Bona fide belief on tax rate justified interest from a later date, with revision dismissed.

Interest on sales tax was upheld from a later date where the assessee's belief about the applicable tax rate was found to be bona fide. The Sales Tax Tribunal accepted that basis and sustained the interest position, and the High Court confirmed that view, dismissing the revision filed by the Commissioner of Sales Tax.

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Issues: Whether interest could be demanded from the assessee from 1st June, 1976, after the tax rate on silicate was corrected, when the Tribunal had found that the assessee bona fide believed the applicable rate to be 4 per cent.

Analysis: The revision turned on the distinction between rectification of an apparent mistake in assessment and the liability to pay interest. The correction of the rate under section 22 of the U.P. Sales Tax Act was permissible, but the demand of interest depended on the assessee's intention. The Tribunal's finding that the assessee honestly believed the rate to be 4 per cent, coupled with the fact that the assessing authority itself had originally applied that rate without objection from the department, negatived any mala fide conduct. On those findings, interest from 1st June, 1976, was not justified.

Conclusion: The demand of interest from 1st June, 1976, was not sustainable and the finding was in favour of the assessee.

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