Composition scheme compliance prevents interest liability when the dealer has paid the amount required under the scheme.

A dealer who validly opted for the composition scheme under section 7-D of the U.P. Trade Tax Act and paid the amount required by that scheme was treated as having discharged the tax liability contemplated by the scheme, so interest under section 8(1) could not be levied on the ground of non-payment of "tax admittedly payable." The contextual and harmonious reading of the charging, return and composition provisions meant that the usual default under the regular assessment regime did not arise. Withdrawal of the composition scheme also did not justify interest on any differential amount paid after cancellation, because the scheme did not create retrospective default merely by being withdrawn later. The operative principle is that lawful compliance with a composition scheme bars interest under the general interest provision.

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Issues: (i) Whether a dealer who had opted for and paid composition money under section 7-D of the U.P. Trade Tax Act could be treated as having failed to pay the tax admittedly payable on its turnover so as to attract interest under section 8(1); (ii) Whether the withdrawal of the composition scheme justified levy of interest on the differential amount paid after cancellation of the scheme.

Issue (i): Whether a dealer who had opted for and paid composition money under section 7-D of the U.P. Trade Tax Act could be treated as having failed to pay the tax admittedly payable on its turnover so as to attract interest under section 8(1).

Analysis: The charging and return provisions of the Act were read with the special composition mechanism under section 7-D. The expression "tax admittedly payable" in the Explanation to section 8(1) was construed in context, and the Court held that a dealer who validly opted for composition and deposited the amount stipulated by the scheme had discharged the tax liability as contemplated by that scheme. Since such a dealer was not required to file the ordinary returns in the same manner as a dealer under the regular assessment regime, the default contemplated by section 8(1) was not made out. The reasoning was supported by the principle that statutory expressions must be given a contextual and harmonious construction.

Conclusion: The petitioner had paid the tax admittedly payable under the composition scheme and was not liable to interest under section 8(1) on that amount.

Issue (ii): Whether the withdrawal of the composition scheme justified levy of interest on the differential amount paid after cancellation of the scheme.

Analysis: The scheme itself contemplated periodic review and permitted withdrawal if the required participation or revenue was not achieved, but it did not provide for interest on the differential amount upon withdrawal. The State's delayed decision to cancel the scheme could not be used to fasten interest on a dealer who had acted under the scheme and paid the amount required by it. The Court treated the withdrawal as affecting the future enforceability of the scheme, not as creating a retrospective default by the petitioner.

Conclusion: The withdrawal of the scheme did not create liability to pay interest on the differential tax amount.

Final Conclusion: The impugned demand of interest was unsustainable because the petitioner had complied with the composition scheme and the subsequent cancellation of that scheme did not convert the petitioner into a defaulter for purposes of section 8(1).

Ratio Decidendi: Where a dealer has lawfully opted for a composition scheme and paid the amount required under that scheme, the amount so paid is treated as tax discharged under the Act for the purpose of interest provisions, and interest cannot be levied merely because the scheme is later withdrawn.

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