1993 (11) TMI 223 - HC - VAT and Sales Tax

Summary

Issues:
1. Calculation of penal interest under section 23(3) of the Kerala General Sales Tax Act.
2. Interpretation of provisions regarding payment and recovery of tax under sections 23(1), 23(3), and 23(5) of the Act.
3. Requirement of serving a fresh notice of demand after reduction of tax in appeal.
4. Applicability of the Kerala Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1967.

Detailed Analysis:
1. The petitioner, a dealer in cashew, challenged the calculation of penal interest under section 23(3) of the Kerala General Sales Tax Act for the assessment year 1975-76. The appellate order reduced the tax liability, leading to a dispute over the correct amount on which penal interest should be calculated. The court held that penal interest accrues immediately after the notice of demand is served, based on the original assessment, and is payable on the reduced amount as per the appellate order. The liability to pay penal interest is automatic and does not require a formal order imposing such interest.

2. The court analyzed sections 23(1), 23(3), and 23(5) of the Act concerning the payment and recovery of tax. It emphasized that the tax assessed as per the notice of demand is payable from the date of service of the notice, and any default triggers immediate payment of the outstanding amount, attracting penal interest as per section 23(3). The court clarified that penal interest is limited to the amount remaining payable after reduction in the appeal or revision, as per the appellate or revisional order.

3. The issue of serving a fresh notice of demand after the reduction of tax in appeal was raised, citing the Supreme Court's decision in Income-tax Officer v. Seghu Buchiah Setty [1964] 52 ITR 538. The court rejected the plea, stating that the Kerala Taxation Laws Act dispenses with the requirement of a fresh notice of demand in cases where tax has been reduced in appeal. The legislation only mandates an intimation of the modified tax payable post-appeal, as done in the instant case, without superseding the original notice of demand.

4. The court addressed the applicability of the Kerala Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1967, emphasizing that it does not mandate interest accrual only from the date of the appellate order. The Act requires only an intimation of the revised tax amount post-appeal, maintaining the original notice of demand for amounts due as per the appellate or revisional order. The court dismissed the writ appeal, upholding the calculation of penal interest and the procedures followed in the case.