Monthly return tax demands require admitted liability; retrospective turnover tax survives absent breach of constitutional limitation.

Under the Kerala General Sales Tax Rules, a demand in Form