Fresh demand notice required after recomputed assessment before default interest can accrue

When an assessment is set aside on appeal and recomputation is directed, the earlier demand notice loses efficacy and cannot support a finding of default for the prior period. Interest under the sales tax enactments becomes recoverable only after a fresh valid demand notice fixes a new date for payment. If the department issues such fresh notices after recomputation, default can be computed only from that later date, not from the original assessment period. On that basis, earlier interest liability was not recoverable and the assessee could not be treated as a defaulter for the pre-notice period.

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Issues: Whether, after the original assessment was set aside and recomputation was directed, the assessee could be treated as a defaulter and saddled with interest for the period prior to the fresh demand notices.

Analysis: The liability to pay interest under the sales tax enactments arose only when tax remained unpaid after the date specified in a valid demand notice. Once the appellate order reduced the tax or directed recomputation, the original assessment and demand ceased to operate. In such a situation, the department was required to issue fresh demand notices, and default could be computed only from the date fixed in those fresh notices. Interest could not be levied for any earlier period when the original demand had lost its force.

Conclusion: The assessee was not a defaulter for the earlier period, and interest for that period was not recoverable. The issue was decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeals were allowed, with the consequence that interest liability could arise only from the fresh demand notices issued after recomputation.

Ratio Decidendi: When an assessment is set aside or recomputed on appeal, the earlier demand notice loses efficacy, and default interest can be charged only from the date specified in a subsequent valid demand notice.

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