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PETITIONER: KHAZAN CHAND ETC.

       Vs.

RESPONDENT: STATE OF JAMMU AND KASHMIR AND OTHERS

DATE OF JUDGMENT13/02/1984

BENCH:

ACT:      Constitution of India 1950, Articles 14 and 265.      Jammu and  Kashmir General Sales Tax Act 1962 Section 8 (1) (2) and (3)-Whether valid and constitutional.      Taxing Power  of  State-What  is-Comprehends  power  to provide for  collection of  tax and  prescribe  methods  for recovery.      Jammu and  Kashmir General Sales Tax Act 1962-Section 8 Sales Tax  -Payment of-After  prescribed period-Charging  of interest on sales tax-Whether valid and legal.      Section  8   (2)-tax  paid  beyond  prescribed  period- Interest  charged   at  graduated  scale-Permissibility  of- Whether violative of Article 114.      Section 8  (3)-Goods sold  on credit basis-Liability to payment of sales tax by dealer-Whether arises.

HEADNOTE:      The  appellants  and  the  petitioners  were  assessees registered as  dealers under  the Jammu  and Kashmir General Sales Tax  Act, 1962.  They filed  their  quarterly  returns within the time prescribed by the Act but without paying the tax duo  according to  such returns. Some of them also filed revised returns  thereafter. The  tax due  was paid  by  the assessees  after   several  months  and  in  some  cases  by instalments. In  a few cases, the full amount of tax was not paid even by the date the assessment orders came to be made. In the case of most of the Assessees the Assessing Authority levied penalty  under sub-section   (2)  of section 8 of the Act before  making any  assessment. In  other cases,  orders requiring interest  to be  paid were  made  along  with  the assessment orders.      The assessees  who were  appellants in  this Court, had filed writ  Petitions in  the  High  Court  challenging  the validity of  section 8  of the  Act under which interest was sought to  be recovered  as also  the demand  for payment of interest. The High Court dismissed the Writ Petitions.      In the  Appeals and  Writ Petitions  to this  Court the assessees were:      (a)  dealers who  had filed  their returns  but had not           deposited the  full amount of tax due according to           such returns, and the Assessing 859           Authority, having accepted the returns, had issued           a composite  notice of  demand calling  up them to           pay the  amount of  tax along with interest due on           it,      (b)  dealers who  had filed  their returns but had paid           the tax  due according  to such  returns after the           expiry of  the prescribed  time and in whose cases           the Assessing  Authority had  accepted the returns

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         and had  issued a  notice of demand asking them to           pay interest  on the  amount of tax for the period           for which such payment was delayed, and      (c)  dealers who  had filed  their returns  but had not           paid the  amount of  tax  due  according  to  such           returns by  the prescribed  time but  had paid  it           later and notices were issued against them calling           upon them  to  pay  interest  for  the  period  of           default before making any order of assessment. It was contended on their behalf that:      (1)  The charging  of interest  from the  assessees was           violative of  Article 265  of the  Constitution as           there  was  no  legislative  power  in  the  State           Legislature to make a law providing for payment of           interest if  the amount of tax was not paid by the           prescribed  time,   and,  for   this  reason,  the           provisions of  section 8  of the  Act in so far as           they provide  for payment  of  such  interest  are           beyond the  legislative competence  of  the  State           Legislature and, therefore unconstitutional.      (2)  Sub-section (2)  of section  8 of the Act was void           as  infringing  Article  14  of  the  Constitution           because   its   provisions   are   discriminatory,           arbitrary and unreasonable.      (3)  The Assessees  carried on business on credit basis           and  as   by  the  dates  when  they  filed  their           quarterly returns  their customers had not paid to           them  the   price  of  goods  sold  to  them,  the           Assessees were  not bound  to pay  tax along  with           their returns but were bound to pay tax in respect           of these  transactions  of  sales  only  when  the           amount of  sale price  was received  by them  from           their customers.      (4)  In some cases, the amount of interest claimed from           the Assessees  exceeded the  amount of tax paid by           them and,  therefore, the  demand for  such excess           amount of interest was bad in law.      (5)  The Assessees  were not  liable to pay interest on           the amount  of tax  not paid  in  time  without  a           notice of  demand for  payment of  tax being first           issued.      (6)  Interest was levied by the Assessing Authority for           the entire 860           period of  default at  the maximum rate prescribed           by sub-section (2) of section 8 which was contrary           to the provisions of that sub-section. ^      HELD :  The constitutionality  of sub-section  (1), (2) and (3)  of section 8 of the Jammu and Kashmir General Sales Tax Act  1962 upheld.  The  State  however  restrained  from recovering from  the Assessees,  interest on  the amount  of quarterly tax  paid after  the expiry of the date prescribed for payment  by sub-section (3) of section 8 of the Act at a rate other  than the  rate of one per cent per month for the first three  months of  default and  at the  rate of two per cent per  month for  the next three months of default and at the rate  of three  per  cent  for  the  period  of  default exceeding six months. [881 G-H; 882A]      1. (i) The Constitution af India, does not apply in its entirety to  the State  of Jammu  and Kashmir  because  that State holds  a special position in the Constitutional set up of the  country. Article  370 makes  special provisions with respect to  the State of Jammu and Kashmir. Under sub-clause (c) of  clause (1) of Article 370 the provisions of Articles

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1 and  370 apply  in relation  to the  State  of  Jammu  and Kashmir and  under sub-clause  (d) of  clause (1) of Article 370 such  of the  other provisions of the Constitution apply in   relation to  that State  subject to such exceptions and modifications as  the President  may  specify  by  an  order issued with  the concurrence of the Government of the State. In exercise  of the power conferred by clause (1) of Article 370 the  President of  India, with  the concurrence  of  the Government of  the State  of Jammu and Kashmir, has made the Constitution (Application  to Jammu and Kashmir) Order, 1954 (C. O.  48)  which  was  amended  from  time  to  time.  The provisions of  the Constitution of India as in force on June 20, 1964.  and as amended by the Constitution Amendment Acts set out in clause (2) of that Order apply in relation to the State of  Jammu and  Kashmir subject  to the  exceptions and modifications set  out in the said clause. By sub-clause (6) (a) of clause (2) of the said Presidential Order, Clause (1) of Article  246  of  the  Constitution  of  India  was  made applicable to  the State  of Jammu  and Kashmir with certain modifications, while  clause (3) of Article 246 was not made applicable to  the State. Sub-clause (22) of clause 2 of the said Presidential  Order  applies  List  I  in  the  Seventh Schedule  to  the  State  of  Jammu  and  Kashmir  with  the omissions and  modifications  mentioned  in  the  said  sub- clause. Entries  92 and  92A of List I apply to the State of Jammu and  Kashmir in  an unmodified  form. By the same sub- clause, List  II in  the Seventh Schedule, namely, the State List, does  not apply  to the  State of  Jammu and  Kashmir. [870G-H; 871A-B]      (ii) Thus  under section 5 of the Constitution of Jammu and Kashmir the executive and legislative power of the State extends to  all matters with respect to which Parliament has power to make laws for the State under the provisions of the Constitution of  India under  the Constitutional  provisions applicable to  the State  of Jammu and Kashmir, the power of the State  Legislature to  enact a  law relating to taxes on intra-State sale or purchase of goods is the same as that of the Legislatures of other States in India. By sub-clause (7) of  clause  2  of  the  said  Order,  Article  265  is  made applicable to the State of Jammu and Kashmir. Section 114 of the Constitution of 861 Jammu and  Kashmir is in terms identical with Article 265 of the Constitution  of India which provides that "No tax shall be levied or collected except by authority of law." [871B-D]      (iii) The  power to  make a  law with  respect  to  tax comprehends within  it the  power to  levy that  tax and  to determine the  persons who  are liable  to pay such tax, the rates at  which such  tax is  to be paid and the event which will attract  liability in respect of such tax. This is done by the  charging sections  of the  particular tax  law.  The taxing power of the state will also comprehend within it the power to  provide for  quantification of  the  liability  of persons made  liable to  pay the  tax. This  is done  by the provisions relating  to assessment.  The taxing  power  will also  comprehend   within  it   the  power  to  provide  for collection of  tax  including  prescribing  the  methods  of recovery of  the amount  of tax  due if the person liable to pay the tax does not voluntarily pay it. The power to make a law with  respect to  a tax  includes not only what has been set out  above but  also a  power to  make provisions in the relevant statute  with respect  to all matters ancillary and incidental to  the levy, assessment, collection and recovery of tax.  Collection of  tax by the State may be either after the liability is quantified by assessment or may be prior to

