Interest on delayed tax payment fails where the underlying demand collapses after correct base production computation.

Interest under Section 8(1) of the U.P. Trade Tax Act could not be levied on delayed payment of admitted tax where the underlying demand itself was unsustainable. The assessment had excluded stock transfers and consignment sales from base production, but the Full Bench interpretation required those items to be included while computing base production. Once that correct computation was applied, the foundation for the demand for the relevant year disappeared, and the consequential claim for delayed payment interest also failed. The interest demand was therefore rightly set aside in favour of the assessee.

---

---

Issues: Whether interest under Section 8(1) of the U.P. Trade Tax Act could be levied on delayed payment of admitted tax for the relevant period when the demand was computed by excluding stock transfers and consignment sales from base production.

Analysis: The levy of interest depended on the existence of a valid tax demand for the period in question. The impugned assessment proceeded on the basis that stock transfers and consignment sales were outside base production. The Full Bench ruling on the meaning of base production held that such transfers and sales must be included while computing base production. On that footing, the foundation for the demand for the year 2002-03 disappeared, and the consequential claim for delayed payment interest could not survive.

Conclusion: The demand of interest under Section 8(1) was unsustainable and was rightly set aside, in favour of the assessee.

---