Surcharge forms part of State tax rate for inter-State taxation; interest and penalty require reconsideration in a bona fide dispute.

Surcharge under the Haryana General Sales Tax Act was treated as part of the State tax rate for determining inter-State tax under section 8(2)(b) of the Central Sales Tax Act, because the applicable rate had to be read from the combined operation of sections 15 and 16. Applying harmonious construction, the Court accepted that the surcharge formed part of the tax burden and sustained the assessment on that basis. On interest and penalty, the dispute was viewed as a bona fide interpretative controversy, so the levy was not finally confirmed and the matter was remanded to the Assessing Authority for reconsideration.

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Issues: (i) Whether surcharge leviable under section 16 of the Haryana General Sales Tax Act, 1973 forms part of the rate of tax for the purpose of section 8(2)(b) of the Central Sales Tax Act, 1956. (ii) Whether the levy of interest and penalty for payment of tax at the rate confined to section 15 alone was justified.

Issue (i): Whether surcharge leviable under section 16 of the Haryana General Sales Tax Act, 1973 forms part of the rate of tax for the purpose of section 8(2)(b) of the Central Sales Tax Act, 1956.

Analysis: The rate of tax under the Haryana Act was held to be ascertainable not from section 15 alone, but from a combined reading of sections 15 and 16. Surcharge was treated as part of the tax burden under the State enactment and, therefore, as part of the rate applicable for determining inter-State tax under section 8(2)(b) of the Central Sales Tax Act, 1956. The Court applied harmonious construction and preferred the interpretation that preserved uniformity between intra-State and inter-State taxation.

Conclusion: The surcharge was held to be includible in the rate of tax, and the assessment on that basis was upheld, against the assessee.

Issue (ii): Whether the levy of interest and penalty for payment of tax at the rate confined to section 15 alone was justified.

Analysis: The liability provisions requiring payment of tax and the penalty provision were considered in the context of a genuine interpretative dispute. Since the assessee had paid tax according to its bona fide understanding and the correct position had not been clearly settled by the departmental authorities, the failure to pay the higher amount was treated as arising from a technical controversy. On that footing, the imposition of penalty and interest required reconsideration.

Conclusion: The matter relating to interest and penalty was remanded to the Assessing Authority for reconsideration, in favour of the assessee.

Final Conclusion: The tax liability was sustained on the inclusion of surcharge in the applicable rate, but the consequential levy of interest and penalty did not stand finally confirmed and was sent back for fresh consideration.

Ratio Decidendi: For determining the rate of tax under section 8(2)(b) of the Central Sales Tax Act, 1956, the State rate must be read as the combined incidence of the charging and surcharge provisions of the State sales tax law where surcharge is an integral part of the tax structure.

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