KHAZAN CHAND ETC. versus STATE OF JAMMU AND KASHMIR AND OTHERS

Citation: [1984] 2 S.C.R. 858 · Decided: 09-02-1984 · Supreme Court of India · Bench: P.N. BHAGWATI · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
c 
D 
KHAZAN CHAND ETC. 
v. 
STATE OF JAMMU AND KASHMIR AND OTHERS 
' 
[P. N: BHAGWATi AND D. P. MADON, JJ.] 
' 
Constitution of India 1950, 
Articles )4 and 265. 
Jainmu and Kashmir General Sales Tax Act 1962 Sectlon 8 (1), (2) and 
(J)-Wherher valid and constitutional. 
Taxing Power of State-What is-Cotnprehends power to provide for" 
collectiati of tax and prescribe methods for recovery. 
' 
Jammu and Kashmir General Sales Tax Act 1962-Section 8 Sales Tax' 
-Payment of-After prescribed perlod-Cha,.ging of interest on sales tax-
Whether valid and legal. 
+ 
Section 8 (2)-tax paid beyond prescribed period-Interest charged at 
;I 
graduated scale-Permissibility of-.Whether vfolatire of Article 14. 
Section 8 (.3)-Goods sold on credit basis-Liability to payment of sal<'S 
E 
tax by dealer-Whether arises. 
F 
G 
The :;ippeltants and the petitioners were assessees registered as dealers 
under the Jammu and Kashmir General Sales Tax Act, 1962. 
They filed 
their quarterly rCturos within the time prescribed by the Act but without 
paying the tax due according to 
su~h returns. 
Some or them also filed 
revised 
f~turns thereafter. 
The 1ax d1Je was paid by the asscssees · after 
several months and in some cases by instahnents. 
In a few cases. 1hc full 
amount of tax was not paid even by the date l he 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 a~sessment. lo other cases, orders requiring interest to be paid were 
made along with the assessment orders. 
The assessees who Were appellants in this_ Court, bad 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 bad filed their rel urns but ~had not deposited the full 
amount of tax due according to such returns, and the Assessing 
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KHAZAN CHAND v. J, & K. STATE 
859 
Authority, having accepted the returns, had issu.ed a composite 
notice of demand calling up them ·to pay the amount of tax 
along wiih 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 Authori! y had accepted the 
returns and had isSued a notice of demand asking them ·to pay 
interest on the amount of tax fof the period for which such pay-
ment was delayed, and 
' 
(c) 
dealers who had filed their returns but had not paid the amount 
of ta:ill due according to such returns by the prescribed time· but 
bad paid it later and notices were issued against them calliOg 
upon them to pay interest for the p'C:riod of default before 
making aay order of assessme.nt. 
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 or the Act 
in so far as they provide for payment of such interest are beyond 
.the legislative competence of the State Legislature and, therefore 
(2) 
(3) 
(4) 
< 
(5) 
unconstitutional. 
' 
Sub-section (2) of section 8 of the Act was void as infringing 
Article 14 of the Constitution becaUse its provisions are discri-
minatory, arbitrary and unreasonable • 
The Assessees carried on business on credit basis and as by the 
dates when they filed their quarterly retuins their customers 
had not pa id 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. 
In some cases, the amount of interest claimed frQm the Assessees 
exceeded the amount of tax paid by them and, therefore, the 
demand for such excess amount of interest was bad in Jaw. 
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. 
A 
B 
c 
D 
E 
F 
G 
(6) 
Interest was levied by the Assessing Autho

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