Interest on sales tax deposits cannot be levied mechanically under a quarterly return scheme without proving actual tax shortfall.

Where a dealer opted for the quarterly-return mechanism under the second proviso to rule 41, interest under section 8(1) could not be levied mechanically on the basis of the prescribed monthly average deposit. The expression "tax admittedly payable" was confined to tax payable on the turnover disclosed in the dealer's books or admitted in proceedings, so interest required a proved shortfall against that actual liability for the relevant period. As no such determination or finding of short deposit was made, the interest demand was unsustainable and the levy was set aside.

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Issues: Whether interest under section 8(1) of the U.P. Sales Tax Act, 1948 was leviable where the dealer, having opted for the second proviso to rule 41, paid tax on a quarterly basis but made delayed and short monthly deposits for the first two months of each quarter.

Analysis: The statutory scheme required monthly returns and monthly payment of tax, but the second proviso to rule 41 permitted an alternative quarterly return arrangement, with tax to be deposited during the first two months of each quarter on the prescribed monthly average of the preceding year. The expression "tax admittedly payable" in the Explanation to section 8(1) was held to refer, in this context, to the tax payable on the turnover disclosed in the dealer's accounts or admitted in a return or proceeding under the Act. Since no return was required for the first two months under the quarterly option, the monthly average deposited under the proviso could not automatically be treated as the tax admittedly payable for the purpose of levying interest. Interest could be levied only after determining the tax payable on the turnover shown in the books for the relevant month and comparing it with the amount actually deposited. In the present case, no such determination was made and no finding recorded that the deposits were short of the tax payable on the turnover disclosed in the accounts.

Conclusion: Interest under section 8(1) was not leviable on the dealer on the facts found, and the levy was unsustainable.

Final Conclusion: The dealer was entitled to relief against the interest demand, and the revisions succeeded with the levy of interest set aside.

Ratio Decidendi: Where a dealer adopts a statutory quarterly-return mechanism, interest for default cannot be imposed mechanically on the basis of the prescribed monthly average deposit; it can be levied only on a proved shortfall against the tax actually payable on the turnover disclosed for the relevant period.

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