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actual assessment  by requiring  the assessee  to pay before any assessment  is made the amount of tax admitted to be due and payable by him. [872B-E]      Whitney v.  Commissioners of  Inland Revenue, L.R. 1926 A.C. 37,  51 H. L. 10 T. C. 79, 110; Chatturam and others v. Commissioner of  Income Tax,  Bihar (1947)  F.C.R.116,  126; (1947) 15  I.T.R 302, 308; Messrs Chatturam Horilram Ltd. v. Commissioner of  Income Tax,  Bihar  and  Orissa,  [1955]  2 S.C.R. 280, 297-8; (1955) 27 I.T.R. 708, 715-6 referred to.      (iv) One  of  the  methods  of  collection  of  revenue adopted by  the Act, is to require that tax due according to the quarterly  returns should  be paid  before  filing  such returns and  it was within the legislative competence of the Legislature of the State of Jammu and Kashmir to provide for recovery of the amount of tax due under quarterly returns if default is  made in  paying such  amount by  the  prescribed time. [872H; 873A]      (v) Payment  of interest  in case of default in payment of tax  is a  means of compelling an assessee to pay the tax due by  the prescribed date. It is a mode of recovery of tax and well within the legislative power of the State. [873C]      2. (i) Inter-State trade and commerce is a matter which affects all  the States in India and thus the whole country. It is  for this  reason that  in the Seventh Schedule to the Constitution the subject of taxes on the sale or purchase of goods taking  place in  the course  of inter-State  trade or commerce has  been put  in List  I and made a Union subject. Taxes on  the sale  or purchase of goods taking place within the State  affect only  those who  carry on  the business of buying and  selling goods  within the  State and, therefore, this subject  has been  put in  List II of Seventh Schedule, namely the State List. [874C-D] 862      (ii) Sales  tax is  the biggest source of revenue for a State and  it is  for the  State to  decide how  and in what manner it  will raise  this revenue  and to  determine which particular transactions  of sale or purchase of goods taking place within  that State  should be taxed and at what rates. and which  particular transactions  of sale  or purchase  of goods should  be exempted  from tax or taxed at a lower rate having  regard   to  the  subject-matter  of  sale,  as  for instance, where  particular goods constitute necessities for the poorer  classes of people or where the goods in question are of such a nature as are required to be exempted from tax or taxed  at a  lower rate  in order  to encourage  a  local industry. Consideration  of these  matters must,  therefore, differ from  State to  State. Similarly  it is  for the each State to  determine the methods it will adopt to collect its revenue from  this source  and to decide which methods would be most  efficacious for  this purpose. If the provisions of the legislation  of every State on a particular topic are to be identical  in every  respect,  there  is  no  purpose  in including that topic in the State List and it may as well be included in the Union List. Merely because the provisions of a State  law differ  from the provisions of other State laws on  the   same   subject   cannot   make   such   provisions discriminatory. [874D-G]      (iii) Interest  is payable  under  sub-section  (2)  of section 8 on the amount  of tax paid after the expiry of the prescribed date  of payment.  The rate  of two  per cent per month and  particularly the rate of three per cent per month can be  said to  be on  the high  side, but  this would  not render  the   provisions  of   that  sub-section   void   or unconstitutional. Providing  for payment of interest in case of delayed  payment of  tax is  a method  usually adopted in

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fiscal legislation to ensure that the amount of tax which is due is  paid by  the prescribed  time and provisions in that behalf form  part of  the recovery  machinery provided  in a taxing statute. It is for the State to provide by what means payment of  tax is  to be enforced and a person who does not pay the amount of tax lawfully and admittedly due by him can hardly complain  of the  measures adopted  by the  State  to compel him to pay such amount. [875A-C]      (iv) Under  the Act,  the same  rates of interest apply both to  the dealer  who has  made default in payment of tax due by  him and  to the  State Government in case of default made by it in making payment of the amount of tax or penalty which has  become refundable  as a result of an appellate or revisional order. The graduated rate of interest provided by sub-section  (2)   of  section   8  cannot,   therefore   be characterised as arbitrary or unreasonable. [875F-G]      3. (i) Under the Act, the liability to pay sales tax is cast upon  the dealer.  This is  made clear by sections 4,6, and clauses (G), (L) (1), (L) (II), and (n) of section 2. It is immaterial  whether the  price of  goods has been paid to the dealer  or is payable to him. The fact that a dealer has sold goods  on credit is, therefore, wholly immaterial. This liability is irrespective of the fact whether the dealer has made profit  or loss  in his  business and  whether  he  has received the sale price or not. [876H; 877A-B]      (ii) Section  64-A of  the Sale of Goods Act, 1930 does not deal  with the  liability of the seller to pay sales tax to the Government. [878E] 863      In the  instant case,  the Assessees  were bound to pay the tax due according to the quarterly returns filed by them before filing such returns and the fact that their customers had not paid to them the sale price did not exempt them from their statutory liability. [878G]      4. The  recovery provisions  of the  Act are  meant for speedy and  prompt collection  of revenue.  These provisions are not  meant for  the benefit of defaulting tax-payers and such defaulters  cannot claim  that the  amount of  interest payable by them on delayed tax payment should be scaled down as if they were entitled to claim relief under a debt-relief law. [879 B-C]      5. Under  sub-section 8  (1) the  tax assessed  or  any other  amount  demanded  is  to  be  paid  within  the  time specified in  the notice  of demand.  Under sub-section (3), the quarterly  tax is  to  be  paid  before  furnishing  the quarterly return  but not  later than  the  date  prescribed under  sub-section   (2)  of   section  7.  Accordingly  the requirement of  sub-section (2)  of section  8 that interest will be  chargeable from  the date  specified for payment in the notice  of demand  cannot be  applied to  the payment of quarterly tax  and necessary  alterations as required by sub section (8)  so section 8 will, therefore have to be made in the provisions  of sub-section (2) in their application to a default made in payment of quarterly tax and sub-section (2) must be  read as  providing that  interest under sub-section (2) will  become payable  from the  date prescribed  by sub- section (3)  of section  8 for  payment  of  quarterly  tax. [880B-F]      Messrs Royal  Boot House  etc. v.  State of  Jammu  and Kashmir and  others. C.M.P.  Nos. 32413  and 32414  of  1983 decided on  January 6, 1984 by P. N. Bhagvati, Ag. C. J. and Venkataramiah and Varadarajan, JJ. referred to.      6. Sub-section (2) of section 8 of the Act provides for different rates of interest depending upon the length of the period of default. [881D]

