Adjustable security deposits under earlier sales tax laws can offset liability, and no interest lies on amounts already with the department.

Security deposited under an earlier sales tax regime and accepted as adjustable security may be set off against the assessee's liability under the Assam General Sales Tax Act, 1993, where the record shows the deposit remained with the department for adjustment. The Court found no basis to treat the amount as an ordinary security deposit incapable of adjustment, and held that interest could not be levied on a tax liability already covered by the available security. The assessment and revisional orders were set aside to the extent they disallowed adjustment and imposed interest, and the assessment was directed to be reframed accordingly.

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Issues: (i) Whether the amounts deposited as security under the Assam Finance (Sales Tax) Act and the Central Sales Tax Act could be adjusted against the assessee's sales tax liability under the Assam General Sales Tax Act, 1993; (ii) Whether interest could be levied on the assessee in respect of the amount already lying as adjustable security with the department.

Issue (i): Whether the amounts deposited as security under the Assam Finance (Sales Tax) Act and the Central Sales Tax Act and accepted as adjustable security could be set off against the tax liability under the Assam General Sales Tax Act, 1993.

Analysis: The notices demanding security did not disclose the reasons, grounds, or material facts for such demand. The record showed that the amounts were deposited pursuant to the then applicable sales tax regime and that the challans recorded the deposits as adjustable security. The Court found no material to support the view that the petitioner had merely sought to unilaterally appropriate an ordinary security deposit contrary to the statutory scheme. On the facts, the deposits were treated as additional adjustable security lying with the department.

Conclusion: The assessee was entitled to adjust the security amount against the sales tax payable.

Issue (ii): Whether interest could be demanded from the assessee when the security amount was already available with the department.

Analysis: Once the deposited amount was held to be adjustable security and the department was already in possession of that amount, the basis for charging interest on the corresponding tax liability did not survive. The revisional view that security could only be forfeited and not adjusted was not accepted on the facts found by the Court.

Conclusion: Interest was not payable by the assessee.

Final Conclusion: The assessment and revisional orders were set aside to the extent they disallowed adjustment of the security and levied interest, and the assessment was directed to be reframed accordingly.

Ratio Decidendi: Where security deposited under an earlier sales tax regime is shown to have been accepted as adjustable security and remains with the department, it may be adjusted against the tax liability for the relevant period, and interest cannot be levied on that amount.

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