1987 (8) TMI 437 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to demand notice for arrears of sales tax and penal interest. Compliance with Revenue Recovery Act. Calculation and recovery of penal interest. Violation of natural justice in issuing demand notice.

Analysis:
The petitioner contested exhibit P6 demand notice seeking payment of arrears for sales tax and penal interest. The total certified amount for recovery was Rs. 58,205.96, including sales tax and penal interest. The petitioner had already remitted Rs. 58,233.96, exceeding the certified amount. However, the counter-affidavit stated that penal interest accrued post the certification date was also to be collected, justifying the issuance of exhibit P6 notice for Rs. 29,223.22, comprising tax and penal interest balance.

The court noted that under the Revenue Recovery Act, a defaulter must pay arrears, interest, and process costs. If interest post-demand date is not calculated and paid, the recovery officer can proceed for its recovery. However, when a defaulter makes payments, they should be appropriately allocated between tax and interest. The defaulter must have a chance to contest the interest amount for the subsequent period.

Penal interest under section 23(3) of the Kerala General Sales Tax Act is levied if tax is not paid on time. The rules require the assessing authority to calculate and notify the dealer periodically about the interest due. Failure to provide such notice violates natural justice principles. The court held that exhibit P6 notice was issued without giving the petitioner a chance to be heard on the interest computation, breaching natural justice. Therefore, exhibit P6 was quashed, allowing respondents to continue recovery proceedings after granting the petitioner a hearing opportunity.

In conclusion, the petition was allowed, exhibit P6 was quashed, and respondents were directed to provide a hearing opportunity before proceeding with recovery. No costs were awarded in the case.