Interest on registered dealers under sales tax law upheld as a rational classification, defeating the Article 14 challenge.

Interest under section 27(1) of the Delhi Sales Tax Act, as applied through section 21(3), is explained as constitutionally valid because registered dealers and unregistered dealers form distinct classes. Registered dealers are treated as tax-collecting intermediaries, must file returns and remit tax due, and receive statutory advantages not available to unregistered dealers. The differential treatment is said to have a rational basis tied to the practical operation of the sales tax system, and the legislature may impose interest on dealers who hold amounts collected on behalf of the State and fail to remit them. The Article 14 challenge therefore fails.

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Issues: Whether the levy of interest under section 27(1) of the Delhi Sales Tax Act, 1975, as attracted by section 21(3), was unconstitutional for applying only to registered dealers and not to other dealers, thereby offending Article 14 of the Constitution of India.

Analysis: The statutory scheme treated registered dealers and unregistered dealers as separate classes. A registered dealer acted as a tax-collecting intermediary under the Act, was required to furnish returns and pay the tax due on those returns, and derived advantages under the sales tax structure that were not available to unregistered dealers. The Court found that an unregistered dealer was not similarly situated, that the differential treatment had a rational basis linked to the practical working of the tax system, and that the legislature was competent to impose interest on the class of dealers who held and failed to remit amounts collected on behalf of the State. The challenge based on Article 14 therefore failed.

Conclusion: The impugned classification was held to be reasonable and non-discriminatory, and the writ petition was rejected.

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