Interest on disputed sales tax differential is not leviable where the liability depends on bona fide classification dispute.

Interest under section 8(1) of the U.P. Sales Tax Act, 1948 was confined to tax "admittedly payable" within the prescribed time, meaning tax disclosed in the dealer's accounts or admitted in the return or proceeding. A bona fide dispute over product classification and the applicable tax rate did not amount to a failure to pay admitted tax, especially where the dealer had paid the tax on its own admitted rate and the disputed balance was paid after final resolution. The distinction from the post-assessment regime under sections 8(1-A) and 8(1-B) meant the differential amount remained disputed tax until determined, so interest under section 8(1) was not leviable.

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Issues: Whether interest under section 8(1) of the U.P. Sales Tax Act, 1948 could be levied on the differential tax arising from a bona fide dispute about the classification of the assessee's products and the applicable rate of tax, where the admitted tax had already been paid and the disputed balance was paid soon after the dispute was finally resolved.

Analysis: Section 8(1) requires deposit of the tax "admittedly payable" within the prescribed time, and the Explanation confines that expression to tax disclosed in the dealer's accounts or admitted in the return or proceeding. The provision operates differently from the post-assessment regime under section 8(1-A) and the consequential interest provision in section 8(1-B). A classification dispute that determines whether the goods fall under a lower or higher rate is not the same as a failure to pay admitted tax. Where the dealer has paid the tax on the basis of the rate and classification admitted by it, the unpaid balance remains disputed tax until the issue is finally determined.

Conclusion: Interest under section 8(1) was not leviable on the disputed differential amount. The levy of interest was unsustainable and the appeals were dismissed.

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