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1997 DIGILAW 205 (GAU)

ASSAM CARBON PRODUCTS LIMITED v. STATE OF ASSAM

1997-09-16

D.N.CHOUDHARY

body1997
JUDGMENT D. N. CHOWDHURY, J. - The writ petition is directed and arises out of an order dated November 19, 1992, passed by the Deputy Commissioner, Assam, Guwahati on a revision application upholding the order of assessment dated October 31, 1986 passed by the Superintendent of Taxes, Unit-A, Panbazar, Guwahati, so far as it relates to levy of interest in exercise of power under section 35-A of the Assam Sales Tax Act, 1947 read with section 9(2) of the Central Sales Tax Act, 1956. 2. The petitioner is a registered dealer under the Central Sales Tax Act and liable to pay Central sales tax on carbon product. For the delay in payment of taxes due for the relevant period the Superintendent of Taxes by his order dated October 31, 1986 levied interest on the petitioner in exercise of its power under section 35-A of the Assam Sales Tax Act read with section 9(2) of the Central Sales Tax Act. 3. The petitioner took up the matter before the Commissioner of Taxes by way of a revision and the Deputy Commissioner dismissed the revision application by his order dated June 13, 1992 and thereafter an application was moved for rectification of the order of assessment. The Deputy Commissioner on fresh consideration of the facts cancelled the revisional order passed on June 13, 1992 and rectified the order by a reasoned order holding that levy of interest under section 35-A was lawful. Hence the writ petition. 4. Dr. A. K. Saraf, learned counsel appearing on behalf of the petitioner, firstly submitted that section 9(2) of the Central Sales Tax Act does not envisage levy of interest for late payment of taxes and therefore the interest could not be realised under the Central Sales Tax Act in aid of section 35-A of the Assam Sales Tax Act. The learned counsel thereafter submitted that section 35-A of the Assam Sales Tax Act is discriminatory and violative of article 14 of the Constitution of India inasmuch as interest is charged at 24 per cent for the delay in payment of taxes whereas a maximum rate of interest on refunds due to the assessee is 6 per cent. Dr. The learned counsel thereafter submitted that section 35-A of the Assam Sales Tax Act is discriminatory and violative of article 14 of the Constitution of India inasmuch as interest is charged at 24 per cent for the delay in payment of taxes whereas a maximum rate of interest on refunds due to the assessee is 6 per cent. Dr. Saraf further submitted that section 35-A of the Assam Sales Tax Act which provides for levy of interest is beyond the competence of the State Legislature inasmuch as the power of levy and collection of interest is not covered by entry 54 or any other entry of List II of the Seventh Schedule to the Constitution of India and as such section 35-A is beyond the legislative competence of the State Legislature. 5. Mr. H. N. Sarma, learned Additional Senior Government Advocate, on the other hand submitted that charging of interest is a part of the machinery section of taxes on sale and therefore the State Legislature was within its competence in enacting section 35-A of the Act. Mr. Sharma further contended that imposition of taxes is a sovereign legislative function of the State and the State Legislature is fully competent to prescribe the amount of taxes as well as the rate of interest. Mr. Sarma also submitted that section 9(2-A) of the Central Sales Tax Act is fully applicable to the assessment, reassessment, collection and enforcement of the Central sales tax. The Act provides for imposition of penalty contained in the State Act as if the Central sales tax was a State sales tax under the Act were applicable under the Central, State sales tax laws also covers the realisation of interest. Though no specific provision was made in the Central sales tax law. Mr. Sarma submitted that even then the interest was payable on account of delay in payment of Central sales tax in aid of section 35-A of the Act and in support of the contention Mr. Sarma referred to the decision of this Court reported in India Carbon Ltd. v. State of Assam (Civil Rule Nos. 304, 306 and 307 of 1977 and 505, 506, 507, 508 and 509 of 1980 delivered 13th September, 1989) 1990 (1) GLR 237. 6. After hearing was concluded and it was reserved for judgment the Supreme Court pronounced its judgment on July 16, 1997 in Civil Appeal Nos. 304, 306 and 307 of 1977 and 505, 506, 507, 508 and 509 of 1980 delivered 13th September, 1989) 1990 (1) GLR 237. 6. After hearing was concluded and it was reserved for judgment the Supreme Court pronounced its judgment on July 16, 1997 in Civil Appeal Nos. 2168 to 2171 of 1993, 7728 of 1995, 7735 of 1995, 7865 of 1995 and 9267 of 1995 in India Carbon Ltd. v. State of Assam [1997] 106 STC 460. The Supreme Court while considering section 9(2-A) of the Central Sales Tax Act and section 35-A of the Assam Sales Tax Act held that the interest on delayed payment of Central sales tax under the provisions of section 35-A of the Act cannot be realised and accordingly the decision of this Court was set aside. The relevant text of the judgment of the Supreme Court is reproduced below : "Section 9(2-A) makes applicable to the assessment, reassessment, collection and enforcement of Central sales tax the provision relating to offenses and penalties contained in the State Acts as if the Central sales tax was a State sales tax. But section 9(2-A) makes no reference to interest. There is no substantive provision in the Central Act requiring the payment of interest on Central sales tax. There is, therefore, no substantive provision in the Central Act which obliges the assessee to pay interest on delayed payments of Central sales tax. Now, the words 'charging or payment of interest' in section 9(2) occur in what may be called the latter part thereof. Section 9(2) authorities the sales tax authorities of a State to assess, reassess, collect and enforce payment of the Central sales tax payable by a dealer as if it was payable under the State Act; this is the first part of section 9(2). By the second part thereof, these authorities are empowered to exercise the powers they have under the State Act and the provisions of the State Act, including provisions relating to charging and payment of interest, apply accordingly. Having regard to what has been said in the case of Khemka & Co. [1975] 35 STC 571 (SC), it must be held that the substantive law that the States' sales tax authorities must apply is the Central Act. In such application, for procedural purposes alone, the provisions of the State Act are available. Having regard to what has been said in the case of Khemka & Co. [1975] 35 STC 571 (SC), it must be held that the substantive law that the States' sales tax authorities must apply is the Central Act. In such application, for procedural purposes alone, the provisions of the State Act are available. The provision relating to interest in the latter part of section 9(2) can be employed by the States' sales tax authorities only if the Central Act makes a substantive provision for the levy and charge of interest on Central sales tax and only to that extent. There being no substantive provision in the Central Act requiring the payment of interest on Central sales tax the States' sales tax authorities cannot, for the purpose of collecting and enforcing payment of Central sales tax, charges interest thereon. The requirement of the 1st respondent's sales tax authorities that the appellants should pay interest at the rate of 24 per cent per annum on delayed payments of Central sales tax under the provisions of section 35-A of the State Act must, therefore, be held to be bad in law." 7. In view of the pronouncement made by the Supreme Court the realisation of Central sales tax in aid of section 35-A not sustainable and therefore, without going into the other issues raised in this writ petition, the present application is to be allowed and accordingly the same is allowed and the order of assessment dated October 31, 1986 so far it relates to levy of interest on the petitioner-company and the order dated November 19, 1992 passed by the Deputy Commissioner for the period ending March 31, 1983 under the Central Sales Tax Act are set aside. There shall however be no order as to costs. 8. Civil Rule Nos. 3337, 3338, 3339, 3279, 3315, 3316, 3317, 3318, 3319, 3320, 3321, 3322, 1052 and 1053 of 1994 : Following the above judgment, these writ petitions are allowed and the assessment order so far it relates to levy of interest on delayed payment of Central sales tax is concerned and the order of the Deputy Commissioner under revision are set aside. Writ petitions allowed.