Retrospective validation of interest on central sales tax arrears upheld by applying State sales tax interest provisions.

Interest could be charged on arrears of central sales tax by applying the U.P. Sales Tax Act where the Central Sales Tax Act, as retrospectively amended, and the validating provision in section 9(4) supplied the necessary authority. Earlier rulings had refused to import State law interest or penalty provisions in the absence of an express Central Sales Tax Act provision, but the amendment to section 9(2) inserted reference to charging or payment of interest and section 9(4) retrospectively validated interest already charged or paid under State sales tax law. Reading those provisions together, the HC held that sections 8(1) and 8(1-B) of the U.P. Sales Tax Act applied to central sales tax arrears, and the challenge to the interest demand failed.

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Issues: Whether interest could be charged on arrears of central sales tax by applying the interest provisions of the U.P. Sales Tax Act in view of the retrospective amendment to section 9(2) of the Central Sales Tax Act and the validating provision in section 9(4) of the Central Sales Tax (Amendment) Act, 1976.

Analysis: The earlier decisions relied upon for the assessee had held that, in the absence of an express provision in the Central Sales Tax Act, State law provisions imposing interest or penalty could not be invoked for central sales tax assessments. The amendment inserted the words relating to charging or payment of interest into section 9(2) and the validating provision in section 9(4) gave retrospective support to interest already charged or paid under the general sales tax law of a State. Reading the amended section 9(2) with section 9(4), the Court held that the State provisions in sections 8(1) and 8(1-B) of the U.P. Sales Tax Act were adopted for central sales tax purposes and that the validating amendment cured the earlier omission.

Conclusion: The charge of interest on the unpaid central sales tax demand under the State law was upheld and the challenge to the demand failed.

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