2006 (10) TMI 407 - HC - VAT and Sales Tax

Summary

Issues involved: Interpretation of provisions of Kerala General Sales Tax Act u/s 23(3) regarding liability for penal interest on tax default without demand notice or instructions.

Summary:
The appellant-assessee filed an annual return declaring a total turnover and paid the tax amount along with surcharge. Subsequently, a revised return was filed without any demand notice, increasing the turnover and tax liability. The assessing authorities accepted the revised return but imposed penal interest u/s 23(3) of the KGST Act. The Deputy Commissioner held that penal interest is not payable without an assessment order or notice of demand. The Board of Revenue, in suo motu revision, confirmed the demands, which led to the appeal. The senior advocate cited Supreme Court decisions emphasizing the necessity of a demand notice for imposing penal interest. The court, following the Supreme Court rulings, held that penal interest can only be charged from the date of notice of demand, not from the date of filing return. The court also referred to a Division Bench decision supporting this principle and set aside the Board of Revenue's order, confirming the Deputy Commissioner's view. The appeal was allowed.