Interest on tax demands requires a valid enforceable demand; an invalid earlier notice cannot support interest liability.

Interest on delayed tax payment can be levied only where there is a valid and enforceable demand for tax legally payable. A demand notice issued when the State lacked authority to levy sales tax on levy transactions was not a valid basis for interest. After the later judgment restoring the State's taxing power, the fresh demand issued on 20 February 1997 became the operative demand, and payment within the permitted time meant no default arose. On that basis, the claim for interest was not sustainable and was quashed in favour of the assessee.

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Issues: Whether interest under section 59 of the Haryana General Sales Tax Act, 1973 could be demanded on tax for assessment year 1975-76 when the earlier demand notice had been issued at a time when the State lacked authority to levy sales tax on levy transactions.

Analysis: Interest under section 59 can be levied only on belated payment of tax that is legally payable pursuant to a valid demand. The earlier demand notice issued in 1982 was made during the period when the State's authority to levy sales tax on levy transactions stood negatived by the prevailing declaration of law, and therefore it was not a valid demand. After the later judgment restoring the State's power to levy tax, a fresh demand issued on 20 February 1997 was the legally effective demand. Since the appellant paid that fresh demand within the permitted time, no default existed on which interest could be founded.

Conclusion: The demand for interest was not sustainable and was quashed. The issue is decided in favour of the assessee.

Ratio Decidendi: Interest for belated payment of tax can be levied only when there is a valid and enforceable demand for tax legally payable; an invalid earlier demand cannot support a subsequent claim for interest.

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