# HAJI LAL MOHD. BIRI WORKS ALLAHABAD TIIROUGH ABDUL HAMID v. 1HE STATE OF U.P. AND OTHERS

- **Citation:** [1974] 1 S.C.R. 25
- **Court:** Supreme Court of India
- **Decided:** 1973-04-23
- **Case number:** Civil Misc. No. 955 of 1969
- **Bench:** K. S. Hegde, H. R. Khanna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/haji-lal-mohd-biri-works-allahabad-tiirough-abdul-hamid-v-1he-state-of-u-p-and-5965
- **Pages:** 6

## Headnote

U.P. Sales Tax Act, 1948 as a1ne11ded by Act 3 of 1964-Jnterest on Sales Tax
arrears to be treated as tax under news. 8(1-A) introduced by 1964 a1nendmen1Wliether separ.'1.fe assessment order and notice of den1and ll'.?cessary in case of in·
rerest-Aniount of interest whether ntust be specified in recovery certificateAnzendnient Act when canie into force_:._!nterest whether
1ndv be char.-;!d for
pedod during which recovery of tax is staved.
The appellant firm was assessed to sales-tax for the assessment years 1957-58
and 1958-1959.
On an application made by the appellant for the composition
of tax the recovery of the tax for 1957-58 \Vas stayed. The stay order \\'as vacated on September 25. 1967.
Thereafter the sales-tax officer issued a certificate
to the Collector for the recovery of arrears of sales-tax for the said ass~ssment
years.
ln the certificate it V..'cts mentioned that 8% interest per annum un the
arrears of tax \Yas also to be recovered as arrears of land rev~nue in term-; of the
provisions of section 8( 1-A) of the U.P. Sales Tax Act, 194b. as amen.Jed by
Act 3 of 1964.
In a writ petition under article 226 of the ConstitutiiJn the
appellant ch~llengcd the res;overy of interest n1ainly on the ground
th~1t th!re
was no assessment order in regard to the int'.:rest and no notice of dem~lrj had
been issued. The High Court dismissed the petition.
Appeal in this Court \Vas
filed with certificate.
Dismissing the appeal,
HELD: (i) The provision in sub-section (1-A.) of section 8 according:
to
which inteu·<;t shall be added to the amount of tax and shall be deemed for all
purpose to be part of tax has been added only for the purpose of recoverr. The
object apparently was that the amount of interest should be recovered i'1
the
same manner as the amount of sales-t;Lx.
The amount of sales-tax nnd other
dues under sub-section (8) of section 8 can be recoY~red as arrears cf land
revenue.
It was v,1ith a view to put the matter beyond any pale of cont~eoversy
and to obviate any obiection that the in;.erest on sales-t<1X cannot be r~covered
as land revenue that sub-section (1-A) pco\ided th:.i.t the interest shall Ce added
to the amount of tax and b~ deemed for ;JI purposes to be a part of the tJX. It
is a matter. of mere arithmetical calculation to arrive at the figure of interest.
There is nothing in any of the rirovision" of the Act as may \Varrant m:::kiag of
another assessment order by the sales-tax officer regarding the amount of interest
or making ·it obligatory for him to issue a demand notice in respect of the interest before sending the recovery certificates to the Collector. [2SG-29C)
(ii) The argument that the sales-tax officer should specify the an1ount of irterest in the recovery certificate
could not be accented.
As the amouat of
interest \Vould go on increasing every day till the rec-overy of the sales-t3-K it is
plainly not possible to specify the exact amount of interest in the reco\·,;ry certificate. [29D]
(iii) According to clause (b) of sub-section (1) of section 5 of the U.P.
General Clauses Act, 1904 where any U.P. Act is not expressed to come into
force on a particular day than in the case of a U.P. Act made after the comrriencement of the Constitution it shall come into operation on the date on· \\"hich the
assent thereto of the Governor or the President as the case may require i;; first
published in the official gazette.
In the present case the President's assent to
U.P. Act 3 of 1964 was DUblished in the official Gazette on Febrnary I, 1964
and hence it must be held to have come into force on that day and not on the
date on which the President's assent was given. [29F]
(iv) There is nothing in the language of section 8( I-A) of the Act which
prevents the running of interest because of the 09eration of any stay order.
