Interest on unpaid turnover tax was upheld where the assessee withheld statutory tax despite an interim injunction.

Interest was chargeable under section 10A of the Bengal Finance (Sales Tax) Act, 1941 on unpaid turnover tax where the assessee knew its statutory liability but chose to withhold payment while contesting the levy. The interim injunction only restrained recovery by the authorities and did not bar voluntary payment by the assessee; furnishing bank guarantees for part of the disputed amount did not amount to discharge of the tax. The tribunal distinguished cases involving bona fide disclosure and payment under a court-authorised arrangement, and held that J.K. Synthetics did not apply on these facts. Interest on the unpaid turnover tax was therefore lawfully demandable.

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Issues: Whether interest was chargeable under section 10A of the Bengal Finance (Sales Tax) Act, 1941 on unpaid turnover tax for the period during which the assessee had challenged the levy and was protected by an interim injunction.

Analysis: The liability to pay turnover tax arose under the statute and was not suspended by the challenge to its validity. The interim order of the High Court restrained collection by the authorities and required bank guarantees for part of the disputed tax, but it did not prohibit payment of the tax by the assessee. The assessee knew the extent of its turnover-tax liability, chose to withhold full payment, and merely furnished bank guarantees for half the amount. The Court distinguished the case from authorities where the dealer had filed complete returns and paid the tax shown therein under a court-authorised arrangement. It held that the reasoning in J.K. Synthetics did not assist the assessee on these facts, because the default here was deliberate withholding of statutory tax and not bona fide payment of tax disclosed in the return.

Conclusion: Interest under section 10A was lawfully demandable on the unpaid turnover tax, and the challenge to the demand failed.

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