Sales tax default and refund set-off principles upheld; earlier-year refunds cannot automatically cancel later tax liability.

Assessed sales tax under section 8(1) of the U.P. Sales Tax Act had to be paid as demanded within the notice period, and refund amounts from earlier assessment years could not be treated as an automatic set-off against later tax liability unless the statute or rules expressly allowed it. On that basis, the dealer remained in default and the recovery certificates were valid. Penal interest under section 8(1-A) was also held to be properly directed by the Sales Tax Officer, with the Collector limited to ministerial computation during recovery. The writ challenge to the recovery proceedings therefore failed on both grounds.

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Issues: (i) whether refund amounts due in earlier assessment years could be set off against tax liability for later assessment years so as to avoid default under section 8 of the U.P. Sales Tax Act; (ii) whether penal interest under section 8(1-A) had to be imposed by the Sales Tax Officer and not by the Collector conducting recovery proceedings.

Issue (i): whether refund amounts due in earlier assessment years could be set off against tax liability for later assessment years so as to avoid default under section 8 of the U.P. Sales Tax Act.

Analysis: Section 8(1) required payment of the assessed tax within the time specified in the notice of demand. The provision contemplated actual payment of the amount demanded and did not provide for a set-off of cross debts. No provision in the Act or the Rules entitled the dealer, as of right, to adjust refund dues of one assessment year against tax liability of another. The existence of a refundable amount did not prevent the dealer from being in default if the assessed tax remained unpaid within time.

Conclusion: The dealer was in default, and the recovery certificates and recovery proceedings were valid.

Issue (ii): whether penal interest under section 8(1-A) had to be imposed by the Sales Tax Officer and not by the Collector conducting recovery proceedings.

Analysis: The recovery certificates issued by the Sales Tax Officer themselves directed recovery of interest under section 8(1-A) if the dues were not realized within the stated period. The imposition of interest was therefore made by the Sales Tax Officer. The Collector was left only with the ministerial task of computing the amount actually recoverable by way of interest, which necessarily depended on the date of payment.

Conclusion: The objection failed because the interest was imposed by the Sales Tax Officer, not by the Collector.

Final Conclusion: The challenge to the recovery certificates failed on both grounds, and the writ petition was dismissed with costs.

Ratio Decidendi: Payment of assessed sales tax must be made as demanded under section 8(1) of the U.P. Sales Tax Act, and unless the statute expressly provides otherwise, refunds from other assessment years cannot be automatically set off to negate default; interest under section 8(1-A) may be directed by the assessing authority while the collecting authority performs the arithmetical recovery.

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