Case ID: 4752

Judgment:
ition Nos. 12695	 13478 82	 13352 of 1983	 99 100	 133 34	 231	 234 36 of 1984. [Under article 32 of the Constitution of India] Civil Appeals Nos. 322 351 of 1984 Appeals by Special leave from the Judgment and Order dated the 24th June	 1983	 19th August	 1983	 1st September	 1983	 & 29th December	 1983 of the Jammu and Kashmir High Court in Writ Petition Nos. 430 & 886/82	 364/81	 478/81	 132/82	 338/80	 525/80	 485/80	 67/83	 404/82	 681/82	 679/81	 688/82	 472/81	 678/82	 864 230/81	 229/83	 476/81	 228/83	 471/80	 287/83	 682/82	 344/82 621/82	 302/80	 624/80	 46/83	 912/83	 558/82 and 623/83. K. K. Venugopal and Anil Dev Singh Satish Vig	 section P. Sharma	 L. K. Gupta	 Vimal Dave	 R. C. Kaushik and Subhash Sharma for the Petitioners/Appellants. Altaf Ahmed for the Respondents. The Judgment of the Court was delivered by MADON	 J. This group of Writ Petitions and Appeals by Special Leave challenges the constitutional validity of sub sections (1)	 (2) and (3) of section 8 of the Jammu and Kashmir General Sales Tax Act	 1962 (J & K Act XX of 1962) and seeks to quash the orders directing the Petitioners and Appellants before us (herein after for the sake of brevity referred to as "the Assessees") to pay interest on the amount of tax due according to the quarterly returns filed by them but not paid within the prescribed time. ALL the Assessees are registered as dealers under the Jammu and Kashmir General Sales Tax Act	 1962 (hereinafter referred to as "The Act"). Sub section (1) of section 7 of the Act requires every dealer liable to pay tax under the Act to furnish in the prescribed form a return of his turnover for a year within 120 days from the expiry of that year. Sub section (2) of section 7 provides as follows: "Without prejudice to the provisions of sub section (1)	 every dealer shall also furnish in the prescribed form quarterly returns for each quarter of the year within thirty days from the expiry of that quarter. Every such return shall be accompanied by a Treasury Receipt or any other proof of having paid the tax due on that return." Thus	 the tax due according to a quarterly return is to be paid by the dealer before filing such return and proof of payment of the tax so due is to accompany such return. Sub sections (1)	 (2)	 (3)	 (7) and (8) of section 8	 omitting what is not relevant for our purpose	 provide as follows: "(1) The tax assessed	 or any other amount demanded	 under this Act shall be paid in such manner and within 865 such time not being less than fifteen days from the date of the notice of 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 accordance with sections 16 and 16 A. x x x x x x (2) If the tax or any other amount due under this Act is not paid by the dealer or any other person	 by whom it is payable	 within the period specified in demand notice	 the dealer or such other person shall be liable to pay interest on the tax or other amount from the date it was payable to the date of actual payment at the following rates (a) If the default is for a period of not exceeding three months at 1% per month; (b) If the default is for a period exceeding three months but less than six months at 2% per month; (c) If the default is for a period exceeding six months at 3% per month: Provided that where	 as a result of an order under Sections 11	 12	 24 or an order of the Court	 the amount of tax or other sum on which interest was payable under this sub section has been reduced	 the interest shall be reduced accordingly and excess interest paid	 if any	 shall be refunded. Explanation Interest shall be charged for full month and not for a part of the month. (3) Quarterly tax shall be paid before furnishing a quarterly return but not later than the date prescribed under sub section (2) of Section 7. X X X X X (7) Where a dealer furnishes a revised return under sub section (4) of Section 7 and the tax payable is more than the tax paid on the basis of original return	 he shall pay the extra tax payable before furnishing the revised return; 866 Provided that if the tax already paid is in excess of the tax payable	 such excess amount shall be treated to have been paid towards the tax payable for the quarter next following the date of furnishing such revised return. (8) Notwithstanding anything contained in this Act	 if a dealer fails to pay the tax payable under this Section	 the provisions of sub section (2) of this Section	 Section 16 and Section 16 A shall apply mutatis mutandis to the recovery thereof. Explanation (1) Quarterly Tax means the tax payable on the basis of a quarterly return required to be furnished by sub section (2) of Section 7. Explanation (2) Interest under sub section (2) of this Section on the extra tax payable on the basis of revised return shall be payable from the date next following the date on which the tax was payable on the basis of original return. " The Assessees filed their quarterly returns within the time prescribed by the Act but without paying the tax due according to such returns. Some of them also filed revised returns thereafter. The tax due was paid by the Assessees after several months and in some cases by instalments. In a few cases	 the full amount of tax was not paid even by the date the assessment order in their cases 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 assessment. In other cases	 orders requiring interest to be paid were made along with the assessment orders. It may be mentioned that in cases where the assessment orders were made	 the returns filed by the Assessees were accepted as correct. Those Assessees who are Appellants before us filed writ petitions in the Jammu and Kashmir High Court challenging the validity of section 8 of the Act under which interest was sought to be recovered from them as also the demand for payment of interest. These writ petitions were heard along with other writ petitions in which other questions arose. The High Court dismissed all these writ petitions but made no order as to the costs thereof. The petitioners before the High Court fell into four categories	 namely 867 (1) Dealers who had neither filed their returns nor deposited the tax due from them and the Assessing Authority had determined the amount of tax payable by them and issued a composite notice of demand calling upon them to deposit the amount of tax along with interest due on it. (2) Dealers who had filed their returns but had not deposited the full amount of tax due according to such returns and the Assessing Authority	 having accepted the returns	 had issued a composite notice of demand calling upon them to pay the amount of tax along with