HINDUSTAN ENGINEERING CO Vs. ASSISTANT COMMISSIONER

JUDGEMENT

(1.) PETITIONER is a dealer in vehicles and spare parts and is an assessee under the Kerala General Sales Tax Act, 1963, for short "the Act". He has filed annual return for the year 1988-89 on April 15, 1989 and a revised return on March 24, 1995 before finalisation of the assessment. The assessment order was passed on February 28, 1997. PETITIONER collected by way of sales tax a sum of Rs. 18,44,356. 43 during the year 1988-89. However, he withheld the payment of a sum of Rs. 3,89,420 out of the same without paying to Government till March 24, 1995. The 1st respondent by the issue of form No. 24 under the Kerala General Sales Tax Rules dated June 23, 1997 directed the petitioner to pay penal interest of Rs. 5,60,764. As against the demand petitioner preferred a revision before the Deputy Commissioner, which was modified reducing the interest from Rs. 5,60,764 to Rs. 5,44,915. The petitioner put forward a second revision before the Commissioner who by order dated June 15, 1998 confirmed the Deputy Commissioner's order. The original petition is filed against these orders.

(2.) THE sum and substance of the contentions raised by learned counsel for the petitioner can be grouped under two heads : (i) THE penal interest cannot be directed to be paid without creating any demand in accordance with law as contemplated under the statutory provisions governing penal interest. Only from the date of failure to comply with the notice, there is justification to demand penal interest. Such a demand is contrary to the decision of the Supreme Court in State of Kerala v. Joy Varghese [1999] 112 STC 651; (1997) 5 KTR 372. (ii) Refusing to grant rebate under section 23a of the Act is illegal.

(3.) A Full Bench of this Court in Abdulla v. Sales Tax Officer [1992] 86 STC 259; (1992) 1 KLT 658 has categorically held that service of a notice of demand under section 23 (3) of the Act is not an essential pre-requisite for the levy and collection of penal interest. By filing the return the assessees had made their own assessment. The tax so assessed should have been paid by the dealer along with the returns as enjoined in rule 21 (7) of the Rules. If there is any default, the liability to pay penal interest automatically arises. The dealer need not be served with any demand notice. This, in short, is the effect of section 23 (1) read with section 23 (3) and rule 21 (7) read with rule 31 of the Rules. The judgment in Joy Varghese v. State of Kerala [1986] 62 STC 227 (Ker) was dealing, with the case of self-assessment. Form No. 14 under the Rules is required to be made and it is only the failure on the part of the dealer to make payment of tax in accordance with the demand and the liability to pay penal interest arises. The Division Bench did not consider the different contingency that was made even in section 23 (3) of the Act. Therefore, the approval of the judgment of Joy Varghese [1986] 62 STC 227 (Ker) by the Supreme Court in State of Kerala v. Joy Varghese [1999] 112 STC 651; (1997) 5 KTR 372, is only to that extent. The Full Bench in Abdulla's case [1992] 86 STC 259 (Ker); (1992) 1 KLT 658, went on further to hold that there are other contingencies envisaged under section 23 (3) of the Act. One of the contingencies envisaged is that if the dealer fails to pay the tax assessed, his own assessment or self-assessment, that itself will attract the liability to pay the penal interest. The section also provides for other contingencies, including the non-payment of tax within the time specified therefor in the notice of demand issued. In such a situation where by self-assessment the tax becomes due on the filing of the return, a further notice of demand in form No. 14 is irrelevant or a surplusage. Rule 31 totally dispenses with service of a notice of demand for payment of interest due under section 23 (3) of the Act. Therefore the decision of the Full Bench in P. C. Abdulla v. Sales Tax Officer [1992] 86 STC 259 (Ker), is still in force. In so far as the present case is concerned, this decision squarely applies. Another Full Bench of this Court in Pathrose Rice and Oil Mills v. Assistant Commissioner (Assessment) Special Circle [1992] 86 STC 274, has also taken the view that accrual of penal interest under section 23 (3) of the Act is automatic and is not dependent on any demand being made by the sales tax authorities for payment of that amount. Yet another Full Bench in Hill Produce Corporation v. State of Kerala [1999] 112 STC 596 (Ker); (1992) 1 KTR 1 had taken the view that it was not necessary that the demand notice should have been served in form No. 14-B for directing the liability of penal interest under section 23 (3) of the Act inasmuch as the said liability for the process of section 23 (3) of the Act read with the first part of rule 21 of the Rules.