COMMISSIONER OF TRADE TAX, LUCKNOW versus M/S. KANHAI RAM THEKEDAR

Citation: [2005] 3 S.C.R. 984 · Decided: 29-04-2005 · Supreme Court of India · Bench: S.N. VARIAVA · Disposal: Dismissed
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Judgment (excerpt)

A 
B 
c 
COMMISSIONER OF TRADE TAX, LUCKNOW 
v. 
M/S. KANHAI RAM THEKEDAR 
APRIL 29, 2005 
[S.N. VARIA VA AND DR. AR. LAKSHMANAN, JJ.] 
U.P. Sales Tax Act, 1948 (now U.P. Trade Tax Act, 1948)-Sections 
8(1), 8(1-B) and 8(2) : 
Demand for interest on tax-Not made in assessment order imposing tax 
liability-Made by a separate order after four years, though three years is the 
limitation period for rectification of assessment order-Validity of-Held: 
Assessee not liable to pay interest in view of inordinate delay in raising the 
demand-Department however entitled to recover the interest from the Assessing 
D Officer concerned for not taking steps for four years. 
Demand for interest on tax-ls automatic and arises by operation of 
law-Notice not necessary before raising demand for interest. 
On 6-6-1986, the Assessing Authority passed order imposing tax 
E liability on respondent-dealer in respect of assessment year 1977-78. 
Respondent-assessee deposited the entire amount of tax. However 
subsequently on 30-7-1990, the assessing authority passed another order 
holding that on the admitted amount of tax the respondent was liable to 
pay interest at the rate of24% p.a. from 1-5-1978. Respondent filed appeal 
contending that the proceedings imposing interest were barred by time. 
F The appeal was dismissed. Second appeal was filed before the Tribunal 
which remanded the matter to the assessing authority for fresh decision. 
Respondent filed revision before High Court which held that even if 
respondent-dealer was liable to pay interest on delayed payment of amount 
of tax, a notice in writing before passing the impugned order was 
G necessary, but as the impugned order dated 30-7-1990 nowhere stated that 
any notice was sent to the dealer, such an order could not be sustained. 
Consequently, it allowed the revision and quashed the order of Tribunal. 
In appeal to this Court, the questions of law arising for consideration 
are whether subsequent proceeding to the assessment was barred by 
lI 
984 
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COMMR. OF TRADE TAX v. KANHAI RAM THEKEDAR 
985 
limitation and whether the order of the High Court to the extent that a A 
notice of demand was necessary before passing the order of interest is 
legally sustainable. 
Dismissing the appeal, the Court 
HELD : 1.1. The liabili!Y for payment of interest arises in view of B 
the provisions contained in Section 8 (1), 8(1-8) and sub-section (2) of 
Section 8 of the U.P. Sales Tax Act, 1948 (now the U.P. Trade Tax Act, 
1948). (987-G-HI 
1.2. The High Court was not justified for deleting the interest levied 
by the authorities on the ground that no notice was served. However, the C · 
demand of interest was not justified because of the inordinate delay on 
the part of the officers concerned for raising the demand of interest from 
the assessee and in the peculiar facts and circumstances of the case. There 
was no demand of interest in the assessment order. As the assessment order 
did not include a claim for interest, the demand for interest had to be mad.e D 
within a reasonable period thereafter. For rectification of the assessment 
order, a limitation period of three years is laid down. Since the demand 
of interest was made after almost four years, the demand is not within a 
reasonable period and the assessee is not liable to pay the interest as 
demanded. The Department is not entitled to recover the interest from 
the assessee-respondent but is at liberty to recover the amount of interest E 
demanded from the Assessing Officer concerned who have not taken steps 
for four years. [9~2-E-H; 993-A, B, C, DJ 
Firm Parshuram Rameshwar Lal v. State of UP., (1974] 33 STC 540 
All, approved. 
Commissioner of Sales Tax v. Qureshi Crucible Center, (1993) suppl 3 
SCC 495; The Sales Tax Officer, Sector /, Kanpur and Anr. v. Mis Dwarika 
Prasad Sheo Karan Dass, [19771 1 SCC 22; Haji Lal Mohd. Biri Works v. 
State of UP., [19741 3 SCC 137 and Prah/ad Rai and Ors. v. Sales Tax 
Officer, Meerut and Ors., (1991) Supp 2 SCC 612, relied on. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2679 of2000. 
From the Judgment and Order dated 16.9.99 of the Allahabad High 
Court in T.T.R. No. 3 of 1999. 
G 
H 
986 
SUPREME COURT REPORTS 
[2005] 3 S.C.R, 
A 
R.G. Padia, S.W.A. Qadri and J.K. Bhatia with him for the Appellant. 
Ranbir Singh Yadav for the Respondent. 
The Judgment of the Court was delivered by 
B 
OR. AR. LAKSHMANAN, J. This appeal is filed by the Commissioner 
c 
of Trade Tax, U.P.
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