interest due on it. (3) 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 Authority had accepted the returns and had issued a notice of demand asking them to pay interest on the amount of tax for the period for which such payment was delayed. (4) Dealers who had filed their returns and had paid the tax due according to such returns by the prescribed time but the Assessing Authority had not accepted the returns and had enhanced the amount of tax payable by these dealers and had issued a composite notice of demand calling upon them to pay the amount of tax so enhanced along with interest on it. We are concerned in these Petitions and Appeals only with dealers who fall under categories (2) and (3) above as also with those dealers who had filed their returns but had not paid the amount of tax due according to such returns by the prescribed time but had paid it later and notices were issued against them calling upon them to pay interest for the period of default before making any order of assessment	 We are not concerned in these Petitions and Appeals with those dealers who fall under categories (1) and (4) above. At the hearing of these Petitions and Appeals	 no arguments whatever were advanced before us in support of the contention that sub section (1) of section 8 was unconstitutional and the challenge 868 to that sub section must	 therefore	 fail. The only contentions which were urged at the hearing were as follows: (1) The charging of interest to the Asssssees is violative of Article 265 of the Constitution of India 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 of the Act in so far as they provide for payment of such interest are beyond the legislative competence of the State Legislature and	 therefore	 unconstitutional. (2) Sub section (2) of section 8 of the Act is void as infringing Article 14 of the Constitution because its provisions are discriminatory	 arbitrary and unreasonable (3) The Assessees carried on business on credit basis and as by the dates when they filed their quarterly returns their customers had not paid 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 those transactions of sale only when the amount of sale price was received by them from their customers. (4) In some cases	 the amount of interest claimed from the Assessees exceeded the amount of tax paid by them and	 therefore	 the demand for such excess amount of interest was bad in law. (5) The Assessees were not liable to pay any interest on the amount of tax not paid in time without a notice of demand for payment of such amount of tax having been first issued to them. (6) Interest was levied by the Assessing Authority for the entire period of default at the maximum rate prescribed by sub section (2) of section 8 which was contrary to the provisions of that sub section. We will first examine the correctness of the contention that the impugned provisions of section 8 of the Act are violative of Article 265 of the Constitution of India. Article 265 of the Constitution 869 provides that "No tax shall be levied or collected except by authority of law. " Thus	 Article 265 postulates that before any tax can be levied and collected there must be a valid law enacted by an appropriate legislature imposing such tax and providing for its collection. The submission on behalf of the Assessees was that under the Constitution the Legislature of the State of Jammu and Kashmir has no legislative power to provide for payment of interest in case of late payment of tax. It was not the contention of the Assessees	 as indeed it could not be	 that the Legislature of the State of Jammu and Kashmir had no legislative power to enact a law levying a tax on the sale or purchase of goods taking place within the State and making provisions for the collection of such tax	 because the constitutional position in this behalf is clear and indisputable. Under clause (1) of Article 246 of the Constitution of India	 Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule to the Constitution referred to as the "Union List" and under clause (3) of the same Article the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II of the Seventh Schedule to the Constitution referred to as the "State List". Taxes on the sale or purchase of newspapers and on advertisements published therein fall under Entry 92 of the Union List and taxes on the sale or purchase of goods	 other than newspapers	 where such sale or purchase takes place in the course of inter State trade or commerce fall under Entry 92A of the Union List	 while taxes on the sale or purchase of goods	 other than newspapers	 subject to the provisions of Entry 92A of List I	 fall under Entry 54 of the State List. Thus	 so far as sales tax is concerned	 the Constitution bifurcates the legislative field of taxation between the Union and the States. As a result of this bifurcation	 the subject of taxes on intra State sale or purchase of goods (other than newspapers) falls exclusively within the State power of taxation. The Constitution of India	 however	 does not apply in its entirety to the State of Jammu and Kashmir because that State holds a special position in the constitutional set up of our country. Article 370 of the Constitution of India makes special provisions with respect to the State of Jammu and Kashmir. Under sub clause (c) of clause (1) of Article 370 the provisions of Articles 1 and 370 apply in relation to the State of Jammu and Kashmir and under sub clause (d) of clause (1) of Article 370 such of the other provisions of the Constitution apply in relation to that State subject to such exceptions and modifications as the President may specify by an order issued with the concurrence of the Govern 870 ment of that State. Thus	 by reason of the application of Article 1 to the State of Jammu and Kashmir by sub clause (c) of clause (1) of Article 370 the State of Jammu and Kashmir is one of the States which from the Union of India and by virtue of sub clause (d) of clause (1) of that Article so far as the provisions of the Constitution	 other than those of Articles 1 and 370	 are concerned	 the President of India has the power	 with the concurrence of the Government of the State of Jammu and Kashmir	 to issue an order specifying which of them shall apply to that State and whether such provisions shall apply in their entirety or subject to such exceptions and modifications as may be specified in that order. Article 370 also envisages the convening of a Constituent Assembly for that State and the framing of a separate Constitution for it. In exercise of the power conferred by clause (1) of Article 370 the President of India	 with the