CASE BRIEF: FOOD CORPORATION OF INDIA Vs. STATE OF HARYANA & ANR. On 16th January 2000.
DECIDING AUTHORITY: SUPREME COURT
DATE OF JUDGMENT: 16/02/2000
BENCH: N.S.Hegde, Ruma Pal
FACTS: When the State of Haryana tried to impose sales-tax on levy transactions undertaken by the appellant in the year 1973, the same was challenged by the appellant before the Punjab & Haryana High Court on the ground that the said transactions did not amount to either purchase or sale. The court by its judgement dated 6th of January, 1997 declared the law as follows : We, therefore, answer the Principal common point holding that the levy procurement is a sale/purchase and, therefore, falls within the purview of Entry 54 List II of the Seventh Schedule to the Constitution. The States were competent to levy sales/purchase tax on such transactions.
It also ultimately dismissed the appeal of the appellant and allowed the appeal filed by the State of Haryana along with other States. By the above judgment, the authority of the State to impose sales-tax on levy transactions came to be restored. After the judgment of this Court, referred to above, the State issued another demand notice for the assessment years 1975-76, 1982-83, 1983-84 and 1984-85 dated 20th of February, 1997, out of these the demands for the year 1975-76 was for a sum of Rs.89,39,947/-. It is submitted before us that the appellant has paid the amount so demanded in the month of March, 1997 itself. However, on 25th of April, 1997 the appellant was issued a further notice purported to be under Section 59 of the Haryana General Sales Tax Act, 1973 ( the Haryana Act) demanding a sum of Rs.2,26,01,400/- towards the interest payable on the belated payment of
Rs.89,39,947/- which was the principal tax due from the appellant for the assessment year 1975-76. The appellant challenged this levy of interest before the Punjab and Haryana High Court but the same came to be rejected by an order of the said High Court dated 18th of January, 1998 against which the above appeal is preferred.
JUDGEMENT: The question that arises for our consideration in this appeal is whether the State of Haryana is justified in demanding interest from the appellant on the tax due by it for the assessment year 1975-76. We have heard learned counsel for both the parties. The answer to the question that falls for consideration by us depends upon the fact whether there was a valid demand notice in the year 1982 (the year from which the interest is demanded) which obligated the appellant to pay the tax demanded under the said notice. As we have noticed herein above, so far as the State of Haryana is concerned during the period between 17th of May, 1975 to 6th of January, 1997, the law declared by the High Court was that the State of Haryana did not have the constitutional authority to impose sales-tax on levy transactions. This declaration of law was not challenged by the State per contra the State of Haryana accepted the declaration of law made by the High Court, therefore, until the position of law stood changed from 6th of January, 1997, the State of Hayana could not have made a demand for the payment of sales-tax on levy transactions. The demand notice by which the State claimed the tax for the assessment year 1975-76 was of the year 1982 which fell within the period when the law did not permit the State of Haryana to impose sales-tax on levy transactions. Therefore on that day when the notice of demand was issued for payment of sales-tax for the assessment year 1975-76, the demand was without authority of law. Subsequently, the State of Haryana could have made such demand only after the judgment of this Court which was delivered on 6th of January, 1997. There is no doubt that by the judgment of this Court, the right of the State of Haryana to collect sales-tax would date back to 1975 but that is not the same as saying that during the said period when the law was adverse to the State of Haryana it could still have made a legitimate demand, because, as stated above, during the period between 1975-77, the States authority to make a demand was eclipsed because of the law declared by the High Court. The declaration of law made by this Court now empowers the State to raise a demand even for the assessment year 1975-76 and the appellant is bound to satisfy the said demand, but the duty of the assessee to satisfy that demand would arise only when a fresh and valid demand after the judgment of this Court is made by the State. If the assessee fails to pay after the fresh demand is made then as contemplated under Section 59 of the Haryana Act, the assessee becomes liable to pay the interest also.
The further question, therefore, is whether on the demands now made by the respondents on the appellant, can the State also claim interest ? We have noticed that the power of the State to collect interest arises under Section 59 of the Act. The said section authorises the State to collect interest on belated payment of tax demanded but this payment of interest can be levied on such belated payment of tax which is legally payable for which a valid demand is condition precedent. As has been noticed by us, the demand notice of the year 1982 which was issued during the period when the State had no authority to levy sales-tax cannot be said to be a valid demand based on which interest could be claimed. A valid demand for the assessment year 1975-76 could have been made by the State of Haryana only after the judgment of this Court i.e. from 6th of January, 1997 and on such a demand being made on 20.2.97, the appellant has satisfied the said demand within the period available to it. If that be so, in our opinion, the State could not have demanded interest on the tax due for the assessment year 1975-76 based on its earlier demand notice. We are of the opinion that the interest demanded by the State of Haryana on the amount due from the appellant for the assessment year 1975-76 cannot be sustained. Therefore, the said demand of interest, impugned in the appeal is quashed.
HELD: Appeal Allowed
By Tejasv Anand, IVth Year, Amity Law School, Delhi.
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