Court rules interest under Haryana Sales Tax Act automatic, no demand notice needed

The court held in favor of the Revenue, ruling that interest under section 59 of the Haryana General Sales Tax Act is chargeable on demands quashed in appeal and is also chargeable without the service of a demand notice. The court emphasized that interest is automatic under the statute and arises by operation of law, not contingent on the issuance of a demand notice or the presence of stay orders. The decision affirmed the Revenue's authority to charge interest on delayed tax payments.

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Issues Involved:
1. Whether interest under section 59 of the Haryana General Sales Tax Act, 1973, is chargeable on demands quashed in appeal.
2. Whether interest under section 59 is chargeable without service of a demand notice.

Issue-wise Detailed Analysis:

1. Interest on Quashed Demands:

The court examined whether interest under section 59 of the Haryana General Sales Tax Act, 1973 (HGST Act), is chargeable on tax demands quashed in appeal. The petitioner contended that interest should not be levied as the tax demands were quashed and stay orders were in place from higher courts. However, the court noted that interest is automatic under section 59 and arises by operation of law. The court emphasized that the first appellate authority's direction to charge interest was neither illegal nor wrong. The Tribunal's decision to remand the matter to the Assessing Authority was upheld, and it was determined that interest is chargeable from the date the tax first became due, despite the stay orders. The court concluded that the petitioner cannot be absolved from liability to pay interest on the delayed payment of tax, as the liability to pay interest is created by the statute and is not contingent on the issuance of a demand notice.

2. Interest Without Demand Notice:

The court considered whether interest under section 59 is chargeable without the service of a demand notice. The petitioner argued that no interest or penalty could be levied in the absence of a demand notice. The court referred to section 59, which presupposes the issuance of a demand notice for payment of tax or penalty. However, the court clarified that the charging of interest is automatic and does not require a separate assessment or notice by the Assessing Authority. The court cited the Supreme Court's judgment in Haji Lal Mohd. Biri Works v. State of U.P., which held that the liability to pay interest is statutory and does not necessitate a demand notice. The court reiterated that interest is deemed as tax for the purposes of collection and recovery under section 59(2) of the HGST Act. The first proviso to section 59(1) explicitly states that interest is recoverable even if the recovery of tax or penalty was stayed by higher courts, provided the amount is ultimately found due.

Conclusion:

The court answered both questions in favor of the Revenue and against the petitioner. It held that interest under section 59 of the HGST Act is chargeable on demands quashed in appeal and is also chargeable without the service of a demand notice. The court emphasized that the statutory provisions make the charging of interest automatic and not contingent on the issuance of a demand notice or the presence of a stay order. The reference was accordingly disposed of, affirming the Revenue's right to charge interest on delayed tax payments.

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