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    In  the  instant  cases,  interest  on  the  amount  of quarterly tax not paid in time has been imposed at a uniform rate for the full period of default and not according to the scale of  rates prescribed  by sub-section (2) of section 8. [881 B]

JUDGMENT:      ORIGINAL JURISDICTION: Writ Petition Nos. 12695, 13478- 82, 13352 of 1983, 99-100, 133-34, 231, 234-36 of 1984.       [Under article 32 of the Constitution of India]              Civil Appeals Nos. 322-351 of 1984      Appeals by  Special leave  from the  Judgment and Order dated the 24th June, 1983, 19th August, 1983, 1st September, 1983, &  29th December,  1983 of  the Jammu and Kashmir High Court in  Writ Petition  Nos. 430  & 886/82, 364/81, 478/81, 132/82,  338/80,  525/80,  485/80,  67/83,  404/82,  681/82, 679/81, 688/82, 472/81, 678/82, 864 230/81, 229/83,  476/81,  228/83,  471/80,  287/83,  682/82, 344/82 621/82,  302/80, 624/80,  46/83, 912/83,  558/82  and 623/83.      K. K.  Venugopal and  Anil Dev  Singh Satish Vig, S. P. Sharma, L.  K. Gupta,  Vimal Dave, R. C. Kaushik and Subhash Sharma for the Petitioners/Appellants.      Altaf Ahmed for the Respondents.      The Judgment of the Court was delivered by      MADON, J.  This group  of Writ Petitions and Appeals by Special Leave challenges the constitutional validity of sub- sections (1),  (2) and  (3) of  section 8  of the  Jammu and Kashmir General  Sales Tax  Act, 1962 (J & K Act XX of 1962) and seeks  to quash the orders directing the Petitioners and Appellants before  us (herein  after for the sake of brevity referred to  as "the  Assessees") to  pay  interest  on  the amount of  tax due  according to the quarterly returns filed by them but not paid within the prescribed time.      ALL the  Assessees are  registered as dealers under the Jammu and  Kashmir General  Sales Tax Act, 1962 (hereinafter referred to  as "The  Act"). Sub-section (1) of section 7 of the Act  requires every  dealer liable  to pay tax under the Act to  furnish in  the prescribed  form  a  return  of  his turnover for  a year within 120 days from the expiry of that year. Sub-section (2) of section 7 provides as follows:           "Without  prejudice  to  the  provisions  of  sub-      section (1),  every dealer  shall also  furnish in  the      prescribed form  quarterly returns  for each quarter of      the year  within thirty  days from  the expiry  of that      quarter. Every  such return  shall be  accompanied by a      Treasury Receipt  or any other proof of having paid the      tax due on that return."      Thus, the tax due according to a quarterly return is to be paid by the dealer before filing such return and proof of payment of  the tax so due is to accompany such return. Sub- sections (1),  (2), (3),  (7) and (8) of section 8, omitting what is not relevant for our purpose, provide as follows:           "(1)  The   tax  assessed,  or  any  other  amount      demanded, under  this Act  shall be paid in such manner      and within 865      such time  not being  less than  fifteen days  from the      date of  the notice  of 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 sections 16 and 16-A.

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    x    x    x     x    x    x           (2) If  the tax or any other amount due under this      Act is  not paid  by the dealer or any other person, by      whom it  is payable,  within the  period  specified  in      demand notice, the dealer or such other person shall be      liable to  pay interest on the tax or other amount from      the date  it was  payable to the date of actual payment      at the following rates-      (a)  If the  default is  for a  period of not exceeding           three months at 1% per month;      (b)  If the  default is  for a  period exceeding  three           months but less than six months at 2% per month;      (c)  If the  default is  for  a  period  exceeding  six           months at 3% per month:           Provided that where, as a result of an order under      Sections 11,  12, 24  or an  order of  the  Court,  the      amount of  tax or  other  sum  on  which  interest  was      payable under  this sub-section  has been  reduced, the      interest  shall   be  reduced  accordingly  and  excess      interest paid, if any, shall be refunded.           Explanation-Interest shall  be  charged  for  full      month and not for a part of the month.           (3) Quarterly  tax shall be paid before furnishing      a  quarterly   return  but  not  later  than  the  date      prescribed under sub-section (2) of Section 7.           X    X    X    X    X           (7) Where  a dealer  furnishes  a  revised  return      under sub-section  (4) of Section 7 and the tax payable      is more  than the  tax paid  on the  basis of  original      return, he  shall pay  the  extra  tax  payable  before      furnishing the revised return; 866           Provided that if the tax already paid is in excess      of the tax payable, such excess amount shall be treated      to have  been paid  towards the  tax  payable  for  the      quarter next  following the  date  of  furnishing  such      revised return.           (8) Notwithstanding  anything  contained  in  this      Act, if  a dealer  fails to  pay the  tax payable under      this Section, the provisions of sub-section (2) of this      Section,  Section  16  and  Section  16-A  shall  apply      mutatis mutandis to the recovery thereof.           Explanation  (1)-Quarterly   Tax  means   the  tax      payable on  the basis of a quarterly return required to      be furnished by sub-section (2) of Section 7.           Explanation (2)-Interest  under sub-section (2) of      this Section  on the  extra tax payable on the basis of      revised return  shall be  payable from  the  date  next      following the  date on which the tax was payable on the      basis of original return."      The Assessees  filed their quarterly returns within the time prescribed  by the  Act but  without paying the tax due according to  such returns.  Some of them also filed revised returns thereafter.  The tax  due was  paid by the Assessees after several  months and in some cases by instalments. In a few cases,  the full  amount of tax was not paid even by the date the assessment order in their cases came to be made. In the case  of most  of the Assessees, the Assessing Authority levied penalty under sub-section (2) of section 8 of the Act before  making   any  assessment.  In  other  cases,  orders requiring interest  to be  paid were  made  along  with  the assessment orders.  It may  be mentioned that in cases where the assessment  orders were  made, the  returns filed by the Assessees were  accepted as correct. Those Assessees who are Appellants before  us filed  writ petitions in the Jammu and

