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Issues involved: Interpretation of penal interest u/s 23(3A) of KGST Act for failure to include turnover in return; Applicability of penal interest when return was filed correctly as per law existing at the time.
The judgment by the Kerala High Court dealt with a case where the petitioner, a company engaged in manufacturing automotive tyres and tubes, filed its return for the assessment year 1995-96 under the Kerala General Sales Tax Act. The petitioner had a dispute regarding whether rubber purchased should be included in the purchase turnover, which was resolved in their favor by a Full Bench decision. However, a subsequent Supreme Court judgment reversed this decision, leading to a demand being raised in 2000, which the petitioner paid. The main issue revolved around whether the petitioner was liable to pay penal interest u/s 23(3A) of the KGST Act. The section in question stipulates that interest accrues on tax due when turnover is not included in the return. The petitioner argued that this section, inserted in 1998, was not applicable to their 1996 return. They relied on a Supreme Court decision emphasizing that if a return is filed correctly as per the law at the time, subsequent changes should not apply retrospectively, especially if the assessee has not committed any fault. The court considered the contention that penal interest should not be charged when the return was filed correctly as per the law at the time. The government pleader argued that the relevant section, now re-numbered as 23(3B), only applies when there was a stay of demand, which was not the case here. The court noted that the assessment for the year 1995-96 was made in 2000, and since the return was correct as per the law at the time of filing, penal interest should not be charged. Interest would be payable from the date of demand, even if the department allowed installment payments. In conclusion, the court allowed the writ appeal, ruling in favor of the petitioner and holding that penal interest under section 23(3A) of the KGST Act was not applicable in this case where the return was filed correctly as per the law existing at the time.
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