Retrospective composition scheme barred interest on the enhanced tax component for the pre-amendment period.

The amended composition scheme under Section 7D of the U.P. Trade Tax Act was given retrospective effect from 28.10.2003, and once the assessee exercised that option, the regular assessment mechanism ceased to govern the relevant period. Interest could not be levied on the additional 2% composition amount for the period before the amendment took effect because the enhanced liability had not yet arisen, and the circular did not separately provide for such interest. The result was that interest was held not leviable for the pre-28.10.2003 period.

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Issues: Whether interest could be levied on the additional 2% composition amount for the period prior to 28.10.2003, when the amended composition scheme under Section 7D of the U.P. Trade Tax Act came into force with retrospective effect.

Analysis: The revised composition scheme introduced on 28.10.2003 granted a retrospective option to pay 3% composition fee in place of 1%, and on exercise of that option the regular tax assessment mechanism ceased to apply for the relevant period. Once the amended scheme was made applicable to the assessment years in question, the assessee's liability stood governed by that scheme. In the absence of a subsisting tax liability for the earlier period under the amended arrangement, interest could not be levied for a time when the enhanced composition liability itself had not yet arisen, particularly when the circular did not provide for such interest.

Conclusion: Interest was not leviable for the period prior to 28.10.2003, and the assessee succeeded on the substantive questions of law.

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