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Kashmir High  Court challenging the validity of section 8 of the Act under which interest was sought to be recovered from them as  also the demand for payment of interest. These writ petitions were  heard along  with other  writ  petitions  in which other  questions arose.  The High  Court dismissed all these writ  petitions but  made no  order as  to  the  costs thereof.      The petitioners  before the  High Court  fell into four categories, namely- 867           (1)   Dealers who  had neither filed their returns                nor deposited  the tax  due from them and the                Assessing Authority had determined the amount                of tax payable by them and issued a composite                notice of demand calling upon them to deposit                the amount  of tax along with interest due on                it.           (2)   Dealers who  had filed their returns but had                not deposited  the full  amount  of  tax  due                according to  such returns  and the Assessing                Authority, having  accepted the  returns, had                issued a  composite notice  of demand calling                upon them to pay the amount of tax along with                interest due on it.           (3)   Dealers who  had filed their returns but had                paid the  tax due  according to  such returns                after the  expiry of  the prescribed time and                in whose  cases the  Assessing Authority  had                accepted the  returns and had issued a notice                of demand  asking them to pay interest on the                amount of  tax for  the period for which such                payment was delayed.           (4)   Dealers who  had filed their returns and had                paid the tax due according to such returns by                the  prescribed   time  but   the   Assessing                Authority had  not accepted  the returns  and                had enhanced  the amount  of tax  payable  by                these dealers  and  had  issued  a  composite                notice of demand calling upon them to pay the                amount of tax so enhanced along with interest                on it.      We are  concerned in  these Petitions  and Appeals only with dealers  who fall under categories (2) and (3) above as also with  those dealers who had filed their returns but had not paid  the amount of tax due according to such returns by the prescribed  time but  had paid it later and notices were issued against  them calling  upon them  to pay interest for the period of default before making any order of assessment, We are  not concerned  in these  Petitions and  Appeals with those dealers who fall under categories (1) and (4) above.      At the  hearing of  these  Petitions  and  Appeals,  no arguments whatever were advanced before us in support of the contention  that   sub-section  (1)   of   section   8   was unconstitutional and the challenge 868 to  that   sub-section  must,   therefore,  fail.  The  only contentions which were urged at the hearing were as follows:      (1)  The charging  of  interest  to  the  Asssssees  is           violative of  Article 265  of the  Constitution of           India as  there was  no legislative  power in  the           State Legislature  to make  a  law  providing  for           payment of  interest if  the amount of tax was not           paid by  the prescribed time and, for this reason,           the provisions  of section  8 of the Act in so far           as they  provide for  payment of such interest are

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         beyond the  legislative competence  of  the  State           Legislature and, therefore, unconstitutional.      (2)  Sub-section (2) of section 8 of the Act is void as           infringing Article  14 of the Constitution because           its provisions  are discriminatory,  arbitrary and           unreasonable      (3)  The Assessees  carried on business on credit basis           and  as   by  the  dates  when  they  filed  their           quarterly returns  their customers had not paid to           them  the   price  of  goods  sold  to  them,  the           Assessees were  not bound  to pay  tax along  with           their returns but were bound to pay tax in respect           of those transactions of sale only when the amount           of sale  price was  received by  them  from  their           customers.      (4)  In some cases, the amount of interest claimed from           the Assessees  exceeded the  amount of tax paid by           them and,  therefore, the  demand for  such excess           amount of interest was bad in law.      (5)  The Assessees  were not liable to pay any interest           on the  amount of  tax not  paid in time without a           notice of demand for payment of such amount of tax           having been first issued to them.      (6)  Interest was levied by the Assessing Authority for           the entire  period of  default at the maximum rate           prescribed by  sub-section (2)  of section 8 which           was  contrary  to  the  provisions  of  that  sub-           section.      We will first examine the correctness of the contention that the  impugned provisions  of section  8 of  the Act are violative of  Article 265  of  the  Constitution  of  India. Article 265 of the Constitution 869 provides that "No tax shall be levied or collected except by authority of  law." Thus, Article 265 postulates that before any tax  can be  levied and  collected there must be a valid law enacted  by an appropriate legislature imposing such tax and providing  for its  collection. The submission on behalf of  the  Assessees  was  that  under  the  Constitution  the Legislature of  the  State  of  Jammu  and  Kashmir  has  no legislative power to provide for payment of interest in case of late  payment of  tax. It  was not  the contention of the Assessees, as  indeed it  could not be, that the Legislature of the  State of  Jammu and Kashmir had no legislative power to enact  a law  levying a  tax on  the sale  or purchase of goods taking  place within  the State  and making provisions for the  collection of  such tax, because the constitutional position in  this behalf  is clear  and indisputable.  Under clause (1)  of Article  246 of  the Constitution  of  India, Parliament has  exclusive power to make laws with respect to any of  the matters  enumerated in  List I  in  the  Seventh Schedule to the Constitution referred to as the "Union List" and under  clause (3) of the same Article the Legislature of any State has exclusive power to make laws for such State or any  part  thereof  with  respect  to  any  of  the  matters enumerated in  List  II  of  the  Seventh  Schedule  to  the Constitution referred  to as  the "State List". Taxes on the sale  or   purchase  of  newspapers  and  on  advertisements published therein  fall under Entry 92 of the Union List and taxes  on   the  sale  or  purchase  of  goods,  other  than newspapers, where  such sale  or purchase takes place in the course of inter-State trade or commerce fall under Entry 92A of the  Union List,  while taxes  on the sale or purchase of goods, other  than newspapers,  subject to the provisions of Entry 92A  of List I, fall under Entry 54 of the State List.