concurrence of the Government of the State of Jammu and Kashmir	 has made the Constitution (Application to Jammu and Kashmir) Order	 1954 (C. O. 48). This order deals with the entire constitutional position of the State of Jammu and Kashmir within the framework of the Constitution of India	 except only the internal Constitution of the State Government to be framed by the Constituent Assembly of that State. The Constituent Assembly of the State of Jammu and Kashmir framed its own Constitution repealing and replacing its earlier Constitution. This new Constitution	 called the "Constitution of Jammu and Kashmir"	 was adopted and enacted by the Constituent Assembly of that State on November 17	 1965. By the Constitution (Application to Jammu and Kashmir) Order	 1954 (C. O. 48)	 as amended from time to time	 the provisions of the Constitution of India as in force on June 20	 1964	 and as amended by the Constitution Amendment Acts set out in clause (2) of that Order apply in relation to the State of Jammu and Kashmir subject to the exceptions and modifications set out in the said clause. By sub clause (6) (a) of clause (2) of the said Presidential Order	 clause (1) of Article 246 of the Constitution of India is made applicable to the State of Jammu and Kashmir with certain modifications with which we are not concerned	 while clause (3) of Article 246 is not made applicable to that State. Sub clause (22) of clause 2 of the said Presidential Order applies Lisi I in the Seventh Schedule to the State of Jammu and Kashmir with the omissions and modifications mentioned in the said sub clause. These omissions and modifications are	 however	 irrelevant for our purpose inasmuch as Entries 95 and 92A of List I apply to the State of Jammu and 871 Kashmir in an unmodified form. By the same sub clause	 List II in the Seventh Schedule	 namely	 the State List	 does not apply to the State of Jammu and Kashmir	 Section 5 of the Constitution of Jammu and Kashmir	 however	 provides as follows: "5	 Extent of executive and legislative Power of the State The executive and legislative power of the State extends to all matters except those with respect to which Parliament has power to make laws for the State under the provisions of the Constitution of India. " Thus	 under the constitutional provisions applicable to the State of Jammu and Kashmir	 the power of the Stage Legislature to enact a law relating to taxes on intra State sale or purchase of goods is the same as that of the Legislatures of other States in India. By sub clause (7) of clause 2 of the said Order	 Article 265 is made applicable to the State of Jammu and Kashmir. Further	 section 114 of the Constitution of Jammu and Kashmir is in terms identical with Article 265 of the Constitution of India and equally provides that "No tax shall be levied or collected except by authority of law. " The question which we	 therefore	 have to consider is "Whether in the exercise of its power to make a law with respect to taxes on the sale or purchase of goods taking place within the State	 the Legislature of that State has the legislative competence to provide for payment of interest on the amount of tax due according to the return filed by an assessee but not paid within the prescribed time?" As was pointed out by Lord Dunedin in Whitney vs Commissioner of Inland Revenue(1); a passage cited with approval by the Federal Court in Chatturam and others vs Commissioner of Income Tax	 Bihar	(2) and by this Court in Messrs Chatturam Horilram Ltd. vs Commissioner of Income Tax	 Bihar and Orissa(2): "Now	 there are three stages in the imposition of a tax: there is the declaration of liability	 that is the part of the statute which determines what persons in respect of what property are liable. Next	 there is the assessment. 872 Liability does not depend on assessment. That	 ex hypothesis	 has already been fixed. But assessment particularizes the exact sum which a person liable has to pay. Lastly	 come the methods of recovery	 if the person faxed does not voluntarily pay. " It would follow from the above decisions that the power to make a law with respect to a tax comprehends within it the power to levy that tax and to determine the persons who are liable to pay such tax	 the rates at which such tax is to be paid and the even which will attract liability in respect of such tax. This is done by the charging sections of the particular tax law. The taxing power of the State will also comprehend within it the power to provide for quantification of the liability of persons made liable to pay the tax. This is done by the provisions relating to assessment. The taxing power will also comprehend within it the power to provide for collection of tax including prescribing the methods of recovery of the amount of tax due if the person liable to pay the tax does not voluntarily pay it. The power to make a law with respect to a tax includes not only what has been set out above but also a power to make provisions in the relevant statute with respect to all matters ancillary and incidental to the levy	 assessment	 collection and recovery of tax. Collection of tax by the State may be either after the liability is quantified by assessment or may be prior to actual assessment by requiring the assessee to pay before any assessment is made the amount of tax admitted to be due and payable by him. This is done by making provisions such as those for advance payment of tax and for self assessment contained in the Income Tax Act	 1961. This is also what sub section (3) of section 8 of the Act does by requiring that the quarterly tax payable on the basis of a quarterly return required to be furnished by sub section (2) of section 7 shall be paid before furnishing such return. This is a mode of collection of revenue in advance before quantification of the actual tax liability and the Legislature would be well within its right and would competent to provide for recovery of such amount if it is not by the prescribed time. The Act	 as its long title shows is "An to provide for the levy of a general tax on the sale or purchase goods in the State and for other matters of connected therewith" a one of the methods of collection of revenue adopted by it is to require that tax due according to the quarterly returns should be paid before filing such returns and it was within the legislative competence of the Legislature of the State of Jammu and Kashmir to provide for recovery of the amount of tax due under quarterly 873 returns if default is made in paying such amount by the prescribed time. This has been done by the State Legislature by enacting subsection (8) of