2006 (6) TMI 488 - HC - VAT and Sales Tax

Summary

Issues:
- Liability of the assessee to pay interest under section 23(3A) of the Kerala General Sales Tax Act, 1963.
- Interpretation of provisions related to interest accrual on escaped turnover.
- Assessment of escaped turnover and liability for interest.

Liability of the Assessee to Pay Interest under Section 23(3A): The judgment revolves around the liability of the assessee, a private limited company, to pay interest under section 23(3A) of the Kerala General Sales Tax Act, 1963. The Commissioner invoked suo motu power of revision under section 37 and held the assessee liable to pay interest on the escaped turnover. The Deputy Commissioner initially reduced the interest but later found the assessee liable for interest from the date of filing the annual return to the completion of assessment. The court analyzed the submissions of the counsel for the assessee, who argued that the conditions for invoking section 23(3A) were not satisfied, and there was an error in restoring the demand notice for interest. However, the court upheld the Commissioner's decision, stating that the dealer deliberately suppressed the taxable turnover, making them liable to pay interest on the escaped assessment.

Interpretation of Provisions Related to Interest Accrual on Escaped Turnover: The judgment delves into the interpretation of provisions related to interest accrual on escaped turnover. The court examined the unamended and amended provisions of section 23(3) and emphasized that interest accrues on the tax due on turnover that has escaped assessment. The assessing authority, Deputy Commissioner, and Commissioner all agreed that taxable turnover had escaped assessment during the relevant year. While the Deputy Commissioner opined that interest was due only from the date of service of demand notice, the Commissioner held that interest accrues from the date the tax would have fallen due for payment if included in the return. The court upheld the Commissioner's view, emphasizing the liability to pay interest on the escaped turnover.

Assessment of Escaped Turnover and Liability for Interest: The judgment also addresses the assessment of escaped turnover and the corresponding liability for interest. The assessee, an SSI unit, had exemption certificates for certain goods but made sales of items produced from inter-State purchases not covered by the exemption. The court noted that the dealer was aware of the taxable event for the goods in question and deliberately suppressed the taxable turnover. As all authorities found escaped assessment, the court agreed with the Commissioner that the dealer is liable to pay interest under section 23(3A). Consequently, the appeal was dismissed as lacking merit, affirming the liability of the assessee for interest on the escaped assessment.