Statutory interest on sustained tax liability continues despite stay of recovery and absence of demand notice.

Under section 59 of the Haryana General Sales Tax Act, 1973, interest accrues by operation of law on unpaid tax when the liability is finally sustained, even if an earlier appellate stage had quashed the demand. The statutory first proviso covers stayed recoveries and preserves interest from the date tax first became due, so a court stay does not accrual. The provision also does not make prior service of a demand notice a condition precedent for charging interest. The P&H HC therefore held interest leviable on the sustained liability and answered the reference against the assessee.

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Issues: (i) Whether interest under section 59 of the Haryana General Sales Tax Act, 1973 is leviable even where the tax demand is ultimately quashed in appeal but the tax is otherwise found due; (ii) Whether interest under section 59 is chargeable in the absence of service of a demand notice, including where recovery was stayed by court orders.

Issue (i): Whether interest under section 59 of the Haryana General Sales Tax Act, 1973 is leviable even where the tax demand is ultimately quashed in appeal but the tax is otherwise found due.

Analysis: Section 59 provides for interest on failure to pay tax or penalty and, by its first proviso, expressly covers situations where recovery is stayed by the appellate authority, High Court, or Supreme Court. The liability to interest is statutory and follows the amount ultimately found due. The Court applied the principle that once the underlying tax liability survives and is finally upheld under the governing statute, interest follows as an incident of that liability. The provision is pari materia with other statutory schemes where the Supreme Court has held that stay of recovery does not prevent the running of interest.

Conclusion: Interest was held leviable where tax was ultimately found due, notwithstanding earlier quashing at an intermediate stage.

Issue (ii): Whether interest under section 59 is chargeable in the absence of service of a demand notice, including where recovery was stayed by court orders.

Analysis: Section 59 contemplates interest when the amount specified in a notice of demand is not paid within time, but the first proviso separately addresses stayed recoveries and makes the tax or penalty recoverable with interest from the date it first became due. The Court held that the statutory scheme does not make prior issuance of a demand notice a condition precedent for charging interest, and that the stay orders did not extinguish or postpone the statutory accrual of interest. The deeming provision treating interest as tax for recovery further supported this construction.

Conclusion: Interest was held chargeable even without service of a demand notice.

Final Conclusion: The reference was answered against the assessee and in favour of the Revenue, confirming that statutory interest attached to the finally sustained tax liability under the Haryana General Sales Tax Act, 1973.

Ratio Decidendi: Where a taxing statute creates a liability to interest on unpaid tax and expressly provides that stayed recovery remains recoverable with interest from the date the tax first became due, interest accrues by operation of law and does not depend on prior service of a demand notice.

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