Automatic statutory interest on unpaid sales tax need not be separately assessed or demanded, and it keeps accruing during a stay.

Statutory interest under section 8(1-A) of the U.P. Sales Tax Act, 1948 was treated as an automatic liability once tax remained unpaid beyond the prescribed period, so recovery could proceed without a separate assessment order or notice of demand. The Court also stated that a stay of recovery did not suspend the running of interest, because the statute contained no exemption for the stay period and the assessing authority had no discretion to waive it. For the amendment enacted by U.P. Act No. 3 of 1964, commencement was fixed at the date of Gazette publication, 1 February 1964, under the General Clauses Act. The result was that the assessee failed on all issues.

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Issues: (i) Whether recovery of interest under section 8(1-A) of the U.P. Sales Tax Act, 1948 required a separate assessment order and notice of demand; (ii) whether interest on arrears of sales tax ceased to run during the period of stay of recovery; (iii) when U.P. Act No. 3 of 1964 came into force for purposes of section 8(1-A).

Issue (i): Whether recovery of interest under section 8(1-A) of the U.P. Sales Tax Act, 1948 required a separate assessment order and notice of demand.

Analysis: The liability to pay interest under section 8(1-A) arose automatically by operation of law once the tax remained unpaid beyond the prescribed period. The deeming fiction that interest shall be added to tax and be part of the tax was enacted to facilitate recovery in the same manner as tax. The Act contained no requirement for a separate assessment of interest or for a separate notice of demand before forwarding a recovery certificate. The amount of interest was capable of being worked out by simple arithmetical calculation when payment was made, even though the exact figure could not be fixed earlier because it increased day by day.

Conclusion: No separate assessment order or notice of demand was necessary for recovery of interest; the point was decided against the assessee.

Issue (ii): Whether interest on arrears of sales tax ceased to run during the period of stay of recovery.

Analysis: Section 8(1-A) contained no language excluding the running of interest during a stay period. The liability was created by statute, and the assessing authority had no discretion to grant exemption from interest merely because recovery was stayed.

Conclusion: Interest continued to run notwithstanding the stay order; this issue was decided against the assessee.

Issue (iii): When U.P. Act No. 3 of 1964 came into force for purposes of section 8(1-A).

Analysis: Under section 5(1)(b) of the U.P. General Clauses Act, 1904, where a Uttar Pradesh Act was not expressed to come into force on a particular day, it came into operation on the day its assent was first published in the official Gazette. Since the amendment Act was published in the Gazette on 1 February 1964, that was its commencement date.

Conclusion: U.P. Act No. 3 of 1964 came into force on 1 February 1964; this issue was decided against the assessee.

Final Conclusion: The statutory interest on unpaid sales tax was recoverable without a separate assessment or demand notice, continued to accrue despite the stay order, and the amending Act commenced on its Gazette publication date; the appeal failed in substance.

Ratio Decidendi: Where a taxing statute creates an automatic liability to interest and provides for recovery of tax and dues as arrears of land revenue, the interest may be recovered on the basis of the statutory computation without a separate assessment or demand notice, and its accrual is not suspended merely because recovery is stayed unless the statute so provides.

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