Tax on old ornaments upheld at 1%, but interest denied where liability was genuinely debatable and not admitted.

Purchase of old ornaments was treated as taxable at 1% after the notification dated 7 September 1981, and the levy was upheld for the relevant period. On the interest question, liability under section 8(1) was held not to arise where the tax liability had not been admitted, the issue remained debatable, and the assessee acted under a bona fide belief that purchase tax was not payable. The Tribunal's order was sustained: the tax levy remained in force, while the interest demand was set aside.

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Issues: (i) Whether the purchase of old ornaments was liable to tax at 1% after the notification dated 7 September 1981; (ii) whether interest under section 8(1) was chargeable on the tax assessed under section 21.

Issue (i): Whether the purchase of old ornaments was liable to tax at 1% after the notification dated 7 September 1981.

Analysis: The Tribunal held that the notification bringing bullion within the tax net at the rate of 1% operated for the relevant period after 7 September 1981 and upheld the levy on the purchases of old ornaments.

Conclusion: The levy of tax on the purchases of old ornaments at 1% was upheld.

Issue (ii): Whether interest under section 8(1) was chargeable on the tax assessed under section 21.

Analysis: The Tribunal found that liability had never been admitted, the issue was debatable, and the assessee could be said to have acted under a bona fide belief that purchase tax was not payable; on that basis, interest was held to be unjustified.

Conclusion: Interest under section 8(1) was not leviable.

Final Conclusion: The revisions failed and the Tribunal's order was sustained, with the tax levy maintained and the interest demand set aside.

Ratio Decidendi: Where tax liability is genuinely debatable and the assessee has not admitted liability, interest cannot be imposed merely because tax is later assessed.

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