Indeed the liability to pay interest
is created by the statute and the Sa!es-tax
Officer has no discretion to
grant any exempti'Jn
from
the
paym ?nt
of
interest. [JOA]
26
SUPREME COURT REPO

## Text

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25
HAJI LAL MOHD. BIRI WORKS ALLAHABAD TIIROUGH
ABDUL HAMID
v.
1HE STATE OF U.P. AND OTHERS
April 23, 1973
[K. S. HEGDE AND H. R. KHANNA, JJ)
U.P. Sales Tax Act, 1948 as a1ne11ded by Act 3 of 1964-Jnterest on Sales Tax
arrears to be treated as tax under news. 8(1-A) introduced by 1964 a1nendmen1Wliether separ.'1.fe assessment order and notice of den1and ll'.?cessary in case of in·
rerest-Aniount of interest whether ntust be specified in recovery certificateAnzendnient Act when canie into force_:._!nterest whether
1ndv be char.-;!d for
pedod during which recovery of tax is staved.
The appellant firm was assessed to sales-tax for the assessment years 1957-58
and 1958-1959.
On an application made by the appellant for the composition
of tax the recovery of the tax for 1957-58 \Vas stayed. The stay order \\'as vacated on September 25. 1967.
Thereafter the sales-tax officer issued a certificate
to the Collector for the recovery of arrears of sales-tax for the said ass~ssment
years.
ln the certificate it V..'cts mentioned that 8% interest per annum un the
arrears of tax \Yas also to be recovered as arrears of land rev~nue in term-; of the
provisions of section 8( 1-A) of the U.P. Sales Tax Act, 194b. as amen.Jed by
Act 3 of 1964.
In a writ petition under article 226 of the ConstitutiiJn the
appellant ch~llengcd the res;overy of interest n1ainly on the ground
th~1t th!re
was no assessment order in regard to the int'.:rest and no notice of dem~lrj had
been issued. The High Court dismissed the petition.
Appeal in this Court \Vas
filed with certificate.
Dismissing the appeal,
HELD: (i) The provision in sub-section (1-A.) of section 8 according:
to
which inteu·<;t shall be added to the amount of tax and shall be deemed for all
purpose to be part of tax has been added only for the purpose of recoverr. The
object apparently was that the amount of interest should be recovered i'1
the
same manner as the amount of sales-t;Lx.
The amount of sales-tax nnd other
dues under sub-section (8) of section 8 can be recoY~red as arrears cf land
revenue.
It was v,1ith a view to put the matter beyond any pale of cont~eoversy
and to obviate any obiection that the in;.erest on sales-t<1X cannot be r~covered
as land revenue that sub-section (1-A) pco\ided th:.i.t the interest shall Ce added
to the amount of tax and b~ deemed for ;JI purposes to be a part of the tJX. It
is a matter. of mere arithmetical calculation to arrive at the figure of interest.
There is nothing in any of the rirovision" of the Act as may \Varrant m:::kiag of
another assessment order by the sales-tax officer regarding the amount of interest
or making ·it obligatory for him to issue a demand notice in respect of the interest before sending the recovery certificates to the Collector. [2SG-29C)
(ii) The argument that the sales-tax officer should specify the an1ount of irterest in the recovery certificate
could not be accented.
As the amouat of
interest \Vould go on increasing every day till the rec-overy of the sales-t3-K it is
plainly not possible to specify the exact amount of interest in the reco\·,;ry certificate. [29D]
(iii) According to clause (b) of sub-section (1) of section 5 of the U.P.
General Clauses Act, 1904 where any U.P. Act is not expressed to come into
force on a particular day than in the case of a U.P. Act made after the comrriencement of the Constitution it shall come into operation on the date on· \\"hich the
assent thereto of the Governor or the President as the case may require i;; first
published in the official gazette.
In the present case the President's assent to
U.P. Act 3 of 1964 was DUblished in the official Gazette on Febrnary I, 1964
and hence it must be held to have come into force on that day and not on the
date on which the President's assent was given. [29F]
(iv) There is nothing in the language of section 8( I-A) of the Act which
prevents the running of interest because of the 09eration of any stay order.
