The court established that the interest under section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 was compensatory and not penal in nature, and the petitioner's filing of the earlier writ petition was not bona fide, rendering the petitioner liable to pay interest under section 24(3) of the Act.

K. RAVIRAJA PANDIAN, J. - The above two writ petitions are filed seeking for the relief of issuance of a writ of certiorari under article 226 of the Constitution of India quashing the order of the second respondent - Tamil Nadu Taxation Special Tribunal, dated December 23, 1998 made in O.P. Nos. 1552 and 1321 of 1997 (E.I.D. Parry (India) Ltd. v. Assistant Commissioner (CT), CAC, Chennai [1999] 113 STC 233) confirming the proceedings of the first respondent - the Assistant Commissioner (CT), Central Assessment Circle III, Chennai dated April 10, 1997 in TNGST/15209/93-94 and the proceedings dated March 21, 1997 in TNGST/15209/91-92 whereby a sum of Rs. 10,95,000 and Rs. 9,11,040 have been imposed on the petitioner as interest under section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 for the belated payment of tax for the said two assessment years and quash the same.

In order to comprehend the point to be resolved in this case, the following facts are to be stated :

The petitioner, an incorporated company under the Companies Act is an assessee on the file of the first respondent. The petitioner received, inter alia, lease rentals from M/s. Ennore Foundries Limited on the lease of diesel gensets in a sum of Rs. 1.50 crores for both the assessment years 1991-92 and 1993-94. Section 3-A of the Tamil Nadu General Sales Tax Act (hereinafter referred to as "the Act") provides for levy of tax on the right to use any goods. The petitioner challenged the said provision by filing writ petition in W.P. No. 6240 of 1992 and this Court by its order dated April 29, 1992 granted interim stay of operation of the impugned provision section 3-A of the TNGST Act, 1959, in so far as they purport to levy sales tax on the lease transactions of the petitioner. It is pertinent to state that the abovesaid provision of section 3-A introduced by Act 28 of 1984 was subsequently amended by Act 25 of 1993 with retrospective effect of the date of original inception. In view of the amendment made, the writ petition filed by the petitioner was disposed of as infructuous on December 22, 1994. Thereafter, the petitioner on September 20, 1995 deposited the tax at 4 per cent. for the assessment years 1993-94 and 1991-92. However, the first respondent demanded interest for the belated payment of tax invoking the provisions of section 24(3) of the TNGST Act. The petitioner challenged the demand of interest on the ground that the operation of the provision of section 3-A has been stayed by this Court from April 29, 1992 to December 22, 1994. Hence, the demand is illegal. However, the Tribunal dismissed the original petition filed by the assessee. Hence, the writ petitions with the prayer aforesaid.

Mr. Prasad, learned counsel appearing for the petitioner, assailed the order primarily on the grounds that the writ petition filed by the petitioner in W.P. No. 6240 of 1992 was admitted by this Court on April 29, 1992 and interim stay was also granted. In that writ petition, the petitioner challenged the provision - section 3-A of the TNGST Act, as introduced by Act 28 of 1984, on the ground that the scope of the provision covers within its ambit the restriction as to the imposition of tax on sale and purchase as envisaged under article 286 of the Constitution of India. The said article lays down that no law of the State shall, impose or authorise the imposition of tax on the sale or purchase of goods, where such sale or purchase has taken place, (a) outside the State, or (b) in the course of import of goods into or export of goods out of the territory of India. When the said writ petition was pending before this Court, by means of an amendment, by Act 25 of 1993, the State Government cured the defects as pointed out in the said writ petition. Hence, though the writ petition was disposed of as infructuous, in substance the contention of the petitioner deemed to have been accepted. Hence, the levy of penalty cannot be legally sustained. He further contende