section 8 under which the provisions of sub section (2) of section 8 and of sections 16 and 16 A are made applicable mutatis mutandis to the recovery of tax payable by a dealer if he fails to pay it. Sub section (2) of section 8 provides for payment of interest	 section 16 provides for recovery of tax as arrears of land revenue	 and section 16 A provides for issue of a garnishee notice to a person from whom money is due	 or may become due	 to the assessee or to a person who holds	 or may subsequently hold	 money for or on account of the assessee to pay to the Assessing Authority as much of the money as is sufficient to pay the amount due by the assessee by way of tax. Thus	 payment of interest in case of default in payment of tax is a means of compelling an assessee to pay the tax due by the prescribed date. It is a mode of recovery of tax and well within the legislative power of the State. The challenge to sub section (2) of section 8 on the ground that the provisions of that sub section infringe Article 14 of the Constitution is a twofold one	 namely: (1) that the said sub section is discriminatory	 and (2) that it is arbitrary and unreasonable. Sub clause (4) of clause 2 of the Constitution (Application to Jammu and Kashmir) Order	 1954	 makes Article 14 of the Constitution of India applicable to the State of Jammu and Kashmir. With respect to the charge of discrimination	 it was submitted that such high rates of interest for non payment of tax are not to be found in the sales tax law of any other State and	 therefore	 by enacting the said sub section (2) of section 8 and providing for payment of interest at the rate of two per cent per month when the period of default exceeded three months but did not exceed six months and for interest at the rate of three per cent per month if the default was for a period exceeding six months	 dealers in the State of Jammu and Kashmir were hostilely discriminated against as compared with dealers in other States. This argument wholly overlooks the very basis of the scheme of distribution of legislative power contained in our Constitution. Our Constitution is federal in its structure and a salient feature of a federal polity is distribution of legislative and administrative powers between the federated unit and the federating units	 that is	 between the federal government 874 and the State governments. Thus	 matters in respect of which our Constitution makers felt that there should be uniformity of law throughout the country have been placed by them in the Union List (List I in the Seventh Schedule to the Constitution) conferring exclusive power upon Parliament to make laws with respect thereto	 while matters which they felt were of local concern and may require laws to be made having regard to the particular needs and peculiar problems of each State have been assigned to the State Legislatures by placing them in List II of the Seventh Schedule	 that is	 the State List. Inter State trade and commerce is a matter which affects all the States in India and thus the whole country. It is for this reason that in the Seventh Schedule to the Constitution the subject of taxes on the sale or purchase of goods taking place in the course of inter State trade or commerce has been put in List I and made a Union subject. Taxes on the sale or purchase of goods taking place within the State affect only those who carry on the business of buying and selling goods within the State and	 therefore	 this subject has been put in List II of the Seventh Schedule	 namely	 the State List. Sales tax is the biggest source of revenue for a State and it is for the State to decide how and in what manner it will raise this revenue and to determine which particular transactions of sale or purchase of goods taking place within that State should be taxed and at what rates	 and which particular transactions of sale or purchase of goods should be exempted from tax or taxed at a lower rate having regard to the subject matter of sale	 as for instance	 where particular goods constitute necessities for the poorer classes of people or where the goods in question are of such a nature as are required to be exempted from tax or taxed at a lower rate in order to encourage a local industry. Consideration of these matters must	 from the nature of things	 differ from State to State. Similarly	 it is for each State to determine the methods it will adopt to collect its revenue from this source and to decide which methods would be most efficacious for this purpose. The provisions of the sales tax law of each State must: therefore	 necessarily differ in various respects from the provisions of sales tax laws of other States. If the provisions of the legislation of every State on a particular topic are to be identical in every respect	 there is no purpose in including that topic in the State List and it may as well be included in the Union List. Merely because the provisions of a State law differ from the provisions of other State laws on the same subject cannot make such provisions discriminatory. The second part of the challenge under Article 14 was with 875 respect to the rates at which interest is payable under sub section (2) of section 8 on the amount of tax paid after the expiry of the prescribed date of payment. It is true that the rate of two per cent per month and particularly the rate of three per cent per month can be said to be on the high side	 but we fail to see how this would render the provisions of that sub section void or unconstitutional. Providing for payment of interest in case of delayed payment of tax is a method usually adopted in fiscal legislation to ensure that the amount of tax which is due is paid by the prescribed time and provisions in that behalf form part of the recovery machinery provided in a taxing statute. It is for the State to provide by what means payment of tax is to be enforced and a person who does not pay the amount of tax lawfully and admittedly due by him can hardly complain of the measures adopted by the State to compel him to pay such amount. It neither lies in the default 's mouth to protest against the rate of interest charged to him nor is it open to him to dictate to the State the methods which it should adopt for recovering the amount of tax due by him. In this connection	 it is pertinent to note that under section 10 B of the Act	 where as a result of an order made in appeal or revision	 a refund has become due to the dealer or any other person on account of tax or penalty found to have been paid in excess	 the State Government is required to pay to such dealer or person simple interest at the rate of 12 