Indeed the liability to pay interest
is created by the statute and the Sa!es-tax
Officer has no discretion to
grant any exempti'Jn
from
the
paym ?nt
of
interest. [JOA]
26
SUPREME COURT REPORTS
( 1974 j 1 S.C.R.
CIVIL APPELLATE JURISDICTION : C.A. No. 543 (NT) -Of 1970.
Appeal by certificate from the Judgment and order dated December
2, 1969 of the Allahabad High Court in Civil Misc. No. 955 of 1969.
A. K. Sen, Yogeshwar Prasad, S. K. Bagga, Shakeel Ahmed and
Mrs. S. Bagga for the appellant.
S. C. Manchanda and 0. P. Rana for the respondents.
The Judgment of the Court was delivered by
KHANNA, /.-This appeal on certificate is directed against the Full
Bench decision of Allahabad High Court whereby that court answered
by a majority of two to one the following question referred to it by
a Division Bench in the negative against the assessee-appellant :
"Whether, in order to
recover
mterest under section
S. (1-A) of the U.P., Sales Tax Act, it is necessary for the
Sales Tax Officer to make an assessment order in respect
of the interest and to issue a notice of demand in respect of
such interest."
The appellant, a partnership firm, is a large-scale manufacturer of
!Wis.
The appellant was assessed to tax under tfie (U.P. Sales Tax
Act, 1948 (U.P. Act No. 15 of 1948) (hereinafter referred to as the
A~t) for the assessment years 1957-58 and 1958-59 as per assessment
order> dated June 10, 1959 and February 12, 1963 respectively. On
an application sent by the appellant to the Minister of Finailce, U. P.
Government requesting for compounding of tax, an order was issued
on 1'foy 6, 1959 staying the recovery of tax due from the appellant.
The stay order was vacated by order dated September 2~, 1967. On
Octooor 9, 1967 the Sales Tax Officer sent a recovery certificate to the
Collector Allahabad for a sum of Rs. 1,65,684.43 for the recovery of
arrears of sales tax for the year 1957-58. The recovery certificate
also mentioned .that interest at the rate of 18 per cent per annum
calcu~ated on the amount of tax with effect from February 1, 1964 till
the date of final payment should also be recovered as arrears of Ian~
revenue in terms of the provisions of section 8 0-A) of the Act. On
October 25, 1967 another recovery certificate for reco~ring a sum of
Rs. 26,238.08 in respect of the year 1958-59 on account o( arrears
of sJ]es tax
was sent by the
Sales Tax Officer to the Collector
Allahabad. It was mentioned in the
certificate that the
aforesaid
amcunt would carry interest at the rate of 18 per cent per annum
calculated with effect from February 1, 1965 till the date of final
payment and the same too should be recovered as
arrears of land
revenue in terms of the provisions of section 8 (I-A) of the Act.
The case of the appellant firm is that the amount of the sales tax
mentioned in the two recovery certificates was paid by it. The appellant, however,
contested its liability to pay interest
amounting to
Rs. 1.36,000 on the amount of sales tax under section 8(1-A) of
the Act. A petition under article 226 of the Constitution was consequemly filed b_v the appellant in the High Court challenging
the
recovery of the interest amounting to Rs. 1,38,000. The main ground
which was taken by the appellant in this connection was that without
m2l:hg an assessment order and without issuing a notice of demand
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HAJI LAL v. U.P. STATE (Khanna, J.)
27
the Sales Tax Officer had no jurisdiction to initiate proceedings toc
the recovery of interest.
Reliance in this connection was placed un
behalf of the appellant upon an earlier Division Bench decision in the
case of Beni Ram Mool Chand v. The Sales Tax Officer( I) wherein
the Division Bench had held that issuance of a notice of demand was
a condition precedent to the recovecy of penal interest.
As the correctness of that decision was challenged, the Division Bench hearing
the writ petition of the appellant referred the question reproduced
earlier to the Full Bench. The Full Bench by a majority of two to
cne, as already mentioned, answered the question in the negative and
against the app~llant.
