TMI Blog1992 (3) TMI 328X X X X Extracts X X X X X X X X Extracts X X X X ..... vandrum, dated March 12, 1984, levying penal interest in the sum of Rs. 47,959.91, which was affirmed in exhibit P4 revisional order by the Deputy Commissioner of Sales Tax (South Zone), Quilon, dated June 6, 1984. Penal interest was levied for non-payment of collected tax. For July and September, 1980, the collected tax of Rs. 23,645.89 was not paid till January 19, 1984. Similarly the collected tax of Rs. 42,272 for the months of December, 1980, and January and February, 1981, was not paid till January 19, 1984. In the circumstances, penal interest was worked out as per section 23(3) of the Act in the sum of Rs. 47,959.91. The levy of penal interest was taken up in revision. The Deputy Commissioner of Sales Tax by order dated June 6, 1984, affirmed the levy of penal interest aforesaid. The challenge against exhibits P1 and P4 did not succeed before the learned single Judge, who by judgment dated August 24, 1987 dismissed the original petition with some directions. Aggrieved by the said decision the petitioner in the original petition filed the Writ Appeal No. 16 of 1988. A Bench of this Court, by order dated February 11, 1988, referred the matter to a Full Bench for consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in both the cases the assessees had opted to pay the sales tax as per their "monthly returns". Rule 21(7) of the Kerala General Sales Tax Rules, 1963 (in short, "the Rules") and rule 21(10) govern such payment. Rule 18(1) and (3) deal with "annual return" and final assessment. For the purpose of resolving the controversy in these cases, we have to construe section 23(1) and (3) of the Act and rules 18(1) and (3), 21(7) read with 21(10) and 31 of the Rules and form No. 24. Form No. 14 deals with notice of provisional annual demand relevant under rule 18(3) and rule 21(2). Similarly, form No. 14D deals with a notice for provisional monthly demand under rule 21(10). The core of the controversy is that a service of notice of demand as stipulated in form No. 24 is a necessary prerequisite for levy and collection of penal interest under section 23(3) of the Act, read with the Rules. We shall extract section 23(1) and (3) of the Act, and rules 18(1) and (3), 21(7) and (10) and 31 of the Rules and form Nos. 14, 14D and 24 of the Rules. Section 23(1) and (3) of the Act: "23. Payment and recovery of tax.-(1) The tax assessed or any other amount demanded under this Act shall be paid in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Treasury and the number and the date of the receipt, in which case he shall produce the receipt before the assessing authority whenever required to do so), crossed cheque or crossed demand draft in favour of the assessing authority for the full amount of tax or taxes due for the year on the basis of the return or for the full amount of tax or taxes actually collected by him, whichever is higher after deducting therefrom the provisional tax if any, paid already for the year, failing which the assessing authority shall serve upon the dealer a demand notice in form 14 and the dealer shall pay the sum demanded within the time and in the manner specified therein." Rule 21(7) and (10) of the Rules: "21. Submission of monthly returns.-.................. (7) Every dealer who is liable to pay tax under the Act and whose taxable turnover in a year is not less than ten thousand rupees, including those liable to be assessed under section 7 and every dealer who is required so to do by the assessing authority by a notice, shall submit so as to reach the assessing authority within 25 days of the publication of the Kerala General Sales Tax (Amendment) Rules, 1983, in the Gazette or recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his sub-rule or not." Form No. 14 of the Rules: "FORM No. 14 Notice of provisional annual demand [See rules 18(3) and 21(ii)] Assessment No.......... To ................(Dealer) Take notice that on the basis of the return in form No. 8 furnished by you for the year ending............ 19..........you are liable under the Kerala General Sales Tax Act, 1963 (Kerala Act 15 of 1963) to pay tax of Rs........................(rupees.......................................)(in words) only for the year and that after deducting the total amount of the monthly payments made by you towards the tax for the year, in response to the notice of provisional assessment and demand No........................dated............and the further tax paid along with the return, you have still to pay a (further) sum of Rs........................ (rupees....................................) (in words) only. This amount shall be paid within thirty days from the date of service of this notice by crossed cheque or crossed demand drafts in favour of the undersigned or by remittance into the Government Treasury at ...............................................failing which the amount will be recovered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the date fixed for payment thereof; And whereas by reason of your default to make payment of the arrears of such balance of tax due/tax, a further sum of Rs............................(in figures) Rupees................................................(in words) has been imposed on you as penal interest under section 23(3) of the said Act. You are hereby directed to pay the sum of Rs............................(in figures) Rupees............................(in words) being the balance of tax due/tax and a sum of Rs......................