The petitioner is a Company engaged in the manufacture of automotive tyres and tubes. The original petition is filed challenging Ext.P1 assessment order under the Kerala General Sales Tax Act, 1963 (hereinafter referred to as 'the KGST Act' for short) for the assessment year 1996-1997 whereby the Assessing Officer levied penal interest of Rs.15,41,178/- on the petitioner invoking Section 23(3) of the KGST Act. It is the case of the petitioner that, owing to a dispute that was pending between the assessee and the Department on the issue of inclusion of rubber cess in the purchase turn over of rubber, the petitioner had not included the rubber cess in the purchase turn over that was disclosed in the return filed by the petitioner. While paying tax, however, the entire tax that was due as per the return filed was paid by the petitioner. Subsequently, taking note of the developments that took place pursuant to the decision of the Supreme Court on the issue of inclusion of rubber cess in the purchase turn over, the assessment of the petitioner for the assessment year 1996-1997 was completed by including the rubber cess in the purchase turnover for the purposes of assessment. Thus, the petitioner become liable to pay additional amounts, by way of tax, on completion of the assessment. By Ext.P1 assessment order, this additional tax amount was demanded from the petitioner. In the assessment order, the Assessing Officer also proceeded to levy penal interest under Section 23 (3) of the KGST Act on the differential tax amount. Ext.P1 assessment order, as already noted is impugned in the writ petition, to the extent it demands penal interest under S. 23 (3) from the petitioner. 2. A counter affidavit has been filed on behalf of the respondents wherein the assessment order is sought to be justified based on the Division Bench judgment of this Court in the Sales Tax Officer v. Maruti Wire Industries Pvt.Ltd. [(1999) 113 STC 19]. It is further pointed out that in so far as the petitioner had not included the cess amount in the return, the provisions of Section 23 (3) of the KGST Act would stand attracted and the amounts by way of penal interest could be demanded from the petitioner.
3. I have heard Sri.Pathros Matthai, the learned Senior counsel appearing on behalf of the petitioner as also the learned Government Pleader appearing on behalf of the respondents.
4. On a consideration of the facts and circumstances of the case as also the submissions made across the Bar, I am of the view that the writ petition, in its challenge against Ext.P1 assessment order to the extent it levies penal interest on the petitioner under Section 23(3) of the KGST Act, must necessarily succeed. The assessment year in question is 1996-1997 and the provision that is invoked for the levy of penal interest is Section 23 (3) of the KGST Act. The Division Bench decision of this Court in the case of Sales Tax Officer v. Maruti Wire Industries Pvt. Ltd. [(1999) 113 STC 19] was subsequently overruled by the Supreme Court in Maruti Wire Industries Pvt. Ltd. v. Sales Tax Officer, First Circle, Mattancherry and Others [(2001) 122 STC 410] wherein the Supreme Court found that the liability of a dealer under the KGST Act to pay sales tax can arise either by way of self assessment on the return of turnover being filed or else on the order of assessment being made. The failure to file return of taxable turnover could render the dealer liable for any other consequence or penal action as provided in law but could not attract the liability of penal interest under Section 23(3) of the Act. In this case, it is not in dispute that while filing the return, without including the amount of cess on rubber purchased in the turnover, the petitioner had paid tax on the turnover that was declared by it in the return. Thereafter, it was only while completing the assessment by Ext.P1 order that the demand consequent to the inclusion of cess on rubber purchased became due and payable from the petitioner. In otherwords, it is only from the date of the assessment order or the consequent demand notice that the liability of the petitioner to pay interest would arise in terms of Section 23(3) of the KGST Act. Since, in the instant case, the petitioner had paid the entire tax due as per the return, the liability of penal interest under Section 23 (3) of the KGST Act could not be fastened on it going by the decision of the Supreme Court in Maruti Wires's case (Supra).
5. It may also be relevant to mention in this context that the interest under Section 23 (3A) of the KGST Act also would not apply to the petitioner for the assessment year in question namely 1996-1997. The provisions of Section 23 (3A) where introduced in the KGST Act only from 1998 and did not contemplate a retrospective operation for an anterior period. This being the case, the levy of interest on Section 23 (3A) would not apply in respect of a demand of tax pertaining to assessment year 1996-1997. On this issue, for the earlier assessment year namely, 1995-1996, a Division Bench of this Court by judgment dated 13.02.2009 in W.A.No.2115 of 2007, held in the petitioner's own case, that the provisions of Section 23 (3A), which was subsequently renumbered as Section 23 (3B), would have no application in a situation where at the time of filing the return, the return was correct as per law. Thus, Ext.P1 assessment order, to the extent it demands penal interest under Section 23(3) of the KGST Act on the petitioner, cannot be legally sustained. I quash Ext.P1 assessment order to the extent it demands penal interest under Section 23(3) of the KGST Act from the petitioner for the assessment year 1996-1997. The respondents are directed to pass consequential orders for the assessment year based on the observations in this judgment.
A.K.JAYASANKARAN NAMBIAR
JUDGE
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