per cent per annum on the amount of such refund from the date such payment was made upto the date on which such refund was granted and in case of delay in refunding the excess amount	 interest at the rate of 24 percent per annum if the refund is granted beyond a period of three months out before the expiry of six months from the date of the appellate or revisional order and at the rate of 36 per cent per annum if it is granted thereafter. Thus	 under the Act	 the same rates of interest apply both to the dealer who has made default in payment of tax due by him and to the State Government in case of default made by it in making payment of the amount of tax or penalty which has become refundable as a result of an appellate or revisional order. The graduated rates of interest provided by sub section (2) of section 8 cannot	 therefore	 be characterized as arbitrary or unreasonable. The remaining contentions are directed not against the constitutionality of the impugned statutory provisions but against the legality of the impugned orders. The first of these contentions is that the assessees	 having sold goods on credit basis	 are not liable to pay the quarterly tax until they have received from their custo 876 mers the price of goods sold to them. This contention is founded upon as assumption that the liability to pay the tax under the Act is contigent upon receipt of the sale price an assumption not warranted by the provisions of the Act. Under the Act	 the liability to pay sales tax is cast upon a dealer. This is made clear by section 4 of the Act which is headed "Liability to tax under this Act. " The relevant provisions of sub section (1) of section 4 are as follows: "Subject to the provisions of this Act	 every dealer	 except the one dealing exclusively in gods declared tax free under Section 5	 shall pay for each year tax on his taxable turnover at a rate not exceeding twenty five per cent of such turnover as may be determined by the Government and notified by the Government in the Government Gazette and such tax shall be charged on the sale of goods once only. X X X X X X" Under section 6	 a dealer who has become liable to pay under section 4 is prohibited from carrying on business as a dealer until he has been registered in accordance with the provisions of the Act. Clause (g) of section 2 inter alia defines a 'dealer ' as meaning "any person who carries on (whether regularly or otherwise) the business of selling	 purchasing or distributing goods	 directly or indirectly	 for cash or for deferred payment	 or for commission	 remuneration	 or other valuable consideration". Clause (L) (1) defines the expression "sale" with all its grammatical variations and cognate expressions as meaning "any transfer of property in goods	 otherwise than by mortgage	 hypothecation	 charge or pledge	 by any person for cash or deferred payment or for any other valuable consideration. ". Clause (L) (II) defines "sale price" as meaning inter alia "the amount of valuable consideration paid or payable to a dealer for any sale made including any sum paid or payable for anything done by the dealer in respect of the goods at the time of or before delivery thereof other than the actual cost of outward freight or delivery or the cost of installation when such cost is separately charged." Under clause (n) of section 2	 "turnover" includes the aggregate of the amounts of sale and purchase and parts of sale and purchase made by any dealer whether as principal	 agent or in any other capacity. It is clear from the above statutory provisions that the liability to pay sales tax is that of the dealer and not of the person who purchases goods from him and for the purposes of sales tax	 it is 877 immaterial whether the price of goods has been paid to the dealer or is payable to him The fact that a dealer has sold goods on credit is	 therefore	 wholly immaterial. This Act imposes the liability to pay sales tax on dealers. This liability is irrespective of the fact whether he has made profit of loss in his business and whether he has received the sale price or not. When the liability to pay sales tax is cast by the statute on the dealer	 he may pass on to his customer the amount of tax payable by him but he can only do so as a term of the contract of sale. Unless and until the purchaser agrees to pay to his vendor the amount of sales tax payable by the vendor	 he is not bound to pay it to the vendor. Where	 however	 the purchaser agrees to pay such amount	 it forms part of the sale price on which sales tax would be payable to the State. Under the sales tax laws of some States	 a dealer is permitted to recover or collect from the purchaser the amount of sales tax payable by him. Even then the dealer can recover or collect such amount only if the purchaser agrees to pay it. In such cases	 under those sales tax laws the amount so recovered or collected is not treated	 either in whole or in part	 as part of the sale price and not taxed	 provided the amount not taxed is paid over to the State or tax on the full amount	 that is	 including the amount of tax so recovered or collected	 is required to be paid along with the quarterly or monthly return	 as the case may be	 and then at the time of assessment refund of the whole or part of the tax on the amount so collected is given to the dealer. In this connection	 a reference was made to section 64 A of the 	 (substituted for the original section 64 A by the Sale of Goods (Amendment) Act	 1963	 under which unless a different intention appears from the terms of the contract	 in the event of any duty of customs or excise on goods or any tax on the sale or purchase of goods being imposed	 increased	 decreased or remitted in respect of any goods after the making of any contract for the sale or purchase of such goods	 without stipulation as to the payment of such duty or tax where duty or tax was not chargeable at the time of the making of the contract	 or for the sale or purchase of such goods duty paid or tax paid where duty or tax was chargeable at that time	 if such imposition or increase so takes effect that the duty or tax or increased duty or tax	 as the case may be	 or any part of such duty or tax is paid or is payable	 the seller may add so much to the contract price as will be equivalent to the amount paid or payable in respect of such duty or tax or increase of duty or tax	 and is to be entitled to be paid and to sue for and recover such addition	 and if 878 such decrease or remission so takes effect that the decreased duty or tax only	 or no duty or tax	 as the case may be	 is paid or is payable	 the buyer may deduct so much from the