Sales tax interest on assessed differential tax is not leviable where bona fide returns were filed and demand was paid on time.

Interest under section 47(4-A) of the Gujarat Sales Tax Act was held chargeable only on default at the stage when tax became legally due under the relevant statutory sub-section, not on additional tax later found payable on assessment where the dealer had filed a bona fide return and paid both the returned tax and the assessed demand within time. The court read section 47 as a complete scheme, rejected a construction that would make part of sub-section (4-A) redundant, and applied the reasoning in J.K. Synthetics while declining to follow the earlier view in Associated Cement. The reference was answered in favour of the assessee and the interest levy was set aside.

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Issues: Whether interest under section 47(4-A) of the Gujarat Sales Tax Act, 1969 could be levied on additional tax assessed on purchases disclosed in bona fide returns when the tax shown in the returns had been paid within time and the assessed tax was also paid within the time specified in the notice of demand.

Analysis: Section 47 was read as a complete scheme governing payment of tax at different stages. Sub-sections (1), (2) and (3) require payment according to the dealer's own assessment at prescribed intervals and at the time of filing returns, while sub-section (4) deals with tax found due on assessment or reassessment and payable pursuant to notice of demand. Sub-section (4-A) was held to attach interest only when there is default in payment at the stage where payment is legally due under the relevant sub-section. A dealer is not required, at the return stage, to anticipate the final view of the assessing authority and pay tax on a hypothetical assessed basis. The construction urged by the Revenue would make the portion of sub-section (4-A) dealing with tax payable under sub-section (4) redundant and would create repugnancy within the provision. The reasoning in J.K. Synthetics was applied as the correct interpretation of the analogous scheme, and the earlier view in Associated Cement was not accepted. The bona fides of the return were also upheld, since the claim for exemption was based on the statutory position and the return had been filed before the position was finally settled.

Conclusion: Interest under section 47(4-A) was not leviable on the additional tax in the facts of the case, and the levy confirmed by the Tribunal was held unsustainable.

Final Conclusion: The reference was answered in favour of the assessee, and the levy of interest on the assessed differential tax was set aside.

Ratio Decidendi: Interest under a sales tax provision of this kind is attracted only on default in paying tax when it becomes legally due under the relevant statutory stage, and not on additional tax later found payable on assessment where the dealer has acted on a bona fide self-assessed return and paid the assessed demand within the prescribed time.

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