1998 (8) TMI 559 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether penal interest can be directed to be paid without creating any demand in accordance with the law?
2. Whether refusing to grant rebate under section 23A of the Act is illegal?

Analysis:
1. The petitioner, a dealer in vehicles and spare parts, filed an annual return for the year 1988-89 and a revised return before the assessment finalization. The issue arose when the petitioner withheld a sum of Rs. 3,89,420 collected as sales tax without paying it to the Government until March 24, 1995. The authorities directed the petitioner to pay penal interest, which was challenged by the petitioner. The contention was that penal interest cannot be demanded without a formal notice, contrary to the decision in State of Kerala v. Joy Varghese. However, the Court held that under the Kerala General Sales Tax Act, a dealer who collects tax is obligated to pay it to the Government without the need for a formal demand. The failure to remit the tax automatically triggers the liability for penal interest as per the statutory provisions.

2. Regarding the refusal to grant rebate under section 23A of the Act, the Court explained the conditions necessary for availing the benefit of this section. The petitioner did not meet the requirements as he was in arrears to pay tax, and the entire arrears were not paid within the specified timeline. Therefore, the petitioner was not entitled to the rebate under section 23A. The Court found no grounds to interfere with the orders passed by the authorities and dismissed the original petition, upholding the decision of the authorities below. The judgment emphasized the statutory obligations of dealers to remit collected taxes promptly and the automatic accrual of penal interest for non-compliance, highlighting the importance of timely tax payments and adherence to statutory provisions to avoid liabilities and penalties.