Forged exemption forms can trigger admitted tax liability and statutory interest on unpaid purchase tax.

Where exemption from sales tax is claimed on the basis of forms later found to be forged, the exemption fails and the tax on the underlying purchases becomes an admitted liability under the U.P. Sales Tax Act. On that footing, statutory interest is payable on the unpaid tax amount under section 8(1), because forged or fictitious documents confer no legal benefit. The Allahabad HC applied the prior view that failure to furnish valid forms leaves the dealer liable for both tax and interest. The Tribunal's deletion of the interest demand was therefore held incorrect.

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Issues: Whether interest was leviable on the tax payable on purchases where exemption had been claimed on the basis of forms later found to be forged and the tax liability on those purchases was treated as escaped turnover.

Analysis: The exemption claim based on the disputed forms was rejected, and the purchases themselves were not in dispute. Once the forms were found to be forged and the exemption failed, the liability to pay tax on those purchases became an admitted tax liability under the Act. On the reasoning applied, interest followed under section 8(1) of the U.P. Sales Tax Act on the unpaid amount. The prior Division Bench view relied on by the Court was treated as covering the situation where a dealer claims exemption on the basis of forms but ultimately fails to furnish valid forms, making the tax payable an admitted liability and attracting interest at the prescribed rate. Forged or fictitious documents were held to confer no legal benefit.

Conclusion: Interest was leviable against the dealer, and the Tribunal was wrong in deleting the interest demand. The issue was decided in favour of the Revenue and against the dealer.

Ratio Decidendi: Where exemption from tax is claimed on the basis of forms that are subsequently found to be forged or invalid, the resulting tax on the underlying purchases becomes an admitted tax liability, and statutory interest is payable on the unpaid amount.

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