Compensatory sales tax interest governs appropriation of appeal deposits and supports recomputation of liability.

Interest under the sales tax law is compensatory and automatic on delayed payment of the correct tax, so a deposit made during appeal may be appropriated in accordance with that liability rather than treated as tax payment first. The Court also accepted that assessment and rectification orders are distinct, and the Tribunal's interference with the assessment and interest computation was unsustainable in light of binding precedent on compensatory interest.

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Issues: (i) Whether the amount deposited by the dealer pursuant to the appellate stay condition was required to be adjusted first towards tax or towards interest due. (ii) Whether the Tribunal was justified in interfering with the assessment and interest computation in view of the applicable precedent on compensatory interest under the sales tax law.

Issue (i): Whether the amount deposited by the dealer pursuant to the appellate stay condition was required to be adjusted first towards tax or towards interest due.

Analysis: The deposit was made during the pendency of the appeals and the dispute concerned the manner of giving credit to that amount in the revised demand. The controlling principle applied was that interest under the sales tax enactment is compensatory in nature and is attracted on delayed payment, so the amount paid does not automatically stand appropriated towards tax merely because the dealer intended it as tax payment. The Court also proceeded on the basis that the assessment and rectification orders were distinct and that merger did not defeat the later adjustment made by the assessing authority.

Conclusion: The adjustment adopted by the Tribunal was held unsustainable and the credit was to be worked out in accordance with the governing legal principle.

Issue (ii): Whether the Tribunal was justified in interfering with the assessment and interest computation in view of the applicable precedent on compensatory interest under the sales tax law.

Analysis: The Court followed the earlier Full Bench view that interest under Section 23(3A) is automatic and compensatory, and that it becomes payable when tax ought to have been paid on the correct taxable turnover. On that footing, the Tribunal's conclusion that the dealer's deposit could not be adjusted against interest and that the assessment computation could not stand was rejected. The Court directed that the assessment consequences be worked out afresh in line with the binding precedent and the earlier connected judgment dealing with the same parties and similar issues.

Conclusion: The Tribunal's order was set aside and the revisions were allowed in favour of the Revenue.

Final Conclusion: The dealer's challenge to the manner of appropriation of the deposit failed, the Tribunal's relief was reversed, and the assessing authority was left to recompute the tax and interest liability in accordance with the governing precedent.

Ratio Decidendi: Interest under the sales tax law is compensatory and automatic on delayed payment of the correct tax, and deposited amounts may be appropriated consistently with that liability rather than being treated as tax payment in the first instance.

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