STATE OF KERALA Vs. WESTERN INDIA OSMETIC AND HEALTH PRODUCTS LTD

JUDGEMENT

(1.) A Division Bench, after doubting the correctness of the judgment of this Court in P.K. Damodaran's case 2003 (2) KLT SN 93 (C. No. 121) : 138 STC 442, has referred this case for decision by Full Bench on the scope of interest payable under Section 23(3A) of the K.G.S.T. Act, hereinafter called the "Act". We have heard Special Government Pleader for the revision petitioner and various counsel appearing for the respondent-assessees.

(2.) The question raised is whether short payment of tax by the dealers along with monthly returns either on account of non-inclusion of turnover or failure to return turnover at the full rate of tax attracts interest under Section 23(3A) of the Act, In S.T. Rev. 107 of 2009 the respondent is a dealer in paper who paid tax on the turnover of paper at 4% as against 8% payable under the Act. The respondent-dealer in the other case has failed to include turnover in the return which led to levy of interest under Section 23(3A) of the Act. The Tribunal in all the cases cancelled levy of interest following the Division Bench decision of this Court above referred wherein this Court held that interest could be levied under Section 23(3A) only if there is failure on the part of the dealer to include any turnover of his business in the return filed and consequent escapement of turnover in the assessment. When the matter was heard, the Division Bench felt that subsequent amendment introduced to Section 23(3A) with effect from 1.4.2004 is clarificatory in nature and the interest under Section 23(3A) being compensatory in nature is payable on the short fall in payment of tax which is the difference between the paid tax and assessed tax, whatever be the circumstances which led to non-payment of full amount of tax in time. In order to consider the issue, we have to refer to the provisions of Section 23(3A) as it originally stood and after it's amendment by Finance Act, 2004 with effect from 1.4.2004, which are extracted below.

(3.) The contention raised by Special Government appearing for the State is that interest under Section 23(3A) is payable from the period the tax would have been paid, had the dealer included the turnover in the return filed. On the other hand, counsel appearing for respondents contended that if the turnover is included in the return the assessee will have no liability to pay interest on non-payment or short payment of tax, and if the same happens on account of misclassification of goods under different rates, Rule 21(9) of the Rules authorises the assessing officer to scrutinize the returns filed and to make provisional or regular assessment demanding actual tax. Therefore according to counsel if there is failure on the part of the assessing officer, assessee cannot be called upon to pay interest for the lapses of the officer. Special Government Pleader has referred to the decision of this Court in Chandramani Traders v. State of Kerala, 2008 16 VST 294 and two unreported decisions of this Court in S.T. Rev. No. 484 of 2004 and M.F.A. No. 331 of 2000 and contended that interest is payable under Section 23(3A) from the due date it was payable till payment, irrespective of the reason for non-payment, short payment or delayed payment of tax;