Before dealing with the contentions advance<l in this Court, we
mJy iefer to the relevant provision .of the Act. Section 3 of the·., Act
creates liability to sales tax. Under this section every dealer is. liable
tc pay tax on the turnover which shall be determined in such manner
as may be prescribed. Section 7 provides for determim!tion of turnover
and assessment of tax. Section 8 deals with payment and
recovery
of tax .. Sub-sections (3), (1-A) and 6 of section 8 read as under:
"8. Payment and recovery of tax.-(1) The tax assessed
under this Act shall be paid in such manner and in such
instalments, if anv. and within such time, not being Jess
than fifteen days from the date of service of the notice of
assessment and demand, as may be specified in the notice.
In default of such payment, the whole of the amount then
remaining due shall become recoverable in accoroance with
sub-section ( 8).
( 1-A) If the tax payable uuuer sub-section (1) remains
unpaid for six months after the expiry of the tijlle specified
in the notice of assessment and demand, or the commencement of the Uttar Pradesh Bikri-Kar (Dwitiya Sanshodhan)
Adhiniyam, 1963, whichever, is later, then without prejudice to any other liability or penalty which the defaulter
may, in consequence of such non-payment, incur under this
Act. simple interest at the rate of eighteen per cent per
annum shall run on the amount then remaining due from
!he date of expiry of the time specified in the said notice, or
from the commencement of the said Adhiniyam, as the case
may be, and shall be added to the amount of tax and be
deemed for all purposes to be part of the tax :
Provided that where as a result of appeal, revision or
,eference, or of any other order of a competent court or
authority, the amount of tax is varied, the interest shall be
recalculated accordingly :
Provid~d further that the interest on the excess amount
of tax payable under an order of
enhancement shall run
from the date of such order if such excess remains unpaid
for six months after the order.
x
x
x
x
(1) (1969) 23 S.T.C. 423,
28
SUPREME COURT REPORTS
[ l974] 1 S.~.R.
\8) Any tax or other dues payable to the State Government under this Act, or any amount of
money which a
person is required to pay to the assessing authority under
sub-section (3) or for which he is personally liable to the
assessing authority under sub-section ( 6) shall be recoverable as arrears of land revenue."
It may be mentioned that sub-section ( 1-A) of section 8
reproduced above was added by U.P. Sales Tax
(Second
Amendment) Act, 1963 (U.P. Act 3 of 1964). The ab~ve
provision was ~pparently added with a view to. tighten up
the machinery (or collection of sales tax and as a deterrent
m~asll\"e so that the dealers may not evade or delay the payment of tax, U.P. Act 3 of J 964 also added section 33 tJ
the Act.
The material part of section 33 reads as under :
"ln respect of any sum
recoverable under this Act as
arrears of land revenue the assessing authority may forward
to the Collector a certificate under his signature specifying
the sum due.
Such certificate shall be conclusive evidence
of the existence of the liability, of its amount, and of the
person who is Jiab!e, and the Collector on receipt of the
certificate shall proceed to recover from such person the
amount specified
therein as if it were an arrear of land
revenue;"
Mr. Sen on behalf of the appellant has arJ111ed that it was essential
!or the Sales Tax Officer to make an assessment order in resn.:ot oi
the interest before he could issue recovery certrncate against the' c,;mellant. In any case, according to Mr. Sen, recovery certificate in respect
of the interest could not he issued till such time a notice of de::iand
in respect of the interest had been issued by the Sales Tax Officer to
the appellant-firm.
These contentions, in our opinion, are not vveHfounded.
There is no provision in the Act which makes it obligatory
on the part of the Sales Tax Officer to make an assessment in re<pect
of the interest which the amount of sales tax would carry under section
8(1-A) of the Act.
There is also no provision in tlre Act which requires the issue of a notice of demand in respect of the interest by
the Sales Tax Officer to the assessee before the ·Sales. Tax Officer
forwards recoverv certificate to the Collector.
Reference has been
made by Mr. Sen.to sub-section {I-A) of section B, according to which
interest shall be added to the amount of tax and shall be deemed for
all purposes to be part of the tax. The above deeming provisica. in
our opinion, has been added only for the purpose of recovery.
