Compensatory interest on delayed sales tax payment is constitutionally valid and recoverable without prior demand notice.

Interest on delayed sales tax payment under section 8 was treated as compensatory, not penal, and the prescribed rate by itself did not make the provision confiscatory or unconstitutional. The provision also operated symmetrically because the State was liable to pay interest on delayed refunds, and the possibility of credit sales did not create any constitutional infirmity. The court further held that sections 7 and 8 formed one scheme for timely tax collection: interest accrued automatically from the date the tax became due, and a prior notice of demand was not a condition precedent to charging or recovering interest. The petitions therefore failed, and the tax with interest was sustained.

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Issues: (i) Whether section 8 of the Jammu and Kashmir General Sales Tax Act, 1962, was unconstitutional as imposing confiscatory interest. (ii) Whether interest under section 8 could be recovered without serving a prior notice of demand.

Issue (i): Whether section 8 of the Jammu and Kashmir General Sales Tax Act, 1962, was unconstitutional as imposing confiscatory interest.

Analysis: Interest on unpaid tax is distinct from tax and penalty and is ordinarily compensatory rather than penal. The provision also operated symmetrically, since the State was similarly liable to pay interest on delayed refund. The rate prescribed did not by itself make the provision confiscatory, and the possibility that a dealer may sell goods on credit did not create any constitutional infirmity or restriction on trade.

Conclusion: Section 8 was held to be constitutionally valid and not violative of the fundamental rights invoked.

Issue (ii): Whether interest under section 8 could be recovered without serving a prior notice of demand.

Analysis: Sections 7 and 8 were construed together as part of one scheme for timely collection of sales tax. The liability to pay tax arose when a true return ought to have been filed and the tax should have been deposited, and assessment only declared that pre-existing liability. A notice of demand under section 8 did not create the liability to pay tax or interest; it only informed the dealer of the amount declared due and enabled recovery. Interest therefore accrued from the date the tax fell due, not from the date of the notice. The later amendment introducing interest also governed the relevant quarter because the due date for filing the return arose after the amendment.

Conclusion: Prior service of a demand notice was not a precedent for charging or recovering interest under section 8.

Final Conclusion: The petitions failed on both questions, and the demand for tax with interest was sustained.

Ratio Decidendi: Where the statute requires a dealer to file a true return and deposit tax by the prescribed date, interest on delayed payment is compensatory and accrues by operation of law from the date the tax becomes due; a notice of demand does not create that liability but only facilitates recovery.

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