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TMI Blog1998 (6) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... within thirty days. Upon service of the notices, the purchaser M/s. Tata Oil Mills Co. Ltd., paid the assessed tax and surcharge as per the demand notices. 2.. The assessee was, thereafter, served with two notices, exhibits P5 and P6, for making payment of Rs. 1,85,882.58 as penal interest under section 23(3) of the Kerala General Sales Tax Act, 1963 (for brevity sake, the Act ) on the ground that the tax assessed was not paid by the assessee on the date when return for the relevant period had fallen due. The interest so demanded relates to the period from May 20, 1983 to February 25, 1985. 3.. The contention of the Revenue is that the assessee under rule 21(7) of the Kerala General Sales Tax Rules, 1963 (for short, the Rules ) was obliged to file return of its turnover for April, 1983 on or before May 20, 1983 along with proof of payment of the tax due for the month and that the assessee having failed to deposit the assessed tax on the date when the return became due, it has become liable to pay penal interest under section 23(3) of the Act from May 20, 1983 till the date of payment. 4.. The contention of the assessee before the learned single Judge was that there was no l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson within the time prescribed therefor, in this Act or in any rule made thereunder and in other cases within the time specified therefor in the notice of demand, or within the time allowed for its payment by the appellate or revisional authority, as the case may be, or if payment is permitted in instalments by any of the authorities empowered in this behalf, any such instalment is not paid within the time specified therefor, the dealer or other person shall pay, by way of penal interest, in the manner prescribed, in addition to the amount due, a sum equal to,- (a).......... Not reproduced as only the rate of penalty is prescribed (b).......... under these clauses. 8.. From sub-section (3) of section 23, it is amply clear that if the tax assessed is not paid, then the dealer will be liable to pay the penal interest. 9.. Admittedly, the assessing officer raised a huge demand of tax under the assessment made on the assessee, the correctness of which is not disputed; rather the tax demanded under the assessment was paid without demur. It implies that turnover of the assessee was taxable and that being so, rule 21(7) enjoined Here italicised. upon the assessee to file a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his part to meet his statutory obligation and, therefore, it would be difficult to hold that the tax payable by him would visit him with the liability to pay interest under clause (a) of section 11-B of the Rajasthan Sales Tax Act (29 of 1954). The court also held that it is difficult on the plain language of the section to hold that the law envisaged the assessee to predict the final assessment and expect him to pay tax on that basis to avoid the liability to pay interest. That would be asking him to do the mere impossible. In short, the court held that so long as the tax is paid as per the assessment made and as per the return filed by an assessee, there will be no interest liability. J.K. Synthetics Ltd. [1994] 94 STC 422 (SC) was distinguished by the court in Calcutta Jute Manufacturing Co. [1997] 106 STC 433 (SC). J.K. Synthetics Ltd. filed returns of turnover for the assessment years from 1975-76 to 1977-78 on the premise that the amount of freight (charged in respect of sale of cement under the Cement Control Order) did not form part of the sale price for the purpose of payment of sales tax and paid tax accordingly contending that it did so bona fide. But the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 45A(1)(c) of the Act operate in entirely different areas and there is no overlapping between the two. The assessee who failed to file return, though under legal obligation to file a return and pay tax thereon, will be subjected to penal interest, inasmuch as it failed to pay the amount due under the Act. A dealer who does not file return and thereby fails to disclose turnover altogether and to pay tax thereon, cannot be treated on a higher pedestal than those who filed return but without disclosing full turnover and without paying full tax. A dealer who files return without disclosing full turnover and without paying full tax, will be subjected to penal interest under sub-section (3). By the same logic, a dealer who does not file return and thereby defaulted in disclosing the turnover and paying the tax thereon, will be liable to pay penal interest under sub-section (3). For the above reasons, we see no force in the view taken by the learned single Judge that unless there is assessed tax on the date of commencement of penal interest, such interest cannot be imposed under sub-section (3) of section 23 of the Act. 13.. Lastly, it was argued before us that no penal interest un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statute. Penalty ordinarily becomes payable when it is found that an assessee has wilfully violated any of the provisions of the taxing statute. Interest is ordinarily claimed from an assessee who has withheld payment of any tax payable by him and it is always calculated at the prescribed rate on the basis of the actual amount of tax withheld and the extent of delay in paying it. It may not be wrong to say that such interest is compensatory in character and not penal . (We are not concerned herein with the other aspects decided in the said case). From the above reproduced material from the case of Associated Cement Co. Ltd. [1981] 48 STC 466 (SC), it is amply clear that the Full Bench did not rely on that authority for the proposition whether liability to pay penal interest is automatic or whether a dealer need be served with any demand notice. Viewed from this angle, the Full Bench decision (P.C. Abdulla v. Sales Tax Officer [1992] 86 STC 259) still holds field, notwithstanding the majority decision in Associated Cement Co. Ltd. [1981] 48 STC 466 (SC), on a different proposition having been overruled by J.K. Synthetics Ltd. [1994] 94 STC 422 (SC). In the result, the appeal su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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