Jain Trading Co. vs State of Kerala and Others

S. Sankarasubban, J.—Petitioner is a registered dealer in rubber and latex. It is an Assessee under the Kerala General Sales Tax Act and the Central Sales Tax Act.

For the assessment year 1988-89, Petitioner filed annual return declaring a total turnover of Rs. 4,49,86,790. Petitioner was assessed to pay tax of Rs. 35,98,943.20 which included turnover tax also. Assessment order is dated 23rd December 1989 and is produced as Ext. P-1. It further stated that an amount of Rs. 35,50,408.90 had already been paid by the Assessee and hence the balance tax due was Rs. 48,534. On receipt of Ext. P-1., Petitioner informed the assessing authority that an amount of Rs. 48,535 was paid on 11th January 1989 and this was not taken into account by mistake. If the above amount was also taken into account, there would be no balance. There was no demand subsequently by the assessing officer.

Third Respondent informed by letter dated 11th February 1990 that Petitioner has to remit an amount of Rs. 21,764 as penal interest for the year 1988-89. This is evidenced by Ext. P-3. According to the third Respondent, the turnover tax was not deposited on due dates. Petitioner remitted two amounts towards turnover tax; (1) Rs. 48,535 on 19th January 1989 and (2) Rs. 1,76,399 on 11th May 1989. The turnover tax payable was Rs. 2,24,933.95. To Ext. P-3, Petitioner gave Ext. P-4 reply. Liability to pay turnover tax is admitted and it is contended that Petitioner was advised that the tax need be paid only at the end of the year. Thereafter, Petitioner received notice under the Revenue Recovery Act to pay penal interest. Hence this Original Petition is filed challenging Exts. P-3 and P-5 notices.

Learned Counsel for the Petitioner contended that the levy of penal interest is without jurisdiction. He contended that there was no demand for payment of tax and it is only on default that penal interest can be levied. He further submitted that there was no rule to pay turnover tax before the end of the year. Learned Counsel relied on the decisions reported in Maruti Wire Industries (P) Limited v. Sales Tax Officer 1994 (2) KLT 44, M/s Cochin Tea Syndicate and Ors. v. Assistant Commissioner 1993 K.L.J. (Tax Cases) 258 and Vijay Lexmi Cashew Co. v. Assistant Commissioner, Sales Tax 1994 (1) KLT 129.

Learned Government Pleader submitted that this is a case where the turnover is admitted. As and when the turnover exceeds the limit, Petitioner is liable to pay the turnover tax. There is no necessity to issue a demand notice as a condition precedent before levying penal interest. He relied on the decisions reported in Abdulla v. Sales Tax Officer 1992 (1) KLT 658 and Gangadharan v. Addl. Sales Tax Officer 91 S.T.C. 80.

The Full Bench of this Court in the decision reported in 1992(1) KLT 658 held that service of notice of demand is not an essential pre-requisite for the levy and collection of penal interest u/s 23(1) read with Section 23(3) of the Kerala General Sales Tax Act. Paripoornan, J. (as he then was) speaking for the Full Bench said: "The liability to pay the penal interest automatically clinches on the failure to pay the tax assessed within the time mentioned in the statement, and the liability to pay interest is automatic ...." If the tax assessed is not paid by the dealer within the time specified therefore in any rule the dealer shall pay penal interest. The dealer need not be served with a demand notice. Thus on self assessment or by statutory assessment, if the tax is due then the liability to pay interest automatically arises. Decisions in 1994 (2) KLT 44 and 1993 K.L.J. Tax Cases 258 cited by the learned Counsel for the Petitioner are not applicable to the facts of this case. In one case, no return was filed, while in Anr. case there was no admission regarding the liability to pay tax. Decision in 1994 (1) KLT 129 is of no help to the Petitioner. There the question was regarding the levy of penal interest when the assessment order is modified in appeal.

As to the liability to pay the turnover tax, the contention was that it arises only at the end of the year and not as and when the turnover exceeds the limit to be taxed. A similar contention was raised in 91 S.T.C. 80, but was negatived. It was observed: "Therefore when once the taxable turnover for the purpose of turnover tax exceeds the limit prescribed, the liability attaches itself at that moment and the dealer become liable to pay tax along with the monthly returns".

In the present case, Petitioner filed the return admitting the turnover. Liability to pay tax is also conceded. But what is contended is that Petitioner was advised that the tax need be paid only at the end of the year. A portion of the amount was paid during the year itself. Hence this is a case where even on the self assessment turnover tax is payable. Hence I do not find any infirmity in Exts. P-3 and P-5.

Original Petition is dismissed.