Penal interest on delayed self-assessed tax arises automatically under the statute and does not depend on notice of demand.

Service of a notice of demand was not required before levy and recovery of penal interest under section 23(3) of the Kerala General Sales Tax Act, read with rule 31. The liability arose automatically when assessed or self-assessed tax was not paid within the time prescribed by the Act or Rules, including monthly return cases under rule 21(7) where tax had to accompany the return. Rule 31 expressly treated the interest liability as independent of notice, and statutory forms could not override the substantive provisions. Any contrary indication in the forms had to yield, and the earlier view requiring notice was overruled.

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Issues: Whether service of a notice of demand was a prerequisite for levy and collection of penal interest under section 23(3) of the Kerala General Sales Tax Act, 1963 read with rule 31 of the Kerala General Sales Tax Rules, 1963.

Analysis: The liability to pay penal interest under section 23(3) arose on default in payment of tax assessed or otherwise due within the time prescribed by the Act or the Rules. In cases of monthly return/self-assessment under rule 21(7), the dealer was required to pay the tax along with the return, and failure to do so attracted interest automatically. Rule 31 specifically provided that penal interest could be calculated and recovered, and its explanation made liability to pay such interest independent of receipt of notice. The statutory forms could not override the parent Act and the Rules, and any indication in the forms suggesting that notice was necessary had to yield to the substantive provisions.

Conclusion: Service of a notice of demand was not an essential prerequisite for levy and collection of penal interest. The liability accrued automatically on default, and the earlier contrary view was overruled.

Ratio Decidendi: Where the statute and rules themselves make penal interest payable on default in timely payment of self-assessed or assessed tax, liability arises by operation of law and is not dependent on service of a notice of demand.

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