The Secretary to Government of Kerala and The Assistant Commissioner vs Premier Breweries Ltd.

P.R. Ramachandra Menon, J.—This is an appeal preferred by the State, challenging the verdict passed by a learned Single Judge of this Court, whereby the demand to satisfy ''interest'' u/s 23(3) of the KGST Act, in respect of the tax liability on the turnover has been set aside.

The factual matrix shows that the respondent herein, who is engaged in the manufacture and sale of Indian Made Foreign Liquor (IMFL) is liable to pay the tax in respect of the turn over, as provided u/s 5(2C) of the KGST Act. The tax is liable to be satisfied along with the return as contemplated under Sub-rule 7 to Rule 21. The case of the respondent is that, the respondent has paid the turn over tax within the specified period mentioned in the demand notice and hence is not liable to pay any ''interest''. The learned Single Judge, placing reliance on the decision of the Apex Court reported in Maruti Wire Inds. Pvt. Ltd. v. Sales Tax Officer 2001 (2) KLT 100, set aside the impugned demand; which is under challenge in this appeal preferred by the State/Revenue.

The appellants contend that, the decision in Maruthi Wires'' case relied upon in the impugned verdict is not applicable to the case in hand, for more than a reason. It is also brought to the notice of this Court that, after the amendment of the Act in 1998, the Statute has undergone a major change, whereby Sub-section 3 of Section 23 has been substituted and issuance of any further demand notice for levy of interest for non payment of tax has been dispensed with. This vital aspect has been taken note of by a Division Bench of this Court in the decision reported in Miracle Elastomer (India) Ltd. Vs. Commissioner of Commercial Taxes, . Reliance is also sought to be placed on the unreported decision of a Division Bench of this Court in S.T. Rev. 296 of 2007 and connected cases. After considering the contentions as now raised in this case, it was held by the Bench that, the liability to satisfy interest u/s 23(3) cannot be avoided. Maruthi Wire''s Case was referred to therein and distinction was also drawn, both factually and legally, in black and white terms. In view of the above said decisions, the impugned verdict is liable to be set aside, submits the learned Government Pleader appearing for the appellant.

In reply to the above contentions, the learned Counsel for the respondent submits that, the law has to be read and understood with reference to Sub-section 3A to Section 23. The said provision brought into force w.e.f. 01.04.1998 reads as follows:

23(3A) where any dealer has failed to include any turnover of his business in any return filed or where any turnover has escaped assessment, interest under Sub-section (3) shall accrue on the tax due on such turnover with effect from such date on which tax would have fallen due for payment had the dealer included the same in the return relating to the period to which such turnover relates.

The situation contemplated u/s 23(3A) stands entirely on a different footing. Even without the position referred to in Sub-section 3A, we find that, the liability to satisfy the interest very much exists u/s 23(3), which reads as follows:

23(3) If the tax or any other amount assessed or due under this Act is not paid by any dealer or other person within the time prescribed therefor, in this Act or in any rule made thereunder and in other cases within the time specified therefore in the notice of demand, the dealer or other person shall pay, by way of interest, in the manner prescribed, in addition to the amount due, a sum equal to,-

Going by contents, the next question to be considered is, whether any stipulation is prescribed in the Statute, either in the Act or under Rules, as to the liability to satisfy the interest only on demand. True, by virtue of the unamended provision, the liability to pay interest could have been only pursuant to a demand. The unamended provision reads as follows:

Section 23(3) (before amendment) If the tax assessed or any other amount due under this Act or any instalment thereof is not paid by any dealer or other person within the time specified thereof in the notice of demand or in the order permitting payment in instalments or within the time allowed for its payment by the appellate or revising authority or within the time specified thereof in this Act or in any rule made thereunder, the dealer or other person shall pay, by way of penal interest, in the manner prescribed, in addition to the amount due; a sum equal to,

With regard to the liability ''to pay tax'', it is provided under Sub-rule (7) to Rule 21, that the tax is payable on the turn over, along with monthly return and also along with final return as specified therein. There is no dispute with regard to the said requirement. Similarly, there is absolutely no challenge against the rule or its constitutional validity. In the said circumstances, the act pursued by the respondent in filing the return without remitting the tax on the declared turn over, is contrary to the rule and is liable to be remedied by demanding interest under Sub-section 3 to Section 23.

Coming to the applicability of the dictum in Maruthi Wires'' Case, it has already been considered in the decision reported in Miracle Elastomer (India) Ltd. Vs. Commissioner of Commercial Taxes, and also in S.T. Rev. 296 of 2007 and connected cases, holding it in favour of the Revenue, making it clear that the assessee is liable to satisfy interest u/s 23(3). Apart from the fact that the decision in Maruthi Wire''s Case was rendered in the light of the pre-amended Section 23(3), the factual position in this case is also quite different. The assessment in question in the said decision was prior to the amendment brought into effect on 01.04.1988; whereas in the instant case the challenge is against the assessment years 1988-''89, 1989-''90 and 1990-''91, which are much after the amendment. More over the assessee concerned therein did not file any return at all. It was observed in paragraph 7 of the said decision as follows :

In view of the law laid down by the Constitution Bench, we are clearly of the opinion that the liability of assessee-appellant to pay sales tax could have arisen either on return of turnover being filed by way of self- assessment or else on an order of assessment being made. No doubt Rule 21(7A) of the Kerala General Sales Tax Rules, 1963 casts an obligation on assessees to file a return of total turnover accompanied by proof of payment of the amount of tax due within 20 days of the previous quarter but such a return was not filed by the appellant. A failure to file return of taxable turnover may render the assessee liable for any other consequences or penal action as provided by law but cannot attract the but cannot attract the liability for payment of penal interest under Sub-section (3) of Section 23 of the Act on the parity of reasoning that if a return of turnover would have been filed on the due date then the tax as per return would have become due and payable on that date.

With regard to the liability to pay tax, it has necessarily to be paid along with filing of the return. But in the Maruthi Wire''s case, since the assessee failed to file the return, it was observed that such an instance would have enabled the assessing authority to take consequential steps including penal proceedings for non filing of the return; but it could not be taken as an analogous situation to demand the ''penal interest'' as well. It was in the said circumstances, that interference was made; whereas, in the present case, the assessee had filed the return, but admittedly without any payment of tax.

In the above circumstances, we find that the appeal preferred by the revenue succeeds. Accordingly, the verdict passed by the learned Single Judge is set aside and the Writ Appeal is allowed. No cost.

Taking note of the submission made by the learned Counsel for the respondent that there is an ''Amnesty Scheme'' declared by the Government, which is valid till 31.12.2010, it is made clear that the respondent/assessee is at liberty to avail the benefit of the said Scheme, subject to satisfaction of terms stipulated in this regard.