VAT interest on delayed cheque encashment was unsustainable where tax was tendered with the return and delay was not attributable to the dealer.

Interest under the VAT law was not leviable where the assessee tendered tax with the return through crossed cheques, an accepted mode of payment, and the delay in encashment was not attributable to the dealer. Section 31(5) applies only when tax is not paid within time because of default by the assessee, so delayed realisation after receipt of the cheques did not satisfy that condition. The Court also noted that, if the payment had been defective, a demand notice should have been issued under Rule 22(7), which was not done. Rule 98 could not be invoked on the facts to fasten interest liability, and the levy failed to that extent.

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Issues: Whether interest could be levied under the value added tax law when the assessee tendered tax along with the return by crossed cheques, but encashment was delayed for reasons not attributable to the assessee, and whether Rule 98 could be invoked to fasten liability despite the mode and place of presentment of the cheques.

Analysis: The return was accompanied by crossed cheques, which was an accepted mode of payment under the return-filing rules. Interest under Section 31(5) is attracted only when tax is not paid within the prescribed time by reason of default attributable to the dealer. The delay in realisation occurred after the cheques were received, and the delay was not attributable to the assessee. The Court also noted that if the payment were defective, a demand notice ought to have been issued under Rule 22(7), which was not done. Further, the jurisdictional wording in Rule 98 created ambiguity on the relevant facts, and the assessee could not be made liable for interest on the basis of that alleged non-compliance.

Conclusion: Interest could not be levied on the assessee for the delayed encashment of the cheques, and the levy was unsustainable to that extent.

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