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Thus, so  far as  sales tax  is concerned,  the Constitution bifurcates the  legislative field  of taxation  between  the Union and  the States.  As a result of this bifurcation, the subject of  taxes on  intra-State sale  or purchase of goods (other than  newspapers) falls  exclusively within the State power of  taxation. The Constitution of India, however, does not apply  in its entirety to the State of Jammu and Kashmir because  that   State  holds   a  special  position  in  the constitutional set  up of  our country.  Article 370  of the Constitution of  India makes special provisions with respect to the  State of  Jammu and Kashmir. Under sub-clause (c) of clause (1)  of Article  370 the provisions of Articles 1 and 370 apply  in relation to the State of Jammu and Kashmir and under sub-clause  (d) of  clause (1)  of Article 370 such of the other  provisions of  the Constitution apply in relation to that  State subject  to such exceptions and modifications as the  President may  specify by  an order  issued with the concurrence of the Govern- 870 ment of  that State.  Thus, by  reason of the application of Article 1  to the  State of  Jammu and Kashmir by sub-clause (c) of  clause (1)  of Article  370 the  State of  Jammu and Kashmir is  one of  the States which from the Union of India and by  virtue of  sub-clause (d)  of  clause  (1)  of  that Article so  far as the provisions of the Constitution, other than those  of  Articles  1  and  370,  are  concerned,  the President of  India has  the power,  with the concurrence of the Government  of the  State of Jammu and Kashmir, to issue an order  specifying which of them shall apply to that State and whether such provisions shall apply in their entirety or subject to  such exceptions  and  modifications  as  may  be specified in  that order.  Article 370  also  envisages  the convening of  a Constituent  Assembly for that State and the framing of  a separate  Constitution for  it. In exercise of the power  conferred  by  clause  (1)  of  Article  370  the President of  India, with  the concurrence of the Government of the State of Jammu and Kashmir, has made the Constitution (Application to  Jammu and  Kashmir) Order, 1954 (C. O. 48). This order  deals with the entire constitutional position of the State  of Jammu  and Kashmir within the framework of the Constitution of India, except only the internal Constitution of the  State Government  to be  framed by  the  Constituent Assembly of  that State.  The Constituent  Assembly  of  the State of  Jammu and  Kashmir  framed  its  own  Constitution repealing and  replacing its  earlier Constitution. This new Constitution,  called   the  "Constitution   of  Jammu   and Kashmir",  was   adopted  and  enacted  by  the  Constituent Assembly of that State on November 17, 1965.      By the  Constitution (Application to Jammu and Kashmir) Order, 1954  (C. O.  48), as  amended from time to time, the provisions of  the Constitution of India as in force on June 20, 1964,  and as amended by the Constitution Amendment Acts set out in clause (2) of that Order apply in relation to the State of  Jammu and  Kashmir subject  to the  exceptions and modifications set  out in the said clause. By sub-clause (6) (a) of clause (2) of the said Presidential Order, clause (1) of  Article  246  of  the  Constitution  of  India  is  made applicable to  the State  of Jammu  and Kashmir with certain modifications with  which we are not concerned, while clause (3) of  Article 246  is not  made applicable  to that State. Sub-clause (22)  of clause  2 of the said Presidential Order applies Lisi I in the Seventh Schedule to the State of Jammu and Kashmir  with the  omissions and modifications mentioned in the  said sub-clause.  These omissions  and modifications are, however, irrelevant for our purpose inasmuch as Entries

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95 and 92A of List I apply to the State of Jammu and 871 Kashmir in  an unmodified form. By the same sub-clause, List II in the Seventh Schedule, namely, the State List, does not apply to  the State  of Jammu  and Kashmir, Section 5 of the Constitution of  Jammu and  Kashmir,  however,  provides  as follows:           "5, Extent  of executive  and legislative Power of      the State-  The executive  and legislative power of the      State extends  to all matters except those with respect      to which  Parliament has  power to  make laws  for  the      State under  the  provisions  of  the  Constitution  of      India."      Thus, under the constitutional provisions applicable to the State  of Jammu  and Kashmir,  the power  of  the  Stage Legislature to  enact a law relating to taxes on intra-State sale or  purchase of  goods is  the  same  as  that  of  the Legislatures of  other States in India. By sub-clause (7) of clause 2  of the  said Order, Article 265 is made applicable to the  State of  Jammu and Kashmir. Further, section 114 of the Constitution  of Jammu and Kashmir is in terms identical with Article  265 of  the Constitution  of India and equally provides that "No tax shall be levied or collected except by authority of law."      The question  which we,  therefore, have to consider is "Whether in  the exercise  of its  power to  make a law with respect to  taxes on  the sale  or purchase  of goods taking place within  the State,  the Legislature  of that State has the  legislative   competence  to  provide  for  payment  of interest on  the amount  of tax  due according to the return filed by  an assessee  but not  paid within  the  prescribed time?"      As was  pointed out  by  Lord  Dunedin  in  Whitney  v. Commissioner of  Inland Revenue(1);  a  passage  cited  with approval by  the Federal  Court in  Chatturam and  others v. Commissioner of  Income Tax,  Bihar,(2) and by this Court in Messrs Chatturam  Horilram Ltd.  v. Commissioner  of  Income Tax, Bihar and Orissa(2):           "Now, there  are three stages in the imposition of      a tax:  there is  the declaration of liability, that is      the part  of the  statute which determines what persons      in respect  of what property are liable. Next, there is      the assessment. 872      Liability does  not  depend  on  assessment.  That,  ex      hypothesis, has  already  been  fixed.  But  assessment      particularizes the  exact sum which a person liable has      to pay.  Lastly, come  the methods  of recovery, if the      person faxed does not voluntarily pay."      It would follow from the above decisions that the power to make  a law  with respect  to a tax comprehends within it the power  to levy that tax and to determine the persons who are liable  to pay  such tax, the rates at which such tax is to be  paid and  the even  which will  attract liability  in respect of  such tax.  This is done by the charging sections of the  particular tax  law. The  taxing power  of the State will also  comprehend within  it the  power to  provide  for quantification of  the liability  of persons  made liable to pay the  tax. This  is done  by the  provisions relating  to assessment. The  taxing power will also comprehend within it the  power  to  provide  for  collection  of  tax  including prescribing the methods of recovery of the amount of tax due if the person liable to pay the tax does not voluntarily pay it. The  power to  make a law with respect to a tax includes not only  what has  been set  out above  but also a power to

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make provisions  in the relevant statute with respect to all matters ancillary  and incidental  to the  levy, assessment, collection and  recovery of  tax. Collection  of tax  by the State may  be either  after the  liability is  quantified by assessment or may be prior to actual assessment by requiring the assessee to pay before any assessment is made the amount of tax  admitted to  be due and payable by him. This is done by making  provisions such  as those  for advance payment of tax and for self-assessment contained in the Income Tax Act, 1961. This  is also what sub-section (3) of section 8 of the Act does  by requiring that the quarterly tax payable on the basis of a quarterly return required to be furnished by sub- section (2)  of section  7 shall  be paid  before furnishing such return.  This is  a mode  of collection  of revenue  in advance before  quantification of  the actual  tax liability and the Legislature would be well within its right and would competent to  provide for  recovery of  such amount if it is not by the prescribed time. The Act, as its long title shows is "An  to provide for the levy of a general tax on the sale or purchase  goods in  the State  and for  other matters  of connected therewith"  a one  of the methods of collection of revenue adopted  by it  is to require that tax due according to the  quarterly returns  should be paid before filing such returns and  it was within the legislative competence of the Legislature of the State of Jammu and Kashmir to provide for recovery of the amount of tax due under quarterly 873 returns if  default is  made in  paying such  amount by  the prescribed time. This has been done by the State Legislature by enacting  subsection (8)  of section  8 under  which  the provisions of  sub-section (2)  of section 8 and of sections 16 and  16-A are  made applicable  mutatis mutandis  to  the recovery of  tax payable  by a dealer if he fails to pay it. Sub-section  (2)  of  section  8  provides  for  payment  of interest, section 16 provides for recovery of tax as arrears of land  revenue, and  section 16-A  provides for issue of a garnishee notice  to a person from whom money is due, or may become due, to the assessee or to a person who holds, or may subsequently hold,  money for  or on account of the assessee to pay to the Assessing Authority as much of the money as is sufficient to  pay the  amount due by the assessee by way of tax. Thus, payment of interest in case of default in payment of tax  is a  means of compelling an assessee to pay the tax due by  the prescribed date. It is a mode of recovery of tax and well within the legislative power of the State.      The challenge  to sub-section  (2) of  section 8 on the ground that  the provisions  of  that  sub-section  infringe Article 14 of the Constitution is a twofold one, namely:      (1)  that the said sub-section is discriminatory, and      (2)  that it is arbitrary and unreasonable.      Sub-clause  (4)   of  clause   2  of  the  Constitution (Application  to  Jammu  and  Kashmir)  Order,  1954,  makes Article 14  of the  Constitution of  India applicable to the State of  Jammu and  Kashmir. With  respect to the charge of discrimination, it  was submitted  that such  high rates  of interest for  non-payment of  tax are not to be found in the sales tax law of any other State and, therefore, by enacting the said  sub-section (2)  of section  8 and  providing  for payment of  interest at  the rate  of two per cent per month when the period of default exceeded three months but did not exceed six  months and for interest at the rate of three per cent per month if the default was for a period exceeding six months, dealers  in the  State of  Jammu  and  Kashmir  were hostilely discriminated  against as compared with dealers in other States.  This argument wholly overlooks the very basis

