Binding Supreme Court clarification on tax set-off permits recomputation, rejects limitation challenge, and limits interest prospectively.

A Supreme Court reversal on surcharge and entry tax set-off required the assessing authority to recompute sales tax, because the earlier favourable interpretation no longer survived and the declaration of law bound authorities under Article 141. The recomputation was treated as valid and not barred by limitation, as no specific limitation period governed the reassessment action and the orders followed the Supreme Court judgment within a reasonable interval. Interest on the differential tax was confined to the period after 28 October 2016, because the legal position was clarified only from that date and could not attract interest for the earlier unsettled period.

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Issues: (i) Whether the re-computation of sales tax payable for the relevant assessment years could be sustained after the Supreme Court had reversed the earlier High Court view on surcharge and entry tax set-off; (ii) whether the re-computation orders were barred by limitation; and (iii) whether interest on the differential tax amount was payable for the period prior to the Supreme Court's judgment.

Issue (i): Whether the re-computation of sales tax payable for the relevant assessment years could be sustained after the Supreme Court had reversed the earlier High Court view on surcharge and entry tax set-off.

Analysis: The earlier orders in favour of the assessee rested entirely on the High Court's earlier interpretation of the Orissa Sales Tax Act and the connected entry tax framework. Once that interpretation was set aside by the Supreme Court, the basis of those subsequent orders ceased to exist. The declaration of law by the Supreme Court binds all authorities under Article 141 of the Constitution of India, and the authorities were required to give effect to that binding position by re-computing the tax.

Conclusion: The re-computation was valid and could not be struck down as illegal.

Issue (ii): Whether the re-computation orders were barred by limitation.

Analysis: The Supreme Court decision was rendered on 28 October 2016 and the impugned re-computation orders followed in December 2017. In the absence of any specific limitation period governing re-computation, the interval was not treated as excessive or unlawful.

Conclusion: The re-computation orders were not time-barred.

Issue (iii): Whether interest on the differential tax amount was payable for the period prior to the Supreme Court's judgment.

Analysis: The legal position on surcharge and entry tax set-off was clarified only by the Supreme Court on 28 October 2016. Interest on the differential amount could therefore run only from that date onward, and not for the earlier period.

Conclusion: Interest was restricted to the period after 28 October 2016 till payment.

Final Conclusion: The challenge to recomputation failed on merits and on limitation, but the demand was modified to confine interest to the post-judgment period, and the writ petitions were disposed of accordingly.

Ratio Decidendi: A binding declaration of law by the Supreme Court must be given effect by the assessing authority, and interest on a tax differential arising from such clarification is payable only prospectively from the date of that declaration where the legal position was unsettled earlier.

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