Gulati, J. - (1.) THIS is a petition under Article 226 of the Consti tution. The petitioner is a general merchant at Allahabad. Among other articles of merchandise he purchased and sold tooth pastes and tooth brushes. One of the questions, which arose before the Sales Tax Authorities, was whether tooth pastes and tooth brushes were toilet goods taxable at single point @ 7 per cent, or they were un classified goods taxable @ 2 per cent. In the assessment year 1962-63 the Sales-tax Officer treated them as toilet goods and levied tax @ 7 per cent., but on appeal it was held that these items were unclassi fied items and were taxable @ 2 per cent. The petitioner has stated that thereafter he started realising sales-tax @ 2 per cent, only and continued to do so until March 15, 1969 when for the first time the Additional Revising Authority, Allahabad by his judgment allowed the revision filed by the State for the assessment year 1962-63 and held that the appropriate rate was 7 per cent. Thereafter for subse quent assessment years a rate of 7 per cent, was charged in respect of the transaction of tooth pastes and tooth brushes. The petitioner filed appeals and for the payment of tax he obtained a stay order from the Revising Authority. For the assessment year 1987-68 the assessment order was passed by the Sales-Tax Officer on August 29, 1968. It was served upon the petitioner on September 28, 1970 and the notice of demand was issued on October 28, 1970. An appeal against this assessment order was filed on October 22, 1970,. The pe titioner made an application to the State
(2.) GOVERNMENT on December 16, 1970 for staying the realisation of tax till the disposal of the ap peal. The Government granted this request and directed the Com missioner of Sales-tax for necessary action. The Commissioner of Sales-tax stayed the realisation of tax and sent necessary direction to the Sales-tax Officer. The stay order was later on revoked by an or der dated September 18, 1970 by the U.P. Government. This order was, however, modified by another order of the U.P. Government dated September 27, 1971. whereby the stay order was extended for another 3 months. The Commissioner of Sales-tax in turn issued the necessary directions to the Sales-tax Officer staying the recovery of the tax. Similarly for the assessment year 1968-69 also the petitioner filed an appeal against the assessment and made a representation to the State Government for the stay of realisation of tax. This request was granted and the Commissioner directed the Sales-tax Officer to stay the recovery. In due course the petitioner paid up the taxes, for all the assessment years and there is no arrear of tax due against him. However, the Department is seeking to realise interest from the petitioner in respect of the demand which remained unpaid for six months and more in spite of the stay order having been granted by the appropriate authorities. The only question that arises in this petition is Whether the petitioner was liable to pay interest in res pect of the period during which the stay orders remained in force. Interest is charged on the arrears of sales-tax under Section 8(1-A) of the U.P. Sales-tax Act, which reads: - "8(1-A). If the tax payable under sub-section (1) remains unpaid for six months after the expiry of the time specified in the notice of assessment and demand, or the commencement of the Uttar Pradesh BikriKar (Dwitiya Sanshodhan) Adhiniyam, 1963, whichever is later, then without prejudice to any other lia bility 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 the 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 reference or of any other order of a competent court or authority, the amount of tax is varied, the interest shall be recalculated accord ingly: Provided 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." The Division Bench before which this matter came up for deci sion noticed that in M\s. Ajai Kumar Ashok Kumar v. Sales-tax Offi cer 1972 U.P. T.C. 581, a Division Bench of this Court had held that the assessee in that case was not liable to pay penal interest for the period during which the realisation of tax remained stayed under the orders of the Commissioner. The reasonings upon which the Bench based its de cision is contained in paragraphs 6 and 7 of the judgment, which are reproduced below: - "6. Now, penal interest is payable under clause (1-A) of Sec tion 8 of the U.P. Sales-tax Act at the rate of 18 per cent, on the sale tax arrears with effect from February 1, 1964. A perusal of clause (1-A) of Section 8 shows very clearly that penal interest at the rate of 18 per cent, is chargeable from a defaulter, if the tax mentioned in the notice of demand issued under sub-section (1) of Section 8 remains unpaid for six months after the expiry of time specified in the notice of demand. If an assessee is not a defaulter, no penal interest can be charged from him. 7. Under sub-section (4) of Section 8 of the Assessing Autho rity may amend or revoke any notice of demand or extend the time for making the payment in pursuance of the notice. The Sales-tax Officer is an Assessing Authority. Thus, if the Sales-tax Officer extends the time for payment, the assessee cannot be said to be a defaulter for purposes of levy of penal interest until the expiry of six months from the extended time. Under Rule 80 of the U.P. Sales-tax Rules the Commissioner of Sales-tax also exercises all the powers of Sales-tax Officer. It follows, therefore, that the Commissioner of Sales-tax may also under sub-section (4) of Section 8 extend the time for making the pay ment of the tax. There is no other provision authorising the Commissioner to stay the recovery of tax."
(3.) THE Bench then noticed the decision of the Supreme Court in the case of Haji Lal Mohammad Bidi Works v. State of U. P. A.I.R. 1973 S.C. 2226. There the Supreme Court held that:- "there is nothing in the language of Section 8 (1-A) which pre vents the running of interest because of operation of any stay order. Indeed, the liability to pay tax is created by the statute and the Sales-tax Officer has no discretion to grant any exemp tion from the payment of interest." Subsequently a similar matter came up before this Court in the case of Ram Chandra Ram v. State of U. P. and others 1974 U.P. T.C. 15. In that case an assessment order was challenged by means of a writ petition and this Court had by an interim order stayed the recovery of tax. The petition was eventually dismissed and the question arose as to whe ther the petitioner was liable to pay interest under Section 8 (1-A) of the U.P. Sales-tax Act for the period during which the stay order granted by this Court remained in operation. The Court relying upon the decision of the Supreme Court in the case of Haji Lal;