Interest on Central sales tax depends on when liability crystallises: from return date for non-furnishing, but only after rejection of a defective C-form.

Interest under the Central sales tax regime is compensatory and depends on when the tax liability legally crystallises. Where no C-form declaration is furnished and the dealer accepts the liability, interest runs from the date the tax ought to have been paid with the return, because assessment only quantifies an existing liability. Where a C-form declaration is filed but later found defective, the entitlement to concessional treatment remains unresolved until assessment rejects the declaration, so interest on the higher tax arises only from that adjudication date and not from the return date.

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Issues: (i) Whether, where no C-form declaration is furnished and the assessee accepts liability to pay tax, interest is chargeable from the date the tax became payable under the return or only from the date of assessment or demand; (ii) Whether, where a C-form declaration is defective, interest on the resultant tax is payable from the date of the return or only after the defect is determined in assessment.

Issue (i): Whether, where no C-form declaration is furnished and the assessee accepts liability to pay tax, interest is chargeable from the date the tax became payable under the return or only from the date of assessment or demand.

Analysis: The statutory scheme treats tax under the Central sales tax regime as due when the dealer, knowing the applicable liability, files the return and claims concessional treatment subject to production of the prescribed declaration. Interest under the governing provisions is compensatory and flows from delayed payment of tax that ought to have been paid with the return. Once the dealer knew that failure to furnish the declaration would result in liability to pay tax at the normal rate and nevertheless withheld the tax amount, the liability to interest could not be postponed until assessment or demand. The assessment order merely quantified an already existing liability; it did not create the liability for the first time.

Conclusion: Interest is payable from the date the tax ought to have been paid along with the return, and not from the date of assessment or demand. This issue is decided in favour of Revenue and against the assessee.

Issue (ii): Whether, where a C-form declaration is defective, interest on the resultant tax is payable from the date of the return or only after the defect is determined in assessment.

Analysis: Where the dealer furnishes a declaration that is later found to be defective and incapable of supporting concessional treatment, the dealer's entitlement to the lower rate remains undecided until the Assessing Authority examines the declaration and rejects the claim. In that situation, the tax liability on the higher rate arises only after the disputed factual determination. The position is materially different from a case of complete non-furnishing, because the assessee has placed the declaration on record and the liability depends on the adjudicatory finding that the declaration cannot be acted upon. Interest, being compensatory, therefore follows the date on which the liability is crystallised by assessment.

Conclusion: Interest is payable only from the date on which the defect is determined and the higher tax liability is adjudicated, not from the date of the return or filing of the defective declaration. This issue is decided in favour of the assessee and against Revenue.

Final Conclusion: The legal position is that delayed tax paid without furnishing the required declaration attracts interest from the due date, while tax liability arising only after rejection of a defective declaration carries interest only from the date of such rejection and assessment.

Ratio Decidendi: Interest on indirect tax liability is compensatory and follows the date on which tax legally became payable, but where entitlement to concessional treatment depends on a declaration whose validity is decided only in assessment, interest begins only after that adjudication.

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