1986 (2) TMI 306 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability to pay penalty u/s 23(3) of the Kerala General Sales Tax Act for failure to pay tax based on the return filed u/r 18(1) of the Kerala General Sales Tax Rules.
2. Maintainability of the petition under Article 226 of the Constitution despite the availability of an alternative remedy.

Summary:

1. Liability to Pay Penalty u/s 23(3):
The core issue is whether a dealer under the Kerala General Sales Tax Act incurs liability to pay penal interest u/s 23(3) for failing to pay the tax amount based on the return filed u/r 18(1) of the Kerala General Sales Tax Rules. Sub-section (3) of section 23 specifies that penal interest becomes payable if the tax assessed or any other amount due is not paid within the time specified in the notice of demand or as allowed by the appellate or revising authority. The liability to pay penal interest is triggered if the tax assessed, any other amount due, or any instalments thereof are not paid within the specified time.

Sub-rule (1) of rule 18 mandates that every dealer liable to pay tax must submit a return in form 8, showing the total turnover and taxable turnover for the preceding year. Sub-rule (3) of rule 18 requires the dealer to submit evidence of tax payment along with the return. If the dealer fails to do so, the assessing authority must serve a demand notice in form No. 14, specifying the amount to be paid within 30 days. Failure to comply with this notice attracts penal interest u/s 23(3).

The Court clarified that penal interest u/s 23(3) is leviable only if the dealer fails to pay the amount specified in the notice of demand issued in form No. 14. The decision in Associated Cement Co. Ltd. v. Commercial Tax Officer, Kota, and other cited cases were found not applicable as they did not contain provisions similar to rule 18(3) and form No. 14.

2. Maintainability of the Petition under Article 226:
The Government Pleader argued that the petition under Article 226 is not maintainable due to the availability of an alternative remedy by way of revision u/s 38 of the Act. However, the petitioner undertook to withdraw the revision and pursue the petition under Article 226. The Court noted that the observations in Hajee Mohd. Meera Sahib v. Assistant Commissioner of Sales Tax might convey the impression that penal interest is payable from the date of submission of the return if the amount is not paid along with the return, without issuing a notice of demand. Given the inconsistency with the current judgment, the Court decided to exercise its jurisdiction under Article 226.

Conclusion:
The Court quashed the order imposing penal interest u/s 23(3) from the date of submission of the return, as no notice of demand u/r 18(3) had been issued. The authorities were directed to proceed in accordance with the law as clarified in this judgment. The writ petition was allowed.