STATE OF ANDHRA PRADESH Vs. MOTHEY GANGARAJU

JUDGEMENT

(1.) THE question falling for determination in this second appeal is, whether an assessee is entitled to claim interest on sales tax collected from him under an assessment which has been declared to be illegal.

(2.) THE respondents in this case are a registered firm carrying on business as commission agents. On its turnover for the year 1945-46, the Commercial Tax Authorities levied sales tax amounting to Rs. 7,248-6-2. The respondent thereupon, filed O.S. No. 80 of 1950 on 19th September, 1947, in the District Court, Eluru, for a declaration that the said assessment was illegal, and for a permanent injunction restraining the State from collecting the same. The suit was transferred to the Subordinate Judge's Court, Eluru, and numbered as O.S. No. III of 1952. During the pendency of the suit, the tax was collected by the department on 26th September, 1949, under threat of coercive process. The Subordinate Judge's Court granted a decree with costs on 25th February, 1954, in favour of the respondent, declaring the levy of the tax as illegal, and giving him liberty to take the necessary action for its recovery from the Government, if it is not paid otherwise. The respondent demanded the refund of the collected from him, but the Government repaid only the principal amount with interest from the date of the judgment (i.e., 25th February, 1954). This suit was therefore laid for recovery of interest on Rs. 7,248-6-2 from the date of collection (26th September, 1949) till the date of judgment (25th February, 1954) at six per cent. per annum.

(3.) IN answering this question, it will be helpful to note the relevant statutory provisions, Section 1 of the Interest Act (XXXII of 1839) reads as follows :-