1996 (11) TMI 399 - SCH - VAT and Sales Tax

Liability of the dealer to pay penal interest - Held that - Having regard to the phraseology of section 23(3) of the Kerala General Sales Tax Act, the liability of the dealer to pay penal interest on the tax assessed or any other amount due under that Act arises only if such tax or amount is not paid within the time specified therefor in the notice of demand . There being no notice of demand, it was held that the liability to pay penal interest did not arise. It is necessary to emphasise that this is not a case of payment of interest at the ordinary statutory rate but a case of penal interest and it is, therefore, that the Act provides that the liability to pay the same arises only after there has been a failure to comply with the provisions of a notice in that behalf.

Summary

The Supreme Court affirmed the judgment of the Kerala High Court regarding the liability of a dealer to pay penal interest under the Kerala General Sales Tax Act. The liability arises only if tax or amount due is not paid within the time specified in the notice of demand. Since there was no notice of demand, the liability to pay penal interest did not arise. The appeals and S.L.P. were dismissed with no order as to costs.