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of the scheme of distribution of legislative power contained in our  Constitution. Our  Constitution is  federal  in  its structure and  a salient  feature of  a  federal  polity  is distribution  of   legislative  and   administrative  powers between the  federated unit  and the  federating units, that is, between the federal government 874 and the State governments. Thus, matters in respect of which our Constitution-makers felt that there should be uniformity of law  throughout the  country have  been placed by them in the Union  List (List  I in  the  Seventh  Schedule  to  the Constitution) conferring  exclusive power upon Parliament to make laws  with respect  thereto, while  matters which  they felt were  of local  concern and may require laws to be made having regard  to the particular needs and peculiar problems of each  State have  been assigned to the State Legislatures by placing them in List II of the Seventh Schedule, that is, the State  List. Inter-State  trade and commerce is a matter which affects  all the  States in  India and  thus the whole country. It  is for this reason that in the Seventh Schedule to the  Constitution the  subject of  taxes on  the sale  or purchase of  goods taking place in the course of inter State trade or  commerce has  been put  in List I and made a Union subject. Taxes on the sale or purchase of goods taking place within the State affect only those who carry on the business of buying and selling goods within the State and, therefore, this subject  has  been  put  in  List  II  of  the  Seventh Schedule, namely,  the State  List. Sales tax is the biggest source of  revenue for  a State  and it  is for the State to decide how and in what manner it will raise this revenue and to  determine  which  particular  transactions  of  sale  or purchase of  goods taking  place within that State should be taxed and  at what  rates, and which particular transactions of sale  or purchase of goods should be exempted from tax or taxed at a lower rate having regard to the subject-matter of sale, as  for instance,  where particular  goods  constitute necessities for  the poorer  classes of  people or where the goods in question are of such a nature as are required to be exempted from  tax or  taxed at  a lower  rate in  order  to encourage a  local industry.  Consideration of these matters must, from the nature of things, differ from State to State. Similarly, it  is for each State to determine the methods it will adopt  to collect  its revenue  from this source and to decide which  methods would  be most  efficacious  for  this purpose. The  provisions of  the sales tax law of each State must: therefore, necessarily differ in various respects from the provisions  of sales  tax laws  of other  States. If the provisions of the legislation of every State on a particular topic are  to be  identical in  every respect,  there is  no purpose in including that topic in the State List and it may as well  be included  in the  Union List. Merely because the provisions of  a State  law differ  from the  provisions  of other State  laws on  the  same  subject  cannot  make  such provisions discriminatory.      The second  part of  the challenge under Article 14 was with 875 respect to the rates at which interest is payable under sub- section (2) of section 8 on the amount of tax paid after the expiry of  the prescribed  date of  payment. It is true that the rate of two per cent per month and particularly the rate of three  per cent  per month  can be said to be on the high side,  but  we  fail  to  see  how  this  would  render  the provisions of  that sub-section  void  or  unconstitutional. Providing for payment of interest in case of delayed payment

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of tax  is a method usually adopted in fiscal legislation to ensure that  the amount  of tax  which is due is paid by the prescribed time  and provisions  in that behalf form part of the recovery  machinery provided  in a taxing statute. It is for the  State to provide by what means payment of tax is to be enforced  and a person who does not pay the amount of tax lawfully and  admittedly due  by him  can hardly complain of the measures  adopted by the State to compel him to pay such amount. It  neither lies  in the  default’s mouth to protest against the  rate of  interest charged to him nor is it open to him  to dictate  to the State the methods which it should adopt for  recovering the  amount of tax due by him. In this connection, it  is pertinent to note that under section 10-B of the  Act, where as a result of an order made in appeal or revision, a refund has become due to the dealer or any other person on  account of tax or penalty found to have been paid in excess,  the State  Government is required to pay to such dealer or  person simple interest at the rate of 12 per cent per annum  on the  amount of  such refund from the date such payment was  made upto  the date  on which  such refund  was granted and in case of delay in refunding the excess amount, interest at  the rate  of 24 percent per annum if the refund is granted  beyond a  period of  three months out before the expiry of  six months  from the  date of  the  appellate  or revisional order and at the rate of 36 per cent per annum if it is  granted thereafter.  Thus, under  the Act,  the  same rates of  interest apply  both to  the dealer  who has  made default in  payment of  tax due  by him  and  to  the  State Government in  case of  default made by it in making payment of the  amount of tax or penalty which has become refundable as a  result  of  an  appellate  or  revisional  order.  The graduated rates  of interest  provided by sub-section (2) of section 8  cannot, therefore,  be characterized as arbitrary or unreasonable.      The remaining  contentions are directed not against the constitutionality of  the impugned  statutory provisions but against the  legality of  the impugned  orders. The first of these contentions  is that  the assessees, having sold goods on credit  basis, are  not liable  to pay  the quarterly tax until they have received from their custo- 876 mers the  price of  goods sold  to them.  This contention is founded upon as assumption that the liability to pay the tax under the Act is contigent upon receipt of the sale price-an assumption not warranted by the provisions of the Act. Under the Act,  the liability  to pay  sales tax  is cast  upon  a dealer. This  is made clear by section 4 of the Act which is headed "Liability  to tax  under  this  Act."  The  relevant provisions of sub-section (1) of section 4 are as follows:           "Subject to  the provisions  of  this  Act,  every      dealer, except  the one  dealing  exclusively  in  gods      declared tax  free under  Section 5, shall pay for each      year  tax  on  his  taxable  turnover  at  a  rate  not      exceeding twenty-five  per cent of such turnover as may      be determined  by the  Government and  notified by  the      Government in the Government Gazette and such tax shall      be charged on the sale of goods once only.      X    X    X    X    X    X"      Under section  6, a dealer who has become liable to pay under section 4 is prohibited from carrying on business as a dealer until  he has  been registered in accordance with the provisions of  the Act.  Clause (g)  of section 2 inter alia defines a  ’dealer’ as  meaning "any  person who  carries on (whether regularly  or otherwise)  the business  of selling, purchasing or  distributing goods,  directly or  indirectly,

