2004 (9) TMI 626 - HC - VAT and Sales Tax

Summary

Issues:
1. Imposition of penal interest under section 23(3) of the KGST Act for delayed payment of Central sales tax under the CST Act.
2. Constitutionality and validity of section 9(2), 9(2A), and 9(2B) of the CST Act, along with the validation clause enacted by the Union Finance Act, 2000.
3. Calculation mistakes in the interest levied and the retrospective effect of the validation provision.

Analysis:
1. The petitioner contested the imposition of penal interest under section 23(3) of the KGST Act for delayed payment of Central sales tax, arguing that section 9(2) of the CST Act did not provide for such penal interest. The respondents asserted that all provisions of the KGST Act, including penal interest, apply by virtue of section 9(2) of the CST Act. The court examined previous decisions and concluded that the legislative competence and validity of section 9(2), 9(2A), and 9(2B) of the CST Act were upheld by the Supreme Court in Shiv Dutt Rai Fateh Chand case, dismissing the petitioner's contentions.

2. The petitioner challenged the constitutionality and validity of section 9(2), 9(2A), and 9(2B) of the CST Act, and the validation clause enacted by the Union Finance Act, 2000. The court referenced the Supreme Court's decision in Shiv Dutt Rai Fateh Chand case, where contentions regarding excessive delegation of legislative powers and retrospective effect of provisions were addressed and rejected. The court held that the amended provisions adequately addressed the levy of interest, removing the infirmities pointed out in previous cases.

3. The court addressed the calculation mistakes in the interest levied and the contention regarding the arbitrariness of the 24% interest rate under section 23(3) of the Act. It was clarified that each state is entitled to set its interest rate, and the demand of penal interest at the same rate for CST arrears was not considered arbitrary. The court dismissed the writ petition but allowed the petitioner to raise calculation issues before the authority. The court maintained the stay for two months to facilitate the petitioner's representation on calculation errors.

In conclusion, the court dismissed the writ petition challenging the imposition of penal interest under the KGST Act for delayed CST payment, upheld the constitutionality and validity of the CST Act provisions, and addressed concerns regarding interest calculation and rates.