six months after the expiry of the tijlle specified in the notice of assessment and demand, or the commence ment of the Uttar Pradesh Bikri-Kar (Dwitiya Sanshodhan) later, then without pre Adhiniyam, 1963, whichever, is judice 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 !he 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 ,eference, or of any other order of a competent court or authority, the amount of tax is varied, the interest shall be recalculated accordingly : Provid~d 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, 28 SUPREME COURT REPORTS [ l974] 1 S.~.R. \8) Any tax or other dues payable to the State Govern ment 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 recover able as arrears of land revenue." It may be mentioned that sub-section ( 1-A) of section 8 (Second reproduced above was added by U.P. Sales Tax Amendment) Act, 1963 (U.P. Act 3 of 1964). The ab~ve provision was ~pparently added with a view to. tighten up the machinery (or collection of sales tax and as a deterrent m~asll\"e so that the dealers may not evade or delay the pay ment of tax, U.P. Act 3 of J 964 also added section 33 tJ the Act. The material part of section 33 reads as under : "ln 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 Jiab!e, 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 arJ111ed that it was essential !or the Sales Tax Officer to make an assessment order in resn.:ot oi the interest before he could issue recovery certrncate against the' c,;mel lant. In any case, according to Mr. Sen, recovery certificate in respect of the interest could not he issued till such time a notice of de::iand in respect of the interest had been issued by the Sales Tax Officer to the appellant-firm. These contentions, in our opinion, are not vveH 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 re<pect 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 tlre Act which re quires 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 recoverv certificate to the Collector. Reference has been made by Mr. Sen.to sub-section {I-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 provisica. 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 )!mount of s1les tax and other dues under sub-section ( 8) of sectiOn 8 can be recovernd ·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 (J-A) provided that the interest shall be added to the amo:mt d tax and be deemed for all purposes to be a part of the tax. A B c D E F .G H HAJI LAL v. U.P. STATE (Khanna, I.) 29 A c D E F G H 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 '!fe 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 arreors 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 whic'1 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 coumed are all known. It is, therefore, a matter of more arithmetical calc:>;Jtion to arrive at the figure of interest. We find nothing in any of !he provisions of the Act as may warrant making of another assess ment order by the Sales Tax Officer regarding the amount of interest or moking it obligatory for him to issue a demand notice in respect of i;: e 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 cer tific;ite. As the amount of interest w-O"ll)d -go on increasing every day ti!! the recovery of the sales tax, it is plainly not possible to specify the e·;act amount of interest in the recovery certificate. The exact amcc::1t of interest can only be known on the day the arrears of snlec ::1x me paid. No elaborate procedure is required for determining the ~~10unt of interest because, as mentioned earlier, it is a matter of sim'O'e arithmetical calculation. !'Jere 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 publishe.d in the official Gazette on February 1, 1964. It was submitted on behalf of the appel Jont 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 reswndents 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. J\!anchanda in this respect is correct because according to clause lh' ~i sub-section (1) of section 5 of the U.P. General Clauses Act, 190A 1U.P. Act No. 1 of 1904) where any Uttar Pradesh Act is not exnre,sed to come into force on a particular day, then in the case of ac Uttar Pradesh Act made after the commencement of the Cons titution, it shall come into operation on the day on which the assent thereto of the Governor or the President, as the case may require, is It may also be mentioned that first published in the official Gazette. in para 33 of the writ petition filed in the High Court the appellant too '1ad 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 arre.~rs of sales tax could not be realised for the period during which 30 SUPllEM~ COURT kEPOkTS [ 1'/74] 1 S.C,k. ·the recovery of sales tax was stayed. We find it !liflicult to accede to this contention because there is nothing in the language of section 8(1-A) of the Act which prevents the interest because of the operation of any stay order. liability to pay interest is created by the statute and the Sales Tax Officer has no dis cretion to grant any exemption from the payment of interest. runnjng of Indeed, the 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. A 8 c G.C. Appeal dismissei.