http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 4  

PETITIONER: SALES TAX OFFICER, SECTOR I KANPUR & ANR.

       Vs.

RESPONDENT: M/S. DWARIKA PRASAD SHEO KARAN DASS

DATE OF JUDGMENT19/11/1976

BENCH: KHANNA, HANS RAJ BENCH: KHANNA, HANS RAJ KRISHNAIYER, V.R.

CITATION:  1977 AIR  533            1977 SCR  (2) 133  1977 SCC  (1)  22

ACT:             Uttar   Pradesh   Sales  Tax  Act,    1948--Sec.   8(9),         8(1A)--Demand notice for tax assessed--Subsequent  reduction         in  tax  liability in appeal and  revision.If  fresh  demand         notice necessary--Liability to pay interest on tax due.

HEADNOTE:             The respondent firm was assessed to sales tax under  the         Uttar  Pradesh  Sales Tax Act 1948 for the  assessment  year         1958-59.   On an appeal filed by the respondent the  quantum         of  tax was reduced.  On a revision filed by the  respondent         made  various payments towards the amount of tax  found  due         from  time to time.  ’the Revenue initiated proceedings  for         recovering the balance of the tax and realising interest  at         the  rate  of 18 per cent.  The Revenue did  not  issue  any         fresh notice of demand after the tax was reduced but  origi-         nally  demand  notice for the entire sum for which  the  re-         spondent was assessed was issued.             In a Writ Petition filed by the assessee the High  Court         quashed the recovery proceedings on the ground that a  fresh         notice  of demand should have been issued to the  respondent         in respect of the amount as reduced in appeal and the  revi-         sion.         Allowing the appeal by special leave,             HELD:  (1)  Section 8 of the Act was amended  by  adding         sub-section  (9) thereto by U.P. Sales Tax Amendment Act  (3         of 1971).  The said sub-section provides that  notwithstand-         ing any judgment, decree etc. where any notice of assessment         and  demand  in respect of any tax or other dues  is  served         upon  a  dealer  by an Assessing Authority and  where  as  a         result  of  appeal  or revision filed by  the  assessee  the         amount  of tax is reduced it shall not be necessary for  the         Assessing Authority to serve upon the dealer a fresh notice.         The High Court judgment was, therefore, erroneous. [135F, H,         136 A-E]         Firm  Parshuram Rameshwar Lal v. State of U.P. 33,  STC  540         approved.             (2)  Section  8(1A) of the Act provides for  payment  of         interest  at the rate of 18 per cent on the tax  amount  re-         maining  due from  the expiry of the time specified  in  the         notice  of demand, till the. date of payment. The  court  in         Haji  Lal Mohammad vs. State of U.P. has held that  the  li-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 4  

       ability to pay the interest under section 8(IA) is automatic         and arises by operation of law and that it is not  necessary         to  mention the amount of interest in the recovery  certifi-         cate.                                                  [134 E-H, 135 A-E]         Haji  Lal  Mohd.  Biri Works v. State of U.P.,  32  STC  496         followed.

JUDGMENT:         CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2061/1971.             (From the Judgment and Order dated the 13th May, 1970 of         the  Allahabad  High Court in Civil Misc. Writ No.  1249  of         1970).         S.C. Manchanda and O.P. Rana, for the Appellant.         J. Ramamurthi, (amicus curiae) for Respondents.         The Judgment of the Court was delivered by         134             KHANNA,  J.  This appeal on certificate is  against  the         judgment  of  Allahabad High Court whereby  the  High  Court         accepted  petition under article 226 of the Constitution  of         India  filed  by  the respondent and  quashed  the  recovery         proceedings initiated by the appellant.             The respondent-firm was assessed to sales tax under  the         U.P.  Sales  Tax Act, 1948 (hereinafter referred to  as  the         Act) for  the assessment year 1958-59.  The respondent  went         up  in  appeal  and the tax demand was reduced   in  appeal.         On  revision  filed by the respondent the  total  demand  of         sales tax was further reduced.  The respondent made  various         payments towards the amount of tax found due from him.   The         sales tax authorities initiated proceedings for’ recovering’         the balance of the tax and realising interest at the rate of         18 per cent from February 1, 1964 on part of the tax demand.         These recovery proceedings were challenged by the respondent         by means of writ petition on the ground that a fresh  notice         of  demand should have been issued to him in respect of  the         amount  as reduced   in appeal and revision.    Unless  that         was done, the respondent could not be treated as a  default-         er.   The liability for payment of interest of the  respond-         ent was also questioned.   The High Court accepted the first         contention and quashed the recovery proceedings.             We  have heard Mr.   Manchanda on behalf of  the  appel-         lant. No one appeared on  behalf  of  the  respondent.   Mr.         Ramamurthi,  however, argued the case amicus curiae.   After         giving  the matter our consideration, we are of the  opinion         that  the judgment  under’ appeal cannot be sustained.             Two  questions arise for determination in  this  appeal.         The  first question is whether the respondent is  liable  to         pay  interest on the amount due from him as sales tax.   The         answer  to this question, in our opinion, should be  in  the         affirmative in view of the provisions of sub-section (1A) of         section  8  of the Act.  The aforesaid sub-section  as  also         sub-section (1) and (8) of that section read as under:                       "8. Payment and recovery of tax.--(1) The  tax                       assessed under this Act shall be paid in  such                       manner  and in such instalments, if  any,  and                       within such time, not being less than  fifteen                       days from the date of service of the notice of                       assessment  and demand as may be specified  in                       the  notice. In default of such  payment,  the                       ,,whole of the amount then remaining due shall                       become  recoverable  in accordance  with  sub-                       section (8).                             (1-A)   If the tax payable  under   sub-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 4  

