2004 (8) TMI 676 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of sales tax for the year 1992-93, initiation of revenue recovery proceedings, validity of instalment facility, liability for penal interest, constitutionality of amendments to the Kerala General Sales Tax Act, applicability of section 23(3) and 23(3B) of the KGST Act, compliance with Government Order, interpretation of court decisions.

Analysis:
The petitioner, an assessee to sales tax, was assessed for the year 1992-93 and faced revenue recovery proceedings due to default in tax payment. The petitioner obtained an instalment facility from the Government to settle the dues. The main contention was the liability for penal interest post the instalment facility and the constitutionality of amendments to the KGST Act. The first respondent argued that the petitioner was liable for interest under section 23(3) of the KGST Act. The court noted that the petitioner had paid the entire demanded amount as per the Government Order, disputing the liability for interest post the order.

The court considered the provisions of section 23(3) and 23(3B) of the KGST Act. It was established that penal interest is applicable for defaults in tax payment until the date of full payment. The court referenced the Aman Traders' case, emphasizing that if the instalment order is followed, no penal interest can be levied post the Government Order. The respondents' reliance on section 23(3B) was deemed inapplicable as the petitioner had not disputed the tax liability or interest before any authority.

The court concluded that penal interest was justified until June 26, 1995, as per exhibit P1, and directed the second respondent to verify the interest due and inform the petitioner accordingly. The judgment declared that no interest could be demanded post-June 26, 1995, given the petitioner's compliance with the instalment facility. The petitioner was instructed to pay the verified amount in two equal monthly instalments upon receipt of the intimation from the second respondent, with the obligation to provide a certified copy of the judgment for compliance.

In summary, the writ petition was disposed of with the decision that penal interest was applicable until June 26, 1995, and no interest could be demanded post that date, subject to verification and compliance with the court's directives. The judgment clarified the petitioner's liability for interest, considering the instalment facility and court precedents, while upholding the provisions of the KGST Act.