1998 (6) TMI 555 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability to file a return and pay tax on imported inedible tallow.
2. Imposition of penal interest under Section 23(3) of the Kerala General Sales Tax Act, 1963.
3. Interpretation of Section 23(3) concerning the timing of tax payment and penal interest.
4. Comparison with precedents and applicability of previous judgments.
5. Automatic liability for penal interest without a demand notice.

Issue-wise Detailed Analysis:

1. Liability to file a return and pay tax on imported inedible tallow:
The assessee, M/s. Maruti Wire Industries Pvt. Ltd., entered into an agreement to supply imported inedible tallow with the tax payable by the purchaser. The assessee did not file a return, claiming the sale was "in the course of import." The assessing authority completed the assessment and determined the tax and surcharge, which were paid by the purchaser upon receiving demand notices.

2. Imposition of penal interest under Section 23(3) of the Kerala General Sales Tax Act, 1963:
The assessee was served with notices for penal interest under Section 23(3) for not paying the assessed tax by the due date. The interest demanded was for the period from May 20, 1983, to February 25, 1985. The Revenue contended that the assessee was obliged to file a return and pay the tax by May 20, 1983, and failure to do so attracted penal interest.

3. Interpretation of Section 23(3) concerning the timing of tax payment and penal interest:
The single Judge held that penal interest liability arises only after assessment or self-assessment by filing a return. The court noted that without a return, no assessment could be deemed to have been made on the due date. The primary question was whether penal interest could be imposed if the tax was not paid with the return due on May 20, 1983.

4. Comparison with precedents and applicability of previous judgments:
The court referred to the Supreme Court's decision in Calcutta Jute Manufacturing Co. v. Commercial Tax Officer, which held that interest liability starts from the date prescribed for filing the return if no return is filed. The court distinguished this case from J.K. Synthetics Ltd. v. Commercial Taxes Officer, where it was held that interest liability does not arise if tax is paid based on the return filed. However, in the present case, the assessee did not file any return, making it liable for penal interest.

5. Automatic liability for penal interest without a demand notice:
The court addressed whether penal interest under Section 23(3) arises automatically without a demand notice. The Full Bench decision in P.C. Abdulla v. Sales Tax Officer held that interest liability is automatic if tax is not paid. The court clarified that this decision remains authoritative despite the overruling of a related proposition in Associated Cement Co. Ltd. v. Commercial Tax Officer by J.K. Synthetics Ltd.

Conclusion:
The appeal was allowed, and the impugned judgment was set aside. The court held that the assessee was liable to pay penal interest from the due date for filing the return, as the liability for penal interest under Section 23(3) is automatic if the tax is not paid by the due date. The judgment emphasized that failure to file a return and pay tax as required attracts penal interest, irrespective of subsequent assessment or self-assessment.