Interest on incomplete tax returns remains payable despite interim stay orders and a constitutional challenge to the charging provision.

Interest under section 10A of the Bengal Finance (Sales Tax) Act, 1941 applies where a dealer files an incomplete return by omitting turnover and tax payable, because the statutory return must be full and correct and not a mere formality. The provision also covers failure to pay the tax legally due. Interim stay orders against recovery do not suspend the statutory incidence of interest, and a bona fide constitutional challenge to the charging provision does not, by itself, exclude liability. The article distinguishes cases where the quantum of tax is genuinely disputed from cases where liability exists but validity is challenged.

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Issues: (i) Whether interest under section 10A of the Bengal Finance (Sales Tax) Act, 1941 was leviable where the assessee filed returns but did not disclose the turnover and tax payable therein. (ii) Whether the liability to pay such interest was excluded because recovery of the turnover tax had been stayed by interim orders of the High Court and the assessee had been bona fide challenging the validity of section 6B.

Issue (i): Whether interest under section 10A of the Bengal Finance (Sales Tax) Act, 1941 was leviable where the assessee filed returns but did not disclose the turnover and tax payable therein.

Analysis: Section 10A was construed as applying where a dealer either fails to furnish the return contemplated by section 10 or furnishes only a truncated or incomplete return, and also fails to make full payment of the tax legally payable. The return required by the Act had to be full and correct, not a mere formality. Since the appellants omitted the turnover and tax payable from the returns, they had not furnished the return referred to in section 10 and therefore fell within sub-section (2) of section 10A.

Conclusion: Interest under section 10A was leviable against the appellants.

Issue (ii): Whether the liability to pay such interest was excluded because recovery of the turnover tax had been stayed by interim orders of the High Court and the assessee had been bona fide challenging the validity of section 6B.

Analysis: The Court held that the decision in J.K. Synthetics was distinguishable because there the dispute concerned the very quantum of tax payable on the basis of the return, whereas here the taxable liability under section 6B was never in doubt and only its constitutional validity had been challenged. The fact that the High Court granted interim protection did not suspend the statutory incidence of interest, and no presumption of a strong prima facie case could be drawn merely from such interim orders. The doctrine that an act of court should prejudice no one did not defeat the statutory right to interest.

Conclusion: The stay of recovery and the pending constitutional challenge did not prevent accrual of interest under section 10A.

Final Conclusion: The statutory charge of interest was upheld and the appeals failed.

Ratio Decidendi: Where a taxing statute requires a full and correct return and imposes interest for non-payment of tax due, a dealer who files an incomplete return and withholds tax cannot avoid interest merely because recovery was stayed by interim judicial orders or because the charging provision was under constitutional challenge.

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