Natural justice in penal interest recovery requires notice and hearing before coercive action on the quantified balance payable.

Penal interest under the Kerala General Sales Tax framework is chargeable on unpaid tax or other amounts due, and the rules contemplate periodic computation and notice in the prescribed form. Where part payments have already been made and the dispute concerns appropriation between tax and interest, the balance payable must be communicated to the dealer before coercive recovery. A demand raised without prior intimation from the assessing authority and without an opportunity to contest the quantification of interest offends natural justice and is liable to be set aside, subject to fresh recovery after hearing.

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Issues: Whether a revenue recovery demand for penal interest, issued after the tax arrears had been substantially remitted, could stand without giving the defaulter notice and an opportunity to be heard on the computation of the interest.

Analysis: Penal interest under section 23(3) of the Kerala General Sales Tax Act is leviable on unpaid tax or other amounts due, and Rule 31 of the Kerala General Sales Tax Rules contemplates calculation of such interest from time to time and service of notice in the prescribed form. Where payments have already been made and the question is how much of the remittance is to be appropriated towards tax and how much towards interest, the computation of the balance payable must be communicated to the dealer before coercive recovery is pursued. A demand issued by the village officer without prior intimation from the assessing authority and without affording the defaulter an opportunity to contest the quantum offends natural justice.

Conclusion: The demand notice was unsustainable for want of notice and hearing on the quantification of penal interest, and it was liable to be quashed, without prejudice to fresh recovery proceedings after giving the petitioner an opportunity of being heard.

Ratio Decidendi: When recovery of penal interest turns on fresh computation after prior payments have been made, the defaulter must be given notice and a fair opportunity to contest the quantum before coercive recovery is initiated.

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