Disputed tax liability and interest: demand on admitted tax was unsustainable, with redetermination required under the disputed-tax provision.

Where an assessee consistently disputes the very tax liability, interest cannot be charged as if the amount were admitted and payable under the provision for admitted tax. The applicable levy is the provision governing assessed but unpaid disputed tax, because classification and liability remained under challenge from the outset. On that basis, the interest demand based on the admitted-tax provision was unsustainable, the impugned demand was quashed, and interest was required to be redetermined under the disputed-tax provision on remand.

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Issues: Whether interest on the petitioner's liability was exigible under Section 8(1) of the U.P. Trade Tax Act, 1948 read with Section 33(2) of the U.P. Value Added Tax Act, or whether the case fell under Section 8(1B) of the U.P. Trade Tax Act, 1948 read with Section 33(4) of the U.P. Value Added Tax Act because the tax liability itself was disputed.

Analysis: The petitioner had consistently disputed its liability under the entry tax regime from the inception, contending that the imported goods were electrical equipments and not machinery, and the very classification and liability were under challenge in appeal. On the facts, the tax could not be treated as tax admittedly payable for the purposes of Section 8(1) of the U.P. Trade Tax Act, 1948 or Section 33(2) of the U.P. Value Added Tax Act. Where the liability itself is contested, the applicable provision for interest is the one governing assessed but unpaid disputed tax, namely Section 8(1B) of the U.P. Trade Tax Act, 1948 read with Section 33(4) of the U.P. Value Added Tax Act.

Conclusion: The demand was unsustainable to the extent it proceeded on Section 8(1) of the U.P. Trade Tax Act, 1948 read with Section 33(2) of the U.P. Value Added Tax Act. Interest had to be redetermined under Section 8(1B) of the U.P. Trade Tax Act, 1948 read with Section 33(4) of the U.P. Value Added Tax Act, in favour of the assessee.

Final Conclusion: The impugned interest demand was quashed and the matter was remitted for fresh determination of interest on the basis of the provision applicable to disputed tax liability.

Ratio Decidendi: Where the assessee has consistently disputed the tax liability itself, the demand cannot be treated as interest on admitted tax; interest is payable only under the provision governing assessed but disputed unpaid tax.

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