contract price as will be equivalent to the decrease of duty or tax or remitted duty or tax	 and is not to be liable to pay or be sued for in respect of such deduction. We do not find Section 64 A of the to have any relevance to the point before us. That section is subject to a different intention appearing from the terms of the contract and gives a right to the seller to add the amount of customs or excise duty or sales tax or purchase tax to the price of goods where such duty or tax is imposed for the first time after the contract of sale is made	 where the contract does not contain any stipulation as to payment of duty or tax	 or in case the goods are sold duty paid or tax paid	 where the rate of such duty or tax is increased	 to add the extra duty or tax to the contract price. That section also gives a corresponding right to the buyer to deduct so much from the contract price as will be equivalent to the decrease of duty or tax or remitted duty or tax where any decrease or remittance in duty or tax takes place after the making of the contract of sale. Section 64 A thus provides for the rights and liabilities inter se of a seller and buyer of goods	 where any customs or excise duty or any sales tax or purchase tax is imposed or its rate increased or decreased	 or such duty or tax remitted in whole or in part after the making of the contract of sale. This section does not deal with the liability of the seller to pay sales tax to the Government. Under section 8 B of the Act	 where a registered dealer realizes any amount by way of tax from the purchaser	 he is required to deposit it in the Government Treasury or in the office of the Deputy Sales Tax Commissioner within one month of its realization. Where a dealer so deposits the tax	 he would get credit for it against the amount of tax payable by him	 but from this it does not follow that where he has not been able to recover the amount of tax or sale price from his customers	 he is not bound to comply with the statutory requirements of sub section (3) of section 8 under which he has to pay tax according to the quarterly return furnished by him before the date prescribed for filing such return. The Assessees were	 therefore	 bound to pay the tax due according to the quarterly returns filed by them before filing such returns and the fact that their Customers had not paid to them the sale price did not exempt them from their statutory liability in this behalf. The next contention	 namely	 that the Assessing Authority was 879 not entitled to impose interest	 the amount of which exceeded the amount of tax in respect of which default had been made in paying it by the prescribed date	 is equally without any substance. No reason was advanced in support of this contention and we fail to see on what principle the Hindu Law rule of damdupat can be made applicable to a sales tax legislation. The recovery provisions of the Act are meant for speedy and prompt collection of revenue. These provisions are not meant for the benefit of defaulting tax payers and such defaulters cannot claim that the amount of interest payable by them on delayed tax payment should be scaled down as if they were entitled to claim relief under a debt relief law. In taking up such a contention	 the concerned Assessees have overlooked the fact that the amount of interest payable by them would not have exceeded the amount of tax not paid by them by the prescribed date had they paid the tax due earlier as also the fact that they would not have been liable to pay any amount at all by way of interest had they paid the tax due by the prescribed date. We now turn to the contention that the Assesses were not liable to pay interest unless a notice of demand was first issued to them calling upon them to pay the amount of quarterly tax due from them. In support of this submission reliance placed upon subsections (1) and (2) of section 8 of the Act. In our opinion	 reliance placed upon those sub sections is misconceived for in doing so the Assessees have overlooked the other relevant provisions of section 8. Sub section (1) of section 8 requires that the tax assessed	 or any other amount demand	 under the Act is to be paid in such manner and within such time	 not being less than fifteen days from the date of the notice of demand	 as may be specified in the notice and it is when default is made in making such payment that the whole of the amount then remaining due becomes recoverable in accordance with sections 16 and 16 A of the Act. Sub section (2) of section 8 lays down that if the tax or any other amount due under the Act is not paid within the period specified in the notice of demand	 the defaulter will become liable to pay interest on the tax or other amount from the date it was payable to the date of actual payment at the rates mentioned in the said sub section. Under sub section (3) of section 8	 quarterly tax is to be paid before furnishing the quarterly return but not later than the date prescribed under subsection (2) of section 7. As we have seen	 under sub section (2) of section 7 quarterly returns are to be furnished within thirty days from 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 880 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	 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 Messrs Royal Booi House etc. vs State of Jammu and Kashmir and others. 881 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. 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 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 and 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 882 months of default and at the rate of three per cent per month for the period of default exceeding six months. We also allow the Appeals filed by the Assessees who are Appellants before us to the same limited extent by setting aside the order of dismissal of their writ petitions passed by the Jammu and Kashmir High Court and making the rule issued in each of those writ petitions absolute only to the limited extent specified above. On an application made to us in that behalf	 we grant to the Petitioners and Appellants before us three months ' time from today to make payment of the amount of interest due and payable by them according to this Judgment and the State of Jammu and Kashmir will not until the expiry of the said period of three months take any steps to recover such amount of interest from any of the Petitioners and Appellants. As the Petitioners and Appellants before us have partly succeeded in the Writ Petitions and Appeals filed by them	 we make no order as to the costs of these Writ Petitions and Appeals. N.V.K Appeals & Petitions partly allowed.

