TMI Blog2009 (7) TMI 1172X X X X Extracts X X X X X X X X Extracts X X X X ..... DRAN NAIR J. The main issue raised in the sales tax revision cases filed by the Revenue against the orders of the Tribunal is against cancellation of interest levied under section 23(3A) of the Kerala General Sales Tax Act, 1963 (hereinafter referred to for short as, the Act ) for belated payment of turnover tax on the excise duty component of the price. Interest demanded was for the period beginning with the end of each assessment year. The assessments involved are for the years 1998-99 to 2004-05. Even though the Revenue has raised another question on purchase tax liability on purchase of water by the respondent, we do not think this is a question of law because the finding is based on the conclusions of fact arrived at by the Tribunal. We therefore proceed to consider only the question raised on interest. We have heard Special Government Pleader appearing for the State and counsel appearing for the respondent. The respondent is a distillery engaged in manufacture and sale of Indian made foreign liquor. The entire products are sold to the Kerala State Beverages Corporation Limited, a Government of Kerala undertaking engaged in monopoly distribution of liquor in the State. Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p in appeal by the State before the honourable Supreme Court and the Supreme Court finally settled the matter by decision in State of Kerala v. Maharashtra Distilleries Ltd. [2005] 141 STC 358. The Supreme Court, after noting the amendment to the Foreign Liquor Rules with effect from January 5, 1999, held that since the Beverages Corporation remits the duty before lifting the same from the warehouse of the distillery, the purchased liquor is duty paid liquor and so much so, the sales turnover for the distillery includes excise duty though paid by the Beverages Corporation Ltd. The conclusion drawn by the Supreme Court contained in paragraph 82 of the judgment is as follows: . . . We, therefore, hold that from January 5, 1999, the date with effect from which the KSBC started paying duty to the manufacturers/ distillers before lifting the stock of IMFL to its own licensed premises, the amount of duty paid formed part of the consideration paid by the Corporation to the manufacturers and consequently it formed part of the turnover of the manufacturers. There was a mistake in this part of the judgment because the Beverages Corporation remits the duty directly to the State before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the date of service of assessment order along with notice of demand. In other words, the Tribunal's finding is that interest is payable only after the respondents committed default in payment after service of assessment order and demand notices in 2006. The Special Government Pleader appearing for the State has relied on a later Division Bench decision of this court in Chandramani Traders v. State of Kerala [2008] 16 VST 294 wherein this court after taking note of the amendment held that Maruti Wire Industries' case [2001] 122 STC 410 (SC) has no application for the later period. He also relied on the decision of the Supreme Court in Commissioner of Trade Tax v. Kanhai Ram Thekedar [2005] 141 STC 1 wherein the Supreme Court has held that the liability of a dealer to pay interest on late payment of tax arises automatically by operation of law. The counsel for the respondent, however, contended that interest payable under section 23(3A) is for default in payment of tax and the respondent-assessee cannot be held to be a defaulter because as and when assessments are made after judgment of the Supreme Court, they have remitted the tax. It is the specific case of the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not a penal levy at all. On going through the above section, it is clear that the interest payable is on the non-payment or short payment of tax by the dealer and the period for which interest is payable is from the due date on which such tax would have been payable had the dealer filed correct return disclosing full amount of tax due under the Act. Non-payment or short-payment of tax may arise on account of failure of the dealer to disclose full turnover or on account of the dealer declaring taxable turnover as exempted turnover or on account of mis-classification of goods on rate of tax in the declared turnover. Section 23(3A) provides for interest for short payment of tax which may be on account of any of the reasons stated above. In other words, as and when assessment is completed, the returns and payment of tax made by the dealer will be verified and the assessing officer is bound to compute interest for the short-payment of tax for the period of default as provided under the said section. Interest under section 23(3A) is compensatory in nature and it will be payable in all cases where tax assessed and demanded is higher than the tax paid by the dealer based on the ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt dated May 6, 2005 See [2005] 141 STC 358., the respondent has not chosen to file revised return or remit the turnover tax on excise duty so that at least interest from such date could be avoided. Further, it is worthwhile to mention here about the scope of section 23(3B) which provides for recovery of interest even for the period during which disputed tax remained stayed by any order of court or authority. In other words, interest under section 23(3A) is mandatory in nature irrespective of pendency of any case or orders passed by any court or authority. Therefore, we allow the revisions on this issue by reversing the order of the Tribunal and by restoring the assessments levying interest under section 23(3A) of the Act. The next grievance of the respondent is against the appropriation of the amount paid first towards the interest payable under the Act in terms of section 55C of the Act. We do not find any substance in this contention because the payments are made much after the introduction of section 55C which authorises the Department to adjust payment first towards interest and balance, if any, towards tax. This contention is also rejected. The sales tax revisions are a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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