Statutory interest on tax default applies despite bona fide mistake and public sector status, the court held.

Interest was held payable on delayed tax payment where the assessee paid tax at a lower rate than the rate then applicable after the earlier concessional notification had been rescinded. Section 25(5) of the Haryana General Sales Tax Act made interest a mandatory consequence of tax default, and Section 9(2) of the Central Sales Tax Act permitted recovery through the State machinery. The assessee's plea of bona fide mistake and its status as a public sector undertaking did not create any exception to this statutory liability, so the default attracted interest.

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Issues: Whether an assessee who failed to pay tax at the requisite rate could avoid liability to interest on the plea of bona fide error and on the ground that it was a public sector undertaking.

Analysis: The assessee admittedly paid tax at 2% though it was obliged to pay 4% for the relevant assessment years after the earlier notification granting a lower rate had been rescinded. Section 25(5) of the Haryana General Sales Tax Act, 1973 makes interest a necessary consequence of default in payment of tax, and Section 9(2) of the Central Sales Tax Act, 1956 authorises recovery of such interest under the State machinery. The provisions do not create any exception for a public sector undertaking or for a plea of bona fide mistake. As the default was undisputed and the notification was unambiguous, the plea of bona fide error was rejected.

Conclusion: The assessee was liable to pay interest on the delayed payment of tax, and the question of law was answered against the assessee.

Ratio Decidendi: Where tax is not paid at the requisite rate and the statute makes interest payable on default, liability to interest follows automatically and cannot be avoided merely by asserting bona fide error or public sector status in the absence of a legally sustainable dispute on levy.

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