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for  cash  or  for  deferred  payment,  or  for  commission, remuneration, or  other valuable  consideration". Clause (L) (1) defines  the expression  "sale" with all its grammatical variations and  cognate expressions as meaning "any transfer of  property   in  goods,   otherwise  than   by   mortgage, hypothecation, charge  or pledge,  by any person for cash or deferred    payment    or    for    any    other    valuable consideration...". Clause  (L) (II)  defines "sale price" as meaning inter  alia "the  amount of  valuable  consideration paid or  payable to a dealer for any sale made including any sum paid  or payable  for anything  done by  the  dealer  in respect of  the goods  at the  time of  or  before  delivery thereof other  than the  actual cost  of outward  freight or delivery or  the cost  of installation  when  such  cost  is separately  charged."   Under  clause   (n)  of  section  2, "turnover" includes the aggregate of the amounts of sale and purchase and  parts of  sale and purchase made by any dealer whether as  principal, agent or in any other capacity. It is clear from the above statutory provisions that the liability to pay sales tax is that of the dealer and not of the person who purchases  goods from  him and for the purposes of sales tax, it is 877 immaterial whether  the price  of goods has been paid to the dealer or  is payable to him The fact that a dealer has sold goods on  credit is,  therefore, wholly immaterial. This Act imposes the  liability to  pay sales  tax on  dealers.  This liability is  irrespective of  the fact  whether he has made profit of  loss in  his business and whether he has received the sale  price or  not. When the liability to pay sales tax is cast  by the statute on the dealer, he may pass on to his customer the amount of tax payable by him but he can only do so as  a term  of the contract of sale. Unless and until the purchaser agrees  to pay  to his  vendor the amount of sales tax payable  by the vendor, he is not bound to pay it to the vendor. Where,  however, the  purchaser agrees  to pay  such amount, it  forms part  of the sale price on which sales tax would be  payable to  the State. Under the sales tax laws of some States,  a dealer  is permitted  to recover  or collect from the  purchaser the  amount of sales tax payable by him. Even then the dealer can recover or collect such amount only if the  purchaser agrees  to pay  it. In  such cases,  under those sales tax laws the amount so recovered or collected is not treated, either in whole or in part, as part of the sale price and  not taxed,  provided the amount not taxed is paid over to  the State  or tax  on the  full  amount,  that  is, including the  amount of  tax so  recovered or collected, is required to  be paid  along with  the quarterly  or  monthly return, as  the case  may  be,  and  then  at  the  time  of assessment refund  of the  whole or  part of  the tax on the amount so collected is given to the dealer.      In this connection, a reference was made to section 64- A of  the Sale  of Goods  Act, 1930,  (substituted  for  the original section  64-A by the Sale of Goods (Amendment) Act, 1963, under  which unless a different intention appears from the terms  of the  contract, in  the event  of any  duty  of customs or  excise on  goods or  any  tax  on  the  sale  or purchase of  goods being  imposed, increased,  decreased  or remitted in  respect of  any goods  after the  making of any contract for  the sale  or purchase  of such  goods, without stipulation as to the payment of such duty or tax where duty or tax  was not  chargeable at the time of the making of the contract, or  for the  sale or  purchase of  such goods duty paid or  tax paid  where duty  or tax was chargeable at that time, if  such imposition  or increase  so takes effect that

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the duty  or tax  or increased  duty or tax, as the case may be, or  any part  of such duty or tax is paid or is payable, the seller  may add so much to the contract price as will be equivalent to  the amount paid or payable in respect of such duty or  tax or  increase of  duty or  tax,  and  is  to  be entitled to  be  paid  and  to  sue  for  and  recover  such addition, and if 878 such  decrease   or  remission  so  takes  effect  that  the decreased duty  or tax  only, or no duty or tax, as the case may be,  is paid or is payable, the buyer may deduct so much from the  contract  price  as  will  be  equivalent  to  the decrease of  duty or tax or remitted duty or tax, and is not to be  liable to  pay or  be sued  for in  respect  of  such deduction. We  do not find Section 64-A of the Sale of Goods Act to  have any  relevance to  the point  before  us.  That section is  subject to  a different intention appearing from the terms of the contract and gives a right to the seller to add the  amount of  customs or  excise duty  or sales tax or purchase tax to the price of goods where such duty or tax is imposed for  the first  time after  the contract  of sale is made, where the contract does not contain any stipulation as to payment  of duty  or tax,  or in  case the goods are sold duty paid or tax paid, where the rate of such duty or tax is increased, to  add the  extra duty  or tax  to the  contract price. That  section also gives a corresponding right to the buyer to  deduct so  much from the contract price as will be equivalent to  the decrease  of duty or tax or remitted duty or tax where any decrease or remittance in duty or tax takes place after the making of the contract of sale. Section 64-A thus provides  for the  rights and liabilities inter se of a seller and  buyer of goods, where any customs or excise duty or any  sales tax  or purchase  tax is  imposed or  its rate increased or  decreased, or  such duty  or tax  remitted  in whole or  in part  after the making of the contract of sale. This section  does not deal with the liability of the seller to pay sales tax to the Government.      Under section 8-B of the Act, where a registered dealer realizes any  amount by way of tax from the purchaser, he is required to  deposit it in the Government Treasury or in the office of the Deputy Sales Tax Commissioner within one month of its  realization. Where  a dealer so deposits the tax, he would get credit for it against the amount of tax payable by him, but  from this it does not follow that where he has not been able  to recover  the amount  of tax or sale price from his customers,  he is not bound to comply with the statutory requirements of  sub-section (3) of section 8 under which he has to  pay tax  according to the quarterly return furnished by him  before the  date prescribed  for filing such return. The Assessees  were, therefore,  bound to  pay the  tax  due according to  the quarterly  returns filed  by  them  before filing such  returns and  the fact  that their Customers had not paid  to them  the sale  price did  not exempt them from their statutory liability in this behalf.      The  next   contention,  namely,   that  the  Assessing Authority was 879 not  entitled  to  impose  interest,  the  amount  of  which exceeded the  amount of  tax in respect of which default had been made  in paying  it by  the prescribed date, is equally without any  substance. No reason was advanced in support of this contention  and we  fail to  see on  what principle the Hindu Law rule of damdupat can be made applicable to a sales tax legislation.  The recovery  provisions of  the  Act  are meant for  speedy and  prompt collection  of revenue.  These

