Compensatory interest on sales tax cannot be charged when tax was paid, refunded after appellate relief, and paid again on restoration.

Interest under section 8(1-B) of the Sales Tax Act, 1948 was not chargeable where the assessee had complied with the demand notices, the tax had been refunded only because appellate relief was granted, and payment was again made when the demand was restored on reference. The court reasoned that interest is compensatory and arises only when assessed or enhanced tax remains unpaid after the notice period because of the assessee's default. As the State was never deprived of money by any withholding by the assessee, there was no unpaid amount attracting interest. The demand of interest was therefore illegal.

---

---

Issues: Whether interest was chargeable under section 8(1-B) of the Sales Tax Act, 1948 when the assessee had complied with the demand notices, the excess tax had been refunded pursuant to appellate relief, and the assessment order was later restored on reference.

Analysis: Section 8(1-B) makes interest payable only where assessed, reassessed, or enhanced tax remains unpaid after the period specified in the notice of demand. The decisive question was whether, on the facts, there was any "unpaid amount" attributable to default by the assessee. The petitioner had paid the tax when demanded, obtained refund only because the appellate authority granted relief, and again complied when fresh demand was raised after the reference decision. In these circumstances, the Government was never deprived of the money by any withholding on the part of the assessee. Interest, being compensatory, arises when the assessee unlawfully retains money due to the State and gains the use of it. That situation was absent here.

Conclusion: Interest was not payable under section 8(1-B) of the Sales Tax Act, 1948, and the demand of interest was illegal.

---