Case: Khazan Chand  Vs.  State Of Jammu And Kashmir And Others

the expiry of the quarter and such return is to be accompanied by a treasury receipt or any other proof of payment of tax due according to that return. This requirement implies that the tax due according to a quarterly return has to be paid before the filing of that return by the prescribed date therefor. Under sub-section (8) of section 8, if a dealer fails to pay the tax payable under that section, the provisions of sub-section (2) of section 8 and of sections 16 and 16-A are to apply mutatis mutandis to the recovery thereof. Thus, the provisions of sub-section (2) of section 8 apply when quarterly tax is not paid before furnishing a quarterly return under sub-section (3) of section 8, but by the express terms of sub-section (8) of section 8, the provisions of sub-section (2) of that section will apply to the recovery of quarterly tax not in their entirety but "mutatis mutandis". Under sub-section (1) the tax assessed or any other amount demanded is to be paid within the time specified in the notice of demand. Under sub-section (3), the quarterly tax is to be paid before furnishing the quarterly return but not later than the date prescribed under sub-section (2) of section 7. Thus, by sub-section (3) the time for payment of quarterly tax is not made dependent upon the issuance of a notice of demand and the date for payment to be specified in it but it is statutorily fixed and as under sub-section (8) of section 8 the provisions of sub-section (2) are to apply mutatis mutandis to the recovery of quarterly tax, necessary changes must be made in the provisions of sub-section (2) in their application to the recovery of quarterly tax payable under sub-section (3). Accordingly, the requirement of sub-section (2) that interest will be chargeable from the date specified for payment in the notice of demand cannot be applied to the payment of quarterly tax and necessary alterations as required by sub-section (8) will, therefore, have to be made in the provisions of sub-section (2) in their application to a default made in payment of quarterly tax and sub-section (2) must be read as providing that interest under sub-section (2) will become payable from the date prescribed by sub-section (3) of section 8 for payment of quarterly tax. There is thus no substance in this contention. We may also mention that in the case of certain other orders made under the Act demanding interest on default being made in payment of quarterly tax, the challenge thereto on the ground that no interest can be charged unless a notice has been issued demanding payment of quarterly tax was negatived by this Court in Royal Boot House v. State of Jammu and Kashmir [1984] 56 STC 212 (SC) . (C.M.P. Nos. 32413 and 32414 of 1983 decided on January 6, 1984, by P. N. Bhagwati, Ag. C.J., and Venkataramiah and Varadarajan, JJ.)We now turn to the last contention raised before us, namely, that the assessing authority was not entitled to charge interest at the maximum rate but could only charge interest at the graduated rate specified in sub-section (2) of section 8. 13. It appears that in most, if not in all, orders which have been impugned in these petitions and appeals, interest on the amount of quarterly tax not paid in time has been imposed at a uniform rate for the full period of default and not according to the scale of rates prescribed by sub-section (2) of section 8. Thus where the default was for a period exceeding three months but not exceeding six months, interest has been levied for the full period of default at the rate of two per cent per month and where the default was for a period exceeding six months, interest at the rate of three per cent per month has been levied for the entire period of default. In our opinion, this is not warranted by the terms of sub-section (2) of section 8 of the Act. Sub-section (2) provides for different rates of interest depending upon the length of the period of default. If the default was for a period not exceeding three months, then the interest could only be charged at the rate of one per cent per month and where the default was for a period exceeding three months but not exceeding six months, then the interest which could be charged can only be one per cent per month for the first three months of default and two per cent per month for the remaining period. In the same way, if the default was for a period exceeding six months, interest could be charged only at the rate of one per cent per month for the first three months of default, at the rate of two per cent per month for the next three months of default and at the rate of three per cent per month for the remaining period of default. The grievance made by the assessees is justified and their challenge to the impugned orders on this ground must, therefore, succeed.In the result, though we uphold the constitutionality of sub-sections (1), (2) and (3) of section 8 of the Jammu and Kashmir General Sales Tax Act, 1962, we make the rule issued in each of the writ petitions before us absolute only to the extent that we restrain the State of Jammu and Kashmir from recovering from the assessees who are petitioners before us interest on the amount of quarterly tax paid after the expiry of the date prescribed for payment thereof by sub-section (3) of section 8 of the Act at a rate other than the rate of one per cent per month for the first three months of default and at the rate of two per cent per month for the next three months of default and at the rate of three per cent per month for the period of default exceeding six months.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]It appears that in most, if not in all, orders which have been impugned in these petitions and appeals, interest on the amount of quarterly tax not paid in time has been imposed at a uniform rate for the full period of default and not according to the scale of rates prescribed by sub-section (2) of section 8. Thus where the default was for a period exceeding three months but not exceeding six months, interest has been levied for the full period of default at the rate of two per cent per month and where the default was for a period exceeding six months, interest at the rate of three per cent per month has been levied for the entire period of default. In our opinion, this is not warranted by the terms of sub-section (2) of section 8 of the Act. Sub-section (2) provides for different rates of interest depending upon the length of the period of default. If the default was for a period not exceeding three months, then the interest could only be charged at the rate of one per cent per month and where the default was for a period exceeding three months but not exceeding six months, then the interest which could be charged can only be one per cent per month for the first three months of default and two per cent per month for the remaining period. In the same way, if the default was for a period exceeding six months, interest could be charged only at the rate of one per cent per month for the first three months of default, at the rate of two per cent per month for the next three months of default and at the rate of three per cent per month for the remaining period of default. The grievance made by the assessees is justified and their challenge to the impugned orders on this ground must, therefore, succeed.In the result, though we uphold the constitutionality of sub-sections (1), (2) and (3) of section 8 of the Jammu and Kashmir General Sales Tax Act, 1962, we make the rule issued in each of the writ petitions before us absolute only to the extent that we restrain the State of Jammu and Kashmir from recovering from the assessees who are petitioners before us interest on the amount of quarterly tax paid after the expiry of the date prescribed for payment thereof by sub-section (3) of section 8 of the Act at a rate other than the rate of one per cent per month for the first three months of default and at the rate of two per cent per month for the next three months of default and at the rate of three per cent per month for the period of default exceeding six months.