Retrospective composition scheme barred interest for the pre-amendment period where the circular did not authorise such levy.

A retrospective amendment to the composition scheme under Section 7D of the U.P. Trade Tax Act permitted payment of a 3% composition fee in place of 1% for the relevant assessment years. Once the assessee exercised that option, the earlier tax consequence under the original scheme was displaced for those years. As the amended circular did not create an interest liability for the period before 28.10.2003, interest could not be levied on the balance 2% amount for that antecedent period. The governing principle is that a retrospective composition scheme replacing the earlier liability does not permit interest for a period not covered by the amended levy.

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Issues: Whether interest could be levied for the period prior to 28.10.2003 on the balance 2% composition amount under the amended composition scheme under Section 7D of the U.P. Trade Tax Act.

Analysis: The amended circular dated 28.10.2003 introduced an option to pay 3% composition fee in place of 1% and was given retrospective effect for the assessment years in question. Once the assessee exercised that option, the earlier tax consequence under the original scheme stood displaced for those years. In the absence of an existing tax liability under the amended retrospective scheme for the prior period, interest could not be charged on the balance amount for the period before the amendment. The circular also did not provide for levy of interest for the period prior to 28.10.2003.

Conclusion: Interest was not leviable for the period prior to 28.10.2003, and the assessee succeeded on the substantial questions of law decided.

Ratio Decidendi: Where a retrospective composition scheme substitutes the earlier tax liability and the governing circular does not authorise interest for the antecedent period, interest cannot be imposed for the period before the assessee could validly exercise the statutory option.

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