Summary:
The appellants and the petitioners were assessees registered as dealers under the Jammu and Kashmir General Sales Tax Act	 1962. They filed their quarterly returns within the time prescribed by the Act but without paying the tax duo according to such returns. Some of them also filed revised returns thereafter. The tax due was paid by the assessees after several months and in some cases by instalments. In a few cases	 the full amount of tax was not paid even by the date the 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 assessment. In other cases	 orders requiring interest to be paid were made along with the assessment orders. The assessees who were appellants in this Court	 had 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 had filed their returns but had not deposited the full amount of tax due according to such returns	 and the Assessing 859 Authority	 having accepted the returns	 had issued a composite notice of demand calling up them to pay the amount of tax along with 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 Authority had accepted the returns and had issued a notice of demand asking them to pay interest on the amount of tax for the period for which such payment was delayed	 and (c) dealers who had filed their returns but had not paid the amount of tax due according to such returns by the prescribed time but had paid it later and notices were issued against them calling upon them to pay interest for the period of default before making any order of assessment. 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 of the Act in so far as they provide for payment of such interest are beyond the legislative competence of the State Legislature and	 therefore unconstitutional. (2) Sub section (2) of section 8 of the Act was void as infringing Article 14 of the Constitution because its provisions are discriminatory	 arbitrary and unreasonable. (3) The Assessees carried on business on credit basis and as by the dates when they filed their quarterly returns their customers had not paid 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. (4) In some cases	 the amount of interest claimed from the Assessees exceeded the amount of tax paid by them and	 therefore	 the demand for such excess amount of interest was bad in law. (5) 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. (6) Interest was levied by the Assessing Authority for the entire 860 period of default at the maximum rate prescribed by sub section (2) of section 8 which was contrary to the provisions of that sub section. ^ HELD : The constitutionality of sub section (1)	 (2) and (3) of section 8 of the Jammu and Kashmir General Sales Tax Act 1962 upheld. The State however restrained from recovering from the Assessees	 interest on the amount of quarterly tax paid after the expiry of the date prescribed for payment 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 for the period of default exceeding six months. [881 G H; 882A] 1. (i) The Constitution af India	 does not apply in its entirety to the State of Jammu and Kashmir because that State holds a special position in the Constitutional set up of the country. Article 370 makes special provisions with respect to the State of Jammu and Kashmir. Under sub clause (c) of clause (1) of Article 370 the provisions of Articles 1 and 370 apply in relation to the State of Jammu and Kashmir and under sub clause (d) of clause (1) of Article 370 such of the other provisions of the Constitution apply in relation to that State subject to such exceptions and modifications as the President may specify by an order issued with the concurrence of the Government of the State. In exercise of the power conferred by clause (1) of Article 370 the President of India	 with the concurrence of the Government of the State of Jammu and Kashmir	 has made the Constitution (Application to Jammu and Kashmir) Order	 1954 (C. O. 48) which was amended from time to time. The provisions of the Constitution of India as in force on June 20	 1964. and as amended by the Constitution Amendment Acts set out in clause (2) of that Order apply in relation to the State of Jammu and Kashmir subject to the exceptions and modifications set out in the said clause. By sub clause (6) (a) of clause (2) of the said Presidential Order	 Clause (1) of Article 246 of the Constitution of India was made applicable to the State of Jammu and Kashmir with certain modifications	 while clause (3) of Article 246 was not made applicable to the State. Sub clause (22) of clause 2 of the said Presidential Order applies List I in the Seventh Schedule to the State of Jammu and Kashmir with the omissions and modifications mentioned in the said sub clause. Entries 92 and 92A of List I apply to the State of Jammu and Kashmir in an unmodified form. By the same sub clause	 List II in the Seventh Schedule	 namely	 the State List	 does not apply to the State of Jammu and Kashmir. [870G H; 871A B] (ii) Thus under section 5 of the Constitution of Jammu and Kashmir the executive and legislative power of the State extends to all matters with respect to which Parliament has power to make laws for the State under the provisions of the Constitution of India under the Constitutional provisions applicable to the State of Jammu and Kashmir	 the power of the State Legislature to enact a law relating to taxes on intra State sale or purchase of goods is the same as that of the Legislatures of other States in India. By sub clause (7) of clause 2 of the said Order	 Article 265 is made applicable to the State of Jammu and Kashmir. Section 114 of the Constitution of 861 Jammu and Kashmir is in terms identical with Article 265 of the Constitution of India which provides that "No tax shall be levied or collected except by authority of law." [871B D] (iii) The power to make a law with respect to tax comprehends within it the power to levy that tax and to determine the persons who are liable to pay such tax	 the rates at which such tax is to be paid and the event which will attract liability in respect of such tax. This is done by the charging sections of the particular tax law. The taxing power of the state will also comprehend within it the power to provide for quantification of the liability of persons made liable to pay the tax. This is done by the provisions relating to assessment. The taxing power will also comprehend within it the power to provide for collection of tax including prescribing the methods of recovery of the amount of tax due if the person liable to pay the tax does not voluntarily pay it. The power to make a law with respect to a tax includes not only