2001 (8) TMI 1337 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of levy of penalty under section 13(2) of the Karnataka Sales Tax Act, 1957.
2. Discrimination in the rate of interest and penalty under sections 13(2) and 13-A of the Karnataka Sales Tax Act, 1957.

Issue-wise Detailed Analysis:

1. Validity of Levy of Penalty under Section 13(2) of the Karnataka Sales Tax Act, 1957:

The appellant challenged the demand notices issued for the payment of penalty under section 13(2)(ii) of the Karnataka Sales Tax Act, 1957, arguing that there was no default in payment of tax due to a stay order granted by the Court. The appellant contended that the period during which the stay was imposed should be excluded in calculating the penalty. The Court examined the provisions of section 13, which contemplates a default in making payment of tax. It was observed that the default continues even when a stay is granted by a competent authority, as the stay only temporarily suspends the operation of the order. The Court referred to the Supreme Court's decision in Consolidated Coffee Ltd. v. Agricultural Income-tax Officer, which held that during the period a stay order is in force, no default can be said to have been made by the assessee in the payment of tax. The Court concluded that the imposition of penalty for the period during which the stay order was in force was not justified. Consequently, the impugned notice demanding the payment of penalty for the period covered by the stay order was quashed, and the amount was to be recalculated and a fresh demand notice issued.

2. Discrimination in the Rate of Interest and Penalty under Sections 13(2) and 13-A of the Karnataka Sales Tax Act, 1957:

The appellant argued that the imposition of interest at 24% for the first three months and 30% thereafter was discriminatory and violative of Article 14 of the Constitution because the interest payable by the department in case of a refund was only 12% under section 13-A of the Act. The Court rejected this contention, stating that the provisions of section 13(2)(ii) cannot be considered discriminatory merely because the interest payable by the department is lesser than the penalty/interest payable by the petitioner. The Court emphasized that these provisions apply to different circumstances and different persons, and it is within the Legislature's purview to determine the applicable provisions.

Conclusion:

The writ appeal was partly allowed. The impugned notice demanding the payment of penalty for the period during which the stay order was in force was quashed. The amount was to be recalculated, and a fresh demand notice issued. The Court did not find it necessary to address the second question regarding discrimination in the rate of interest and penalty.