Penal interest under sales tax law requires a valid notice of demand and missed payment within the specified time.

Penal interest under the Kerala General Sales Tax Act could be imposed only if the tax or other amount due was not paid within the time specified in a notice of demand. The statutory language treated service of the notice and non-compliance with it as a condition precedent to liability for penal interest, not merely ordinary statutory interest. Because no notice of demand had been issued, the statutory prerequisite was absent and the levy could not stand.

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Issues: Whether penal interest under section 23(3) of the Kerala General Sales Tax Act could be levied in the absence of a notice of demand specifying the time for payment.

Analysis: Section 23(3) fastens liability to penal interest only where the tax assessed or other amount due is not paid within the time specified in the notice of demand. The liability is not for ordinary statutory interest but for penal interest, and the statutory language makes service of a notice of demand and failure to comply with it a necessary condition precedent. As no notice of demand had been issued, the prerequisite for imposing penal interest was absent.

Conclusion: Penal interest was not payable, and the challenge to the levy failed.

Ratio Decidendi: Where a taxing statute makes liability to penal interest contingent on non-payment within the time specified in a notice of demand, such interest cannot be levied unless that statutory condition precedent is satisfied.

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