IMPORTANT POINT
A failure to file return of taxable turnover may render the assessee liable for any other consequences or penal action as provided by law but cannot attract the liability for payment of penal interest under Section 23(3) of the Kerala General Sales Tax Act, 1963.

Headnote:Kerala General Sales Tax Act, 1963-Section 23(3)-Kerala General Sales Tax Rules, 1963-Rule 27(7A)-Liability of the assessee-appellant to pay penal interest on sales tax-Whether the appellant, an assessee, is liable to pay any penal interest on the assessed tax under Section 23(3) of the Act from the date when return was due though neither a return was furnished nor any tax paid on self assessment basis? (No)-Appeal allowed.
Held : In view of the law laid down by the Constitution Bench, we are clearly of the opinion that the liability of the assessee appellant to pay sales tax could have arisen either on return of turnover being filed by way of self-assessment or else on an order of assessment being made. No doubt Rule 27(7A) of the Kerala General Sales Tax Rules, 1963 casts an obligation on assessees to file a return of total turnover and taxable turnover accompanied by proof of payment of the amount of tax due within 20 days of the previous quarter but such a return was not filed by the appellant. A failure to file return of taxable turnover may render the assessee liable for any other consequences or penal action as provided by law but cannot attract the liability for payment of penal interest under sub-section (3) of Section 23 of the Act on the parity of reasoning that if a return of turnover would have been filed on the due date then the tax as per return would have become due and payable on that date. For the foregoing reasons, the appeal is allowed. The judgment of the Division Bench is set aside and that of the learned single Judge is restored. There will be no order as to the costs. (Paras 8 and 9)

JUDGMENT

R.C. Lahoti, J.-Whether the appellant, an assessee, is liable to pay any penal interest on the assessed tax under Section 23(3) of the Kerala General Sales Tax Act, 1963 (hereinafter the Act , for short), from the date when return was due though neither a return was furnished nor any tax paid on self-assessment basis, is the question arising for decision in this appeal.

2. Briefly stated the relevant facts are as follows. In April, 1983 the appellant, stationed in Patna, entered into an agreement with M/s. Tata Oil Mills Co. Ltd. to supply imported inedible tallow to their factory at Ernakulam. Accordingly, the tallow was imported at the Cochin Port and delivered to the buyer. The appellant did not file a return of the turnover relating to the above-said transaction. The Sales Tax Officer finalised the assessment on 10.10.1984 and served the appellant on 4.3.1985 with notice raising a demand of sales tax whereafter the tax was paid. The appellant was then served with two notices raising demand for payment of Rs. 1,85,882.58p. as penal interest under sub-section (3) of Section 23 of the Act for the period 20.5.1983 (the date by which the return of turnover was due to be filed accompanied by proof of payment of the tax due as per return) to 25.2.1985. This demand was impugned by filing a writ petition before the High Court of Kerala at Ernakulam. A learned single Judge allowed the petition and quashed the said demand. The State of Kerala preferred a writ appeal which has been allowed and the judgment of the learned single Judge has been set aside. The aggrieved appellant has filed this appeal by special leave.

3. Sub-section (3) of Section 23 of the Act reads as under:-

"(3) If the tax or any other amount assessed or due under this Act is not paid by any dealer or other person 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) one per cent of such amount for each month or part thereof for the first three months after the date specified for its payment;

(b) two per cent of such amount for each month or part thereof subsequent to the first three months aforesaid."

4. The present one is not a case where any amount of tax was collected by the appellant and then not deposited. It is an admitted position that the validity of impugned demand depends on the meaning to be assigned to the expression "if the tax or any other amount assessed" as occurring in Section 23(3) of the Act. According to the appellant there was no order of assessment not a return of turnover filed by way of self assessment in which case it should have been accompanied by proof of payment of tax as per self assessment and, therefore, the appellant was not required to pay tax unless and until a demand based on an order of assessment was raised against it. According to the respondent, an assessee held liable to payment of sales tax and not filing a return of turn-over, cannot be placed on a higher pedestal than an assessee who files a return and, therefore, a reasonable construction to be placed on sub-section 3 of Section 23 would be that an assessee not filing a return of turnover should be held liable to pay penal interest with effect from a date on which he should have filed a return of turnover accompanied by payment of tax even if such return was not actually filed. The learned counsel for the appellant submitted in response that the scheme of the Act as it stood at the relevant time contemplates a different penal act

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2001 Supreme(SC) 574

IMPORTANT POINTA failure to file return of taxable turnover may render the assessee liable for any other consequences or penal action as provided by law but cannot attract the liability for payment of penal interest under Section 23(3) of the Kerala General Sales Tax Act, 1963.

Cases Referred (2)

IMPORTANT POINT
A failure to file return of taxable turnover may render the assessee liable for any other consequences or penal action as provided by law but cannot attract the liability for payment of penal interest under Section 23(3) of the Kerala General Sales Tax Act, 1963.