what has been set out above but also a power to make provisions in the relevant statute with respect to all matters ancillary and incidental to the levy	 assessment	 collection and recovery of tax. Collection of tax by the State may be either after the liability is quantified by assessment or may be prior to actual assessment by requiring the assessee to pay before any assessment is made the amount of tax admitted to be due and payable by him. [872B E] Whitney vs Commissioners of Inland Revenue	 	 T. C. 79	 110; Chatturam and others vs Commissioner of Income Tax	 Bihar (1947) F.C.R.116	 126; 	 308; Messrs Chatturam Horilram Ltd. vs Commissioner of Income Tax	 Bihar and Orissa	 	 297 8; 	 715 6 referred to. (iv) One of the methods of collection of revenue adopted by the Act	 is to require that tax due according to the quarterly returns should be paid before filing such returns and it was within the legislative competence of the Legislature of the State of Jammu and Kashmir to provide for recovery of the amount of tax due under quarterly returns if default is made in paying such amount by the prescribed time. [872H; 873A] (v) Payment of interest in case of default in payment of tax is a means of compelling an assessee to pay the tax due by the prescribed date. It is a mode of recovery of tax and well within the legislative power of the State. [873C] 2. (i) Inter State trade and commerce is a matter which affects all the States in India and thus the whole country. It is for this reason that in the Seventh Schedule to the Constitution the subject of taxes on the sale or purchase of goods taking place in the course of inter State trade or commerce has been put in List I and made a Union subject. Taxes on the sale or purchase of goods taking place within the State affect only those who carry on the business of buying and selling goods within the State and	 therefore	 this subject has been put in List II of Seventh Schedule	 namely the State List. [874C D] 862 (ii) Sales tax is the biggest source of revenue for a State and it is for the State to decide how and in what manner it will raise this revenue and to determine which particular transactions of sale or purchase of goods taking place within that State should be taxed and at what rates. and which particular transactions of sale or purchase of goods should be exempted from tax or taxed at a lower rate having regard to the subject matter of sale	 as for instance	 where particular goods constitute necessities for the poorer classes of people or where the goods in question are of such a nature as are required to be exempted from tax or taxed at a lower rate in order to encourage a local industry. Consideration of these matters must	 therefore	 differ from State to State. Similarly it is for the each State to determine the methods it will adopt to collect its revenue from this source and to decide which methods would be most efficacious for this purpose. If the provisions of the legislation of every State on a particular topic are to be identical in every respect	 there is no purpose in including that topic in the State List and it may as well be included in the Union List. Merely because the provisions of a State law differ from the provisions of other State laws on the same subject cannot make such provisions discriminatory. [874D G] (iii) Interest is payable under sub section (2) of section 8 on the amount of tax paid after the expiry of the prescribed date of payment. The rate of two per cent per month and particularly the rate of three per cent per month can be said to be on the high side	 but this would not render the provisions of that sub section void or unconstitutional. Providing for payment of interest in case of delayed payment of tax is a method usually adopted in fiscal legislation to ensure that the amount of tax which is due is paid by the prescribed time and provisions in that behalf form part of the recovery machinery provided in a taxing statute. It is for the State to provide by what means payment of tax is to be enforced and a person who does not pay the amount of tax lawfully and admittedly due by him can hardly complain of the measures adopted by the State to compel him to pay such amount. [875A C] (iv) Under the Act	 the same rates of interest apply both to the dealer who has made default in payment of tax due by him and to the State Government in case of default made by it in making payment of the amount of tax or penalty which has become refundable as a result of an appellate or revisional order. The graduated rate of interest provided by sub section (2) of section 8 cannot	 therefore be characterised as arbitrary or unreasonable. [875F G] 3. (i) Under the Act	 the liability to pay sales tax is cast upon the dealer. This is made clear by sections 4	6	 and clauses (G)	 (L) (1)	 (L) (II)	 and (n) of section 2. It is immaterial whether the price of goods has been paid to the dealer or is payable to him. The fact that a dealer has sold goods on credit is	 therefore	 wholly immaterial. This liability is irrespective of the fact whether the dealer has made profit or loss in his business and whether he has received the sale price or not. [876H; 877A B] (ii) Section 64 A of the does not deal with the liability of the seller to pay sales tax to the Government. [878E] 863 In the instant case	 the Assessees were bound to pay the tax due according to the quarterly returns filed by them before filing such returns and the fact that their customers had not paid to them the sale price did not exempt them from their statutory liability. [878G] 4. The recovery provisions of the Act are meant for speedy and prompt collection of revenue. These provisions are not meant for the benefit of defaulting tax payers and such defaulters cannot claim that the amount of interest payable by them on delayed tax payment should be scaled down as if they were entitled to claim relief under a debt relief law. [879 B C] 5. Under sub section 8 (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. Accordingly the requirement of sub section (2) of section 8 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) so 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. [880B F] Messrs Royal Boot House etc. vs State of Jammu and Kashmir and others. C.M.P. Nos. 32413 and 32414 of 1983 decided on January 6	 1984 by P. N. Bhagvati	 Ag. C. J. and Venkataramiah and Varadarajan	 JJ. referred to. Sub section (2) of section 8 of the Act provides for different rates of interest depending upon the length of the period of default. [881D] In the instant cases	 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. [881 B]