2001 (3) TMI 1000 - HC - VAT and Sales Tax

Summary

Issues:
Validity of section 23(3B) of the Kerala General Sales Tax Act, 1963 challenged on constitutional grounds and prospective application. Dispute over liability to pay interest during stay period by court or authority.

Analysis:

1. The judgment concerns the challenge to the validity of section 23(3B) of the Kerala General Sales Tax Act, 1963, now numbered as (3A), on constitutional grounds. The petitioners contended that the provision violates articles 14, 19, 20, and 21 of the Constitution of India and should operate prospectively.

2. A learned single Judge held that section 23(3B) is valid and retrospective in operation. The issue revolves around the sales tax collected but remitted belatedly, with a separate issue in one case regarding the belated payment of turnover tax.

3. The disputed section 23(3B) deals with the liability of interest for belated tax payment, particularly during periods of stay by a court or authority. The provision clarifies that interest is leviable on the amount finally settled after any appeal or revision.

4. The court emphasized that the liability to pay interest arises when a dealer fails to pay the tax due within the prescribed time, regardless of any stay on recovery by a court or authority. The statute does not empower courts to waive interest, and the liability commences after the prescribed period.

5. Referring to legal precedents, the court highlighted the principle of restitution, where parties should not suffer undue hardship due to court orders. The judgment cited cases where interest was deemed payable during periods of stay on tax collection.

6. The judgment also addressed the contention of prospective application, clarifying that the amendment introducing section 23(3B) in the Finance Act, 1994, is clarificatory and hence retrospective. The court held that the liability to pay interest existed even before the amendment.

7. The court rejected arguments that section 23(3B) infringed fundamental rights or was inapplicable to cases assessed before 1994. It affirmed that the provision for interest aims to ensure timely tax payments and deter evasion, maintaining that interest is payable for delayed payments as prescribed by the statute.

8. Ultimately, the court dismissed the writ appeals and original petitions, upholding the validity and retrospective application of section 23(3B) and affirming the liability of interest on belated tax payments, even during periods of stay by courts or authorities.