Strict sales tax recovery compliance limits penalty and interest, while admitted arrears may be paid in instalments.

Strict compliance with statutory demand and recovery requirements was required in sales tax recovery proceedings, and the recovery notice was invalid to the extent it sought penalty where mandatory service of demand notice was not shown and the prescribed form was materially incomplete. Interest also could not be levied on amounts already unpaid before the date from which the statute barred such recovery. The Court further allowed the admitted tax arrears to be paid in instalments, treating instalment relief as consistent with the statute and the interests of justice.

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Issues: (i) Whether the recovery notice was valid insofar as it included penalty and interest on the assessed sales tax arrears; (ii) Whether the assessee was entitled to pay the admitted tax arrears by instalments.

Issue (i): Whether the recovery notice was valid insofar as it included penalty and interest on the assessed sales tax arrears.

Analysis: The assessed tax had remained unpaid long before 1 January 1971 and the statute authorised recovery only in the manner prescribed. As regards penalty, the record did not show proper service of the mandatory demand notice for part of the penalty, and the statutory recovery form was materially defective because the relevant particulars were left blank. In such strict recovery proceedings, compliance with the prescribed form and service requirements was essential. As regards interest, the governing provision expressly prohibited charging interest on amounts that had remained unpaid prior to 1 January 1971. Since the tax and penalty demanded were outstanding before that date, interest could not lawfully be levied on them.

Conclusion: The recovery notice was unsustainable to the extent it demanded penalty and interest, and those portions were liable to be quashed.

Issue (ii): Whether the assessee was entitled to pay the admitted tax arrears by instalments.

Analysis: The admitted tax liability was not disputed, and the Court considered the long period of default and the assessee's financial position while moulding relief. Granting instalments did not contravene the statute and served the ends of justice.

Conclusion: The assessee was granted permission to clear the admitted tax arrears in instalments.

Final Conclusion: The writ petition succeeded only in part: the recovery notice was set aside for penalty and interest, while the admitted tax liability was allowed to be paid in instalments.

Ratio Decidendi: In sales tax recovery proceedings, statutory demand and form requirements must be strictly complied with, and interest cannot be levied on arrears that were already unpaid before the date from which the statute itself bars such interest.

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