SHALIMAR JEWELLERY Vs. COMMISSIONER OF COMMERCIAL TAXES

JUDGEMENT

(1.) Heard learned counsel for the appellant and learned Govt. Pleader.

(2.) The order under challenge is a common order issued by the Commissioner under S.37 of the Kerala General Sales Tax Act restoring the demand of interest for the assessment years 1994-95 and 1995-96. The appellant is admittedly a jeweller entitled to payment of sales tax at compounded rate under S.7(1)(a) of the Act. The tax payable at compounded rate during the relevant years was 150% of the highest tax payable for any of the three preceding years. Even though the appellant filed compounding application in Form No. 21 based on the tax payable for the three preceding years, viz., 1990-91 to 1992-93 and the officer accepted the same, later the appellant themselves revised the return filed for 1993-94 declaring higher liability for tax. This resulted in mistake in the application for compounding filed by the appellant and the order issued by the officer thereon, warranting correction under S.43 of the Act. In fact, when revised return was filed for the year 1993-94, admitting higher liability for tax, the appellant should have filed revised application for compounding for 1994-95 and 1995-96 or at least paid differential tax over and above what was payable under Form 21-A issued by the officer based on the original compounding application filed by the appellant. The Deputy Commissioner cancelled the demand of penalty stating that the assessing officer is responsible for the delay in payment of tax. The Commissioner rightly found that the Deputy Commissioner's order is not sustainable because delay in payment of tax was on account of the wrong return originally filed by the appellant for 1993-94 based on which compounding application was filed and order passed thereon. Even though the order of the Deputy Commissioner in this regard is not correct, and the Commissioner rightly interfered with it, we are unable to uphold the order of the Commissioner upholding demand of interest on the ground of loss of revenue, because S.23(3) of the Act does not cover every situation authorising demand of interest as a compensatory measure for belated payment of tax. The principle behind the provision for interest is certainly compensatory, but we do not think, S.23(3) is couched in such a way to authorise levy of interest in every case of delayed payment of interest. This is a case where demand obviously arose only after the assessing officer rectified and issued revised order on the appellant's compounding application. No doubt, the appellant themselves are responsible for the mistaken order on compounding application because, the compounding application itself was wrong and the same was admitted by the appellant by filing revised return for 1993-94. At least on the date of filing of the revised return for 1993-94, the appellant was bound to file revised application for compounding or at least sought rectification of order issued by the officer on the compounding application and remitted the differential tax for 1994-95 and 1995-96. This was also not done by the appellant. S.23(3A) is the section which provides for compensatory interest in all cases of belated payment of tax. Since this provision was introduced only with effect from 01/04/1998, the same does not apply for the two years in question. The Supreme Court in Maruthi Wire Industries Pvt. Ltd. v. STO, 2001 KHC 364 : 2001 (3) SCC 735 : AIR 2001 SC 1413 : 2001 (122) STC 410 : 2001 AIR SCW 1368 : 2001 (2) KLT 100 : ILR 2001 (2) Ker. 247 : 2001 (9) KTR 273 (SC), has held that even if interest is not payable for the delayed payment of tax for want of demand and consequent default, the assessing officer will be justified in considering penalty under S.45A of the Act, if delay is caused on account of the assessee's attempt to evade or delay payment. The assessing officer does not appear to have considered penalty as an alternative measure at least to compensate Revenue, if the appellant wants to contest the liability for interest. Since the interest demanded under S.23(3) of the Act is not in accordance with the statutory provisions, we feel the matter requires reconsideration by the assessing officer. The assessing officer also is free to consider penalty under S.45A if facts of the case warranted it. While considering penalty, the officer is free to limit it to an amount equal to interest to compensate for delayed payment of tax.

(3.) In the circumstances, the appeals are disposed of vacating, the order of the Commissioner upholding levy of interest, but with a direction to the assessing officer to reconsider the matter with reference to the statutory provisions and after verifying the records and orders issued and in the light of our observations above. The assessing officer will pass fresh orders within a period of three months from the date of receipt of a copy of this judgment.