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TMI Blog1992 (3) TMI 342X X X X Extracts X X X X X X X X Extracts X X X X ..... ncerned is 1977-78. The subjectmatter of appeal is a sum of Rs. 77,956.12 which is levied as penal interest under section 23(3) of the K.G.S.T. Act, and another sum. In this reference, we are concerned with the award of penal interest in the aforesaid sum of Rs. 77,956.12. 3.. The facts of the case are as follows: The appellant is a partnershipfirm dealing in produce like pepper and ginger and is paying tax under rule 21 of the K.G.S.T. Rules, 1963. For the year 1977-78, the appellant filed a return in form 8 as per rule 21(11) of the Rules on April 30, 1978. The tax due as per the return had already been paid provisionally along with the monthly returns in form 9. The final assessment for the year 1977-78 was taken up on July 25, 1979. Pepper and ginger are liable to tax on the last purchase in the State. The appellant was selling goods through agents in other States. The purchase turnover became taxable only after sales by the agents when the goods acquired the quality of last purchase in the State. Subsequent to the filing of form 8 return on April 30, 1978, some more sales were effected by the agents from the despatches made in the year 1977-78, and account sales were rendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l interest under section 23(3) of the Act on the appellant when the tax for the year had not been assessed, but had only become due by virtue of the provision in rule 21(11) of the Rules; and, (2) whether, on the facts and in the circumstances of the case, the Board of Revenue was justified in imposing penal interest from May 1, 1978 by reversing the decision of the Deputy Commissioner to impose interest only from July 25, 1979. Though two other points were raised in the memorandum of appeal, they were not argued before us. 5.. It will be necessary to refer to the relevant provisions of the K.G.S.T. Act and the K.G.S.T. Rules. Section 23 as it stood at the relevant time (for the assessment year 1977-78) read as follows: "23. Payment and recovery of tax.-(1)The tax assessed or any other amount demanded under this Act shall be paid in such manner and in such instalments, if any, and within such time, as may be specified in the notice of demand, not being less than twenty-one days from the date of service of the notice. If default is made in paying according to the notice of demand, the whole of the amount outstanding on the date of the default shall become immediately due and shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessing authority, and sub-rule (14) of rule 21 provides for the issuance of a demand notice in form 14B. 6.. In the present case, the position was that the appellant filed the monthly returns and was paying tax during the assessment year 1977-78, and that after the close of the assessment year, he filed a return in form 8 on April 30, 1978, as per rule 21(11), and the tax due as per the return had already been paid provisionally along with the monthly returns in form 9. When the final assessment for the year 1977-78 was taken up on July 25, 1979, under rule 21(13), the appellant filed a revised return, incorporating certain additional turnover. This revised return was filed on July 25, 1979 itself in form 8, and the balance of tax, including surcharge, of Rs. 1,93,838 became payable as per the revised return. The final assessment order was passed by the Assistant Commissioner on August 29, 1979, and was served on the appellant on February 23, 1980. The balance of tax of Rs. 1,68,825.50 and the surcharge of Rs. 14,901.52 were paid on March 25, 1980, within the time specified in the demand notice. However, the assessing authority issued a demand notice on August 8, 1980 und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est under section 23(3) of the K.G.S.T. Act, inasmuch as the said liability arose by force of the provisions of section 23(3), read with the first part of rule 21(11). The liability arose, the moment the tax remained unpaid along with form 8 return. The liability was not dependent upon the issuance of a demand notice in form 14B. It would be convenient to refer to the relevant portion of section 23(3) which was in force from April 1, 1978. It read as follows: "Section 23(3): If the tax assessed......... is not paid.......... within the time specified therefor........ in any rule made thereunder, the dealer........ shall pay by way of penal interest.........." (Emphasis* supplied) In the present case, as already noticed, the tax due as per the original return dated April 30, 1978 was paid in time, but the tax due as per the revised return dated July 25, 1978 was paid much later and was not paid on April 30, 1978. According to the State, penal interest became payable from May 1, 1978, but according to the appellant, penal interest became payable only from July 25, 1979 and not from May 1, 1978. 9.. The question then arises what is the effect of filing of the "revised return", in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to pay interest on the amount of tax which they were liable to pay, but had not paid as required by sub-section (2) of section 7. In other words, penal interest would become payable from the date on which the proper return should have been filed and not from the date on which the "revised return" was filed. The liability to pay penalty may, however, be different from that of liability to pay penal interest. 10.. In the light of the above decision of the Supreme Court, it must be held that the appellant is liable to pay penal interest from May 1, 1978 and not merely from July 25, 1979, when the revised return was filed. The words in Rule 21(11) which provides for filing of the return in form 8 must be construed as a return ought to be filed under that provision, and the default has to be construed in terms of section 23(3) of the K.G.S.T. Act as a default occurring for non-payment of the tax payable in terms of the return which ought to have been filed. 11.. For the aforesaid reasons, we are of the view that the Board of Revenue was right in holding that the appellant was liable for the payment of interest in regard to tax payable on the excess turnover with effect from M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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