                     section   (1)  remains unpaid for  six  months                       after the expiry of the time specified in  the                       notice  of  assessment  and  demand  or,   the                       commencement  of the Uttar  Pradesh  Bikri-Kar                       (Dwitiya    Sanshodhan)    Adhiniyam,    1963,                       whichever is later, then, without prejudice to                       any  other liability or penalty which the  de-                       faulter  may,  in  consequence  of  such  non-                       payment, incur under this Act, simple interest                       at  the  rate of eighteen per cent  for  annum                       shall run on the amount then remain-                       135                       ing  due from the date of expiry of  the  time                       specified  in  the said notice,  or  from  the                       commencement  of  the said Adhiniyam,  as  the                       case may  be, and shall be added to the amount                       of  tax and be deemed for all purposes  to  be                       part of the                   tax:                             Provided  that  where  as  a  result  of                       appeal, revision or reference, or of any other                       order  of a competent court or authority,  the                       amount of tax is varied, the interest shall be                       recalculated accordingly.                             Provided  further that the  interest  on                       the  excess   amount of tax payable  under  an                       order  of enhancement shall run from the  date                       of  such order if such excess  remains  unpaid                       for six months after the order  ......                             (8) Any tax or other dues payable to the                       State  Government  under  tiffs  Act,  or  any                       amount of money which a person is required  to                       pay  to  the assessing  authority  under  sub-                       section  (3)  or for which  he  is  personally                       liable  to the assessing authority under  sub-                       section (6) shall be recoverable as arrears of                       land revenue."         This  Court considered the above provisions in the  case  of         Haji Lal Mohd. Biri WOrks v. State of U.P.(1) and held  that         the liability to pay interest under section 8(1-A) is  auto-         matic  and arises by operation of law.  It was  further  ob-         served in that case that .it is not necessary for the  sales         tax officer to specify the amount of interest in the  recov-         ery  certificate.   We may add that there is no  dispute  in         the  present case that the notice of assessment  and  demand         was  served  upon the  assessee-respondent.  The  respondent         cannot, therefore, escape liability for payment of interest.             The  second question which arises for  consideration  is         whether  it was necessary for the sales tax  authorities  to         issue  a fresh notice of demand to the respondent after  the         tax assessed by the sales  tax officer was reduced on appeal         and further reduced on revision.  So far as this question is         concerned,   we find that sub-section (9) has been added  in         section’8  of the Act by the U.P. Sales Tax (Amendment)  Act         (3 of 1971).   The aforesaid sub-section reads as under:                       "(9)  Notwithstanding anything  contained   in                       sub-section (1) and (1-A) and  notwithstanding                       any  judgment, decree or order of  any  court,                       tribunal or other authority, where any  notice                       of assessment and demand in respect of any tax                       or other dues under this Act is served upon  a                       dealer  by  an  assessing  authority  and   an                       appeal, revision or other proceeding is  filed                       in respect of such tax or dues, then-                             (a)   where as a result of such  appeal,                       revision or proceeding the amount of such  tax

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 4  

                     or  other  dues  is  enhanced,  the  assessing                       authority shall serve upon the dealer a  fresh                       notice only in respect of the amount by  which                       such  tax or other dues are enhanced  and  any                       proceeding in relation                       (1) 32 S.T.C. 496.                       136                       to the amount specified in the notice  already                       served  upon him before the disposal  of  such                       appeal,  revision or other proceeding  may  be                       continued  from  the stage at which  it  stood                       immediately before such disposal;                             (b)  where as a result of  such  appeal,                       revision  or other proceeding  the amount   of                       such  tax or other dues  is reduced,--                             (i)  it shall not be necessary  for  the                       assessing authority to serve upon the dealer a                       fresh notice;                             (ii)  if any recovery   proceedings  are                       pending,   the assessing authority  shall-give                       intimation  of the fact of such  reduction  to                       the  Collector who shall thereupon take  steps                       for the recovery of only the reduced  amount.;                       and                             (iii) any proceedings initiated  on  the                       basis  of  the notice or notices  served  upon                       the dealer before the disposal of such appeal,                       revision  or other proceeding,  including  any                       recovery  proceedings  may  be  continued   in                       relation  to  the amount so reduced  from  the                       stage  at  which it stood  immediately  before                       such disposal;                             (c)  no fresh notice shall be  necessary                       in  any  case where the amount of the  tax  or                       other  dues is not varied as a result of  such                       appeal, revision or other proceeding."         It is apparent from clause (b) of sub-section (9) that where         as  a  result of appeal, revision or other  proceedings  the         amount of the tax or other dues is reduced, it shall not  be         necessary  for  the assessing authority to  serve  upon  the         dealer  a fresh notice.   The Allahabad High Court has  also         taken the same view in the case of Firm Parshuram  Rameshwar         Lal v. State of U.P.(3)             In  view of the above, we accept the appeal,  set  aside         the judgment of the High Court and dismiss the writ petition         filed by the respondent.   The parties in the  circumstances         shall bear their own costs throughout.         P.H.P.                                          Appeal   al-         lowed.         (1) 33 S.T.C. 540         137