Statutory interest on sales tax arrears survives stay orders, and no fresh demand notice is needed after partial assessment modification.

Statutory interest on sales tax arrears remained recoverable despite stay orders, because retrospective amendment to section 9(2) of the Central Sales Tax Act validated interest in accordance with State law and section 8(2) of the U.P. Sales Tax Act allowed interest to continue during the stayed period. A later reduction or modification of the assessment did not extinguish the surviving tax liability. No fresh notice of demand was required where the original assessment was only partly modified and not quashed in entirety; the existing demand notice continued to operate under section 8(9) of the U.P. Sales Tax Act.

---

---

Issues: (i) Whether interest on delayed payment of sales tax was recoverable under the Central Sales Tax Act and the U.P. Sales Tax Act despite the pendency of stay orders and modification of the assessment; (ii) whether a fresh notice of demand was necessary after reduction or modification of the assessed tax.

Issue (i): Whether interest on delayed payment of sales tax was recoverable under the Central Sales Tax Act and the U.P. Sales Tax Act despite the pendency of stay orders and modification of the assessment.

Analysis: The liability to pay interest was upheld on the basis of the retrospective amendment to section 9(2) of the Central Sales Tax Act, which validated charging of interest in accordance with State law. Under section 8(2) of the U.P. Sales Tax Act, interest continued to run even during the period when recovery remained stayed and the stay order was later vacated. The Court also held that the subsequent modification of the assessment did not wipe out the earlier demand so far as the surviving tax liability was concerned.

Conclusion: The demand of interest was valid and recoverable.

Issue (ii): Whether a fresh notice of demand was necessary after reduction or modification of the assessed tax.

Analysis: On the facts, the original demand notice continued to operate because the assessment was not quashed in entirety, only partly modified. Section 8(9) of the U.P. Sales Tax Act, particularly clause (b) and the then existing clause (c), supported the view that where the tax was reduced or not varied, a fresh notice was unnecessary. The modified order merely adjusted the amount payable and did not create a wholly new demand requiring a fresh notice.

Conclusion: No fresh notice of demand was required.

Final Conclusion: The writ petition failed because the claim for interest was legally sustainable and the recovery proceedings were not vitiated by any absence of a fresh demand notice.

Ratio Decidendi: Statutory interest on sales tax arrears continues notwithstanding a stay order, and where an assessment is only reduced or modified without creating a fresh demand, the original notice of demand remains effective and no fresh notice is required.

---