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provisions are  not meant for the benefit of defaulting tax- payers and  such defaulters  cannot claim that the amount of interest payable  by them  on delayed  tax payment should be scaled down as if they were entitled to claim relief under a debt relief  law.  In  taking  up  such  a  contention,  the concerned Assessees have overlooked the fact that the amount of interest  payable by  them would  not have  exceeded  the amount of  tax not  paid by  them by the prescribed date had they paid  the tax  due earlier  as also  the fact that they would not  have been  liable to pay any amount at all by way of interest  had they  paid the  tax due  by the  prescribed date.      We now  turn to  the contention  that the Assesses were not liable  to pay  interest unless  a notice  of demand was first issued  to them calling upon them to pay the amount of quarterly tax  due from  them. In support of this submission reliance placed upon subsections (1) and (2) of section 8 of the Act.  In our  opinion, reliance  placed upon  those sub- sections is  misconceived for in doing so the Assessees have overlooked the  other relevant provisions of section 8. Sub- section (1)  of section 8 requires that the tax assessed, or any other amount demand, under the Act is to be paid in such manner and  within such  time, not  being less  than fifteen days from  the date  of the  notice of  demand,  as  may  be specified in  the notice  and it  is when default is made in making such  payment that  the  whole  of  the  amount  then remaining  due   becomes  recoverable   in  accordance  with sections 16  and 16-A of the Act. Sub-section (2) of section 8 lays  down that  if the  tax or any other amount due under the Act  is not  paid within  the period  specified  in  the notice of  demand, the  defaulter will  become liable to pay interest on  the tax  or other  amount from  the date it was payable to the date of actual payment at the rates mentioned in the said sub-section. Under sub-section (3) of section 8, quarterly tax  is to be paid before furnishing the quarterly return  but   not  later  than  the  date  prescribed  under subsection (2)  of section  7. As  we have  seen, under sub- section (2)  of  section  7  quarterly  returns  are  to  be furnished within  thirty days from the expiry of the quarter and such  return is  to be accompanied by a Treasury Receipt or any other proof of payment of tax due 880 according to  that return. This requirement implies that the tax due  according to  a quarterly  return has  to  be  paid before the  filing of  that return  by the  prescribed  date therefor. Under  sub-section (8)  of section  8, if a dealer fails to  pay  the  tax  payable  under  that  section,  the provisions of  sub-section (2)  of section 8 and of sections 16 and  16-A are  to apply  mutatis mutandis to the recovery thereof. Thus,  provisions of  sub-section (2)  of section 8 apply when  quarterly tax  is not  paid before  furnishing a quarterly return  under sub-section  (3) of section 8 but by the express  terms of  sub-section (8)  of  section  8,  the provisions of  sub-section (2) of that section will apply to the recovery  of quarterly  tax not  in their  entirety  but "mutatis mutandis".  Under sub-section  (1) the tax assessed or any  other amount  demanded is to be paid within the time specified in  the notice  of demand.  Under sub-section (3), the quarterly  tax is  to  be  paid  before  furnishing  the quarterly return  but not  later than  the  date  prescribed under sub-section (2) of section 7. Thus, by sub-section (3) the time  for payment of quarterly tax is not made dependent upon the  issuance of  a notice  of demand  and the date for payment to  be specified  in it  but it is statutorily fixed and, as under sub-section (8) of section 8 the provisions of

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sub-section  (2)  are  to  apply  mutatis  mutandis  to  the recovery of quarterly tax, necessary changes must be made in the provisions  of sub-section  (2) in  their application to the recovery of quarterly tax payable under sub-section (3). Accordingly,  the   requirement  of   sub-section  (2)  that interest will  be chargeable  from the  date  specified  for payment in  the notice  of demand  cannot be  applied to the payment  of  quarterly  tax  and  necessary  alterations  as required by sub-section (8) will, therefore, have to be made in the provisions of sub-section (2) in their application to a default  made in  payment of quarterly tax and sub-section (2) must  be read  as providing  that  interest  under  sub- section (2)  will become payable from the date prescribed by sub-section (3)  of section  8 for payment of quarterly tax. There is  thus no  substance in this contention. We may also mention that  in the case of certain other orders made under the Act  demanding interest on default being made in payment of quarterly  tax, the  challenge thereto on the ground that no interest  can be  charged unless a notice has been issued demanding payment  of quarterly  tax was  negatived by  this Court in  Messrs Royal Booi House etc. v. State of Jammu and Kashmir and others. 881      We now  turn to  the last  contention raised before us, namely, that  the Assessing  Authority was  not entitled  to charge interest  at the  maximum rate  but could only charge interest at  the graduated rate specified in sub-section (2) of section 8.      It appears  that in  most, if  not in all, orders which have been  impugned in these Petitions and Appeals, interest on the  amount of  quarterly tax  not paid  in time has been imposed at a uniform rate for the full period of default and not according  to the  scale of  rates  prescribed  by  sub- section (2)  of section 8. Thus, where the default was for a period exceeding  three months but not exceeding six months, interest has  been levied  for the full period of default at the rate of two per cent per month and where the default was for a  period exceeding  six months, interest at the rate of three per  cent per  month has  been levied  for the  entire period of  default. In our opinion, this is not warranted by the terms  of sub-section, (2) of section 8 of the Act. Sub- section  (2)   provides  for  different  rates  of  interest depending upon  the length  of the period of default. If the default was  for a  period not  exceeding three months, then the interest  could only  be charged  at the rate of one per cent per  month and  where the  default  was  for  a  period exceeding three  months but  not exceeding  six months, then the interest which could be charged can only be one per cent month for the first three months of default and two per cent per month  for the  remaining period In the same way, if the default was  for a  period exceeding  six  months,  interest could be  charged only at the rate of one per cent per month for the  first three  months of  default, at the rate of two per cent  per month for the next three months of default and at the  rate of  three per  cent per month for the remaining period of  default. The  grievance made  by the Assessees is justified and their challenge to the impugned orders on this ground must, therefore, succeed.      In the  result, though  we uphold the constitutionality of sub-sections  (1), (2)  and (3) of section 8 of the Jammu and Kashmir  General Sales  Tax Act,  1962, we make the rule issued in each of the Writ Petitions before us absolute only to the  extent that  we restrain  the State  and  Jammu  and Kashmir  from   recovering  from   the  Assessees   who  are Petitioners before  us interest  on the  amount of quarterly

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tax paid after the expiry of the date prescribed for payment thereof by sub-section (3) of section 8 of the Act at a rate other than  the rate of one per cent per month for the first three months  of default and at the rate of two per cent per month for the next three 882 months of  default and  at the  rate of  three per  cent per month for  the period  of default  exceeding six  months. We also allow  the Appeals  filed  by  the  Assessees  who  are Appellants before  us to  the same limited extent by setting aside the  order of dismissal of their writ petitions passed by the  Jammu and  Kashmir High  Court and  making the  rule issued in  each of those writ petitions absolute only to the limited extent specified above.      On an  application made  to us in that behalf, we grant to the  Petitioners and  Appellants before  us three months’ time from  today to  make payment  of the amount of interest due and  payable by  them according to this Judgment and the State of  Jammu and Kashmir will not until the expiry of the said period  of three  months take any steps to recover such amount  of   interest  from   any  of  the  Petitioners  and Appellants.      As the Petitioners and Appellants before us have partly succeeded in  the Writ  Petitions and Appeals filed by them, we make no order as to the costs of these Writ Petitions and Appeals. N.V.K                    Appeals & Petitions partly allowed. 883