No Interest where no Liability was admitted under the U.P. Sales Tax Act: Allahabad HC [Read Judgment]

The Allahabad High Court in the revision petition of Union of India Thru’ The General Manager & Anr. v. The Commissioner, Trade Tax, U.P., Lucknow held that no interest can be levied under the U.P. Sales Tax Act where the assessee did not admit tax liability by paying the tax by way of ‘protest’.

The revisionist is a Government of India undertaking and it deals in procurement, distribution as well as export of Opium, its derivatives and life saving medicines and exportation thereof. The Assessing Authority has held the revisionist to be a ‘manufacturer’ and has imposed tax liability holding it to be a ‘dealer’ on purchase of Opium. The revisionist hence deposited the amount under protest. The application filed by the revisionist under Section 22 of the Act claiming rectification of the orders and that the interest is not chargeable as the liability of tax was disputed was rejected. Also, a writ petition demanding a refund of amount of purchase tax paid was filed which also held against the petitioner.

The issue in the present matter pertains to the imposition/liability of interest under Section 8(1) of the U.P. Sales Tax Act, 1948.

The revisionist contended that in the A.Y.s 1975-76, 76-77, 77-78, the assessment was made by the assessing authority in the year 1979. The returns were filed by the revisionist without admitting any tax liability. Furthermore, the application of the Act was disputed since the revisionist is not a ‘dealer’, is not liable to tax in view of Article 285 of the Constitution of India and that the procurement of opium and sales and manufactured product are not liable to tax.

The revisionist contended that even the relevant provisions of Section 3-AAAA came into force on 17.4.1979 though with retrospective effect from 1.4.1974, therefore there was no liability at the hands of the revisionist in the relevant assessment years. Further, even the application under Section 22 was rejected by the assessing authority after a long gap on 15.1.2001. Learned counsel for the revisionist has submitted that in fact the writ petition was filed for the refund of the amount of purchase tax which was paid by the revisionist under protest however, since the writ petition was pending for about 11 years and the High Court while dismissing the writ petition has considered the submissions of the revisionist. In fact the revisionist has filed an objection vide letter dated 6.4.1981 which seems to have not been disposed of till date.

The Hon’ble Court after going through the elaborate discussions and contentions raised by the parties, pointed out that the fact that the revisionist is disputed its liability under the Act is not disputed by the respondent opposite party. Moreover there was a bona fide dispute raised by the revisionist regarding liability for tax thereon, thus, it cannot be said to be its admitted taxable turnover and, therefore, there is no liability for payment of interest under Section 8(1) of the Act.