(in figures) Rupees................................(in words) being the penal interest imposed on you as aforesaid on or before....................... by crossed cheque or crossed demand draft in favour of the undersigned or by remitting into the Government treasury failing which the sum shall be recoverable from you as an arrear of land revenue and/or as a fine imposed by a Magistrate. Place: Signature of the assessing authority Date: (With the seal of office)" 5.. Section 23 of the Kerala General Sales Tax Act, 1963, was amended by Act 12 of 1976, Act 21 of 1978 and Act 6 of 1988. Section 23(3) of the Act as it stood before Act 12 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case will come within the last category, where, though the proceeding is criminal in form, still, it is only a summary mode of enforcing a civil right.........." Section 23(3) of the Kerala General Sales Tax Act, 1963, came up for consideration again before another Division Bench of this Court in Haridas v. Assistant Commissioner, Sales Tax [1979] 44 STC 26. In that case arrears of sales tax were due from an assessee in respect of assessments for the years 1970-71 to 1973-74. On the assessee's motion the Government allowed him to pay the amount in instalments. The assessee paid the instalments in time and the arrears were liquidated. In spite of prompt payment of the instalments, penalty (penal interest) was imposed for non-payment of arrears due. The plea of the assessee was that the assessee had paid the arrears in instalments as per Government order, exhibit P2, and so no penalty was imposable. The Division Bench noticed the earlier decision in Burmah Shell Co. Ltd. case [1973] 32 STC 429 and held that the liability to pay interest is automatic and arises by operation of law. It was further held that there was no provision enabling the Government to pass an order grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Supreme Court, which ran as follows: "7. Submission of returns.-(1) Every registered dealer, and such other dealer, as may be required to do so by the assessing authority by notice served in the prescribed manner, shall furnish prescribed returns, for the prescribed periods, in the prescribed forms, in the prescribed manner and within the prescribed time to the assessing authority: Provided that the assessing authority may extend the date for the submission of such returns by any dealer or class of dealers by a period not exceeding fifteen days in the aggregate. (2) Every such return shall be accompanied by a treasury receipt or receipts of any bank authorised to receive money on behalf of the State *Refers to Hindustan Sugar Mills Ltd v. State of Rajasthan [1979] 43 STC 13 (SC). Government, showing the deposit of the full amount of tax due on the basis of return in the State Government treasury or bank concerned." "11B. Interest on failure to pay tax, fee or penalty.-(a) If the amount of any tax payable under sub-sections (2) and (2A) of section 7 is not paid within the period allowed, or (b) if the amount specified in any notice of demand, whether for tax, fee, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal taxable turnover as also the tax payable by him in the return, which is required to be submitted in form No. 8, within the specified time. It was further held that if the dealer failed to submit evidence regarding payment as enjoined in rule 18(3), an obligation is cast on the assessing authority under rule 18(3) to serve a demand notice in form No. 14 and the clear implication is that if the dealer complies with the terms in the demand in form No. 14, he shall not incur the liability to pay the penalty prescribed under section 23(3) of the Act. The Division Bench held that it is clear that the failure to make the payment, is that payment which is required to be made in accordance with the notice of demand contemplated under sub-rule (3) of rule 18 of the Rules, issued in form No. 14 and it is the failure on the part of the dealer to pay the amount in accordance with the demand in form No. 14, that attracts liability to pay the penal interest under section 23(3) of the Act. Placing heavy reliance on the abovesaid decision, it was argued by the assessee's counsel that the service of notice of demand is an essential prerequisite for levy and collection of interest under section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself makes him liable to pay the penal interest. In such a situation whereby 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. Failure to pay the tax as per own assessment itself entails consequences provided by section 23(1) read with section 23(3) of the Act. Secondly, the Division Bench placed reliance on rule 18 similar to rule 21, which is applicable herein; but totally ignored rule 31, which has decisive impact in the matter of mode of payment of penal interest under section 23(3) of the Act (rule 31 is extracted in page 264 supra). Rule 31 was not noticed at all. According to us, rule 31 totally dispenses with service of a notice of demand for payment of interest due under section 23(3) of the Act. Thirdly, in Joy Varghese case [1986] 62 STC 227, the attention of the Division Bench was not invited to the earlier two Bench decisions of this Court, rendered in Burmah Shell Oil Storage and Distributing Co. of India Ltd. v. Sales Tax Officer [1973] 32 STC 429 and Haridas case [1979] 44 STC 26. The earlier two Bench decisions have unambiguously laid down the law that the liability to pay th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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