The
object apparently was that the amount of interest should be recovered
in the same manner as the amount of sales tax. The )!mount of s1les
tax and other dues under sub-section ( 8) of sectiOn 8 can be recovernd
·beyond any pale of controversy and to obviate any objection that the
interest on sales tax cannot be recovered as land revenue that subsection (J-A) provided that the interest shall be added to the amo:mt
d tax and be deemed for all purposes to be a part of the tax.
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HAJI LAL v. U.P. STATE (Khanna, I.)
29
According to section 8(1-A), simple interest at the rate of 18
per cent per annum shall run on the amount of arrears of sales tax
from the date specified in that sub-section. It would thus appear that
the liability to pay interest is automatic and arises by operation of
law.
The amount of interest on the date of payment of tax is not
constant but increases from day to day. The amount of interest can,.
therefore, be not predicated till such time as the arrears of sales tax
'!fe paid and it is consequently not possible to specify a definite figure
in respect of the interest in the recovery certificate.
At the time the
arreors of sales tax are paid, there can be no difficulty in finding the
amount of interest which has become due.
The amount of tax on
whic'1 interest is to accrue, the rate of interest, the date from which
interest is to commence and the date up to which interest is to be
coumed are all known. It is, therefore, a matter of more arithmetical
calc:>;Jtion to arrive at the figure of interest. We find nothing in any
of !he provisions of the Act as may warrant making of another assessment order by the Sales Tax Officer regarding the amount of interest
or moking it obligatory for him to issue a demand notice in respect
of i;: e interest before sending the recovery certificate to the Collector.
We are also not impressed by Mr. Sen"s argument that the Sales
Tax Officer should specify the amount of interest in the recovery certific;ite.
As the amount of interest w-O"ll)d -go on increasing every day
ti!! the recovery of the sales tax, it is plainly not possible to specify
the e·;act amount of interest in the recovery certificate.
The exact
amcc::1t of interest can only be known on the day the arrears of
snlec ::1x me paid. No elaborate procedure is required for determining
the ~~10unt of interest because, as mentioned earlier, it is a matter of
sim'O'e arithmetical calculation.
!'Jere was some argument before us on the point as to when U.P.
Act 3 of 1964 came into force.
This Act received the assent of the
President on January 25. 1964 but was
publishe.d in the
official
Gazette on February 1, 1964. It was submitted on behalf of the appelJont that the Act came into force on the date it received the assent
of the President.
As against that, Mr. Manchanda on behalf of the
reswndents stated that the Act came into force on February 1, 1964,
the day it was published in the official Gazette. The stand taken by
Mr. J\!anchanda in this respect is correct because according to clause
lh' ~i sub-section (1) of section 5 of the U.P. General Clauses Act,
190A 1U.P. Act No. 1 of 1904) where any Uttar Pradesh Act is not
exnre,sed to come into force on a particular day, then in the case
of ac Uttar Pradesh Act made after the commencement of the Constitution, it shall come into operation on the day on which the assent
thereto of the Governor or the President, as the case may require, is
first published in the official Gazette. It may also be mentioned that
in para 33 of the writ petition filed in the High Court the appellant
too '1ad taken the stand that the U.P. Act 3 of 1964 had come into
force on February 1, 1964.
Argument has also been advanced by Mr. Sen that the interest on
arre.~rs of sales tax could not be realised for the period during which
30
SUPllEM~ COURT kEPOkTS
[ 1'/74] 1 S.C,k.
·the recovery of sales tax was stayed. We find it !liflicult to accede to
this contention because there is nothing in the language of section
8(1-A) of the Act which prevents the runnjng of interest because
of the operation of any stay order.
Indeed, the liability to pay
interest is created by the statute and the Sales Tax Officer has no discretion to grant any exemption from the payment of interest.
Mr. Sen has pointed out that the amount of sales tax payable by
the appellant was reduced on appeal and the appellant is entitled to a
consequential relief on that account. This is a matter which is outside
the ambit of the question which has been dealt with in the judgment
under appeal. In case the appellant is entitled to any relief on account
of reduction of the amount of sales tax in appeal, it would be for him
to agitate the matter in appropriate proceedings ..
The appeal consequently fails and is dismissed with costs.
G.C.
Appeal dismissei.
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