Accepted tax cheque not dishonoured: departmental non-encashment cannot justify interest on the dealer.

A cheque tendered within time for admitted sales tax, and accepted by the department as a permitted mode of payment, operates as payment unless it is dishonoured. Where the cheque was received and deposited but was not presented for encashment, and no dishonour was shown, the delay in realisation was attributable to departmental inaction, not the dealer. Interest for delayed payment under section 8(1) can be levied only when the default is attributable to the assessee; on these facts, interest was not recoverable and the demand could not be sustained.

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Issues: Whether interest under section 8(1) of the U.P. Sales Tax Act, 1948 could be recovered from the dealer when the admitted tax was tendered by cheque within time, the cheque was received by the department, but it was not presented for encashment and was never shown to have been dishonoured.

Analysis: The tax regulations permitted payment of admitted tax by cheque along with the return. The receipt issued by the department and the contemporaneous correspondence showed that the cheque had been deposited. Once a cheque is accepted as a mode of payment, it operates as payment unless dishonoured. The cheque here was not shown to have been dishonoured, and the delay in realising its proceeds was attributable to the department rather than to the dealer. Interest for delayed payment can be levied only where the default is attributable to the assessee.

Conclusion: Interest was not recoverable from the assessee, and the demand and recovery proceedings could not be sustained.

Final Conclusion: The writ petition succeeded, and the impugned interest demand was set aside because the admitted tax had been validly tendered within time by cheque and the subsequent non-realisation was due to departmental inaction.

Ratio Decidendi: Where a cheque tendered in payment of admitted tax is accepted by the department and is not shown to have been dishonoured, non-presentation or non-encashment of the cheque by the department cannot be treated as a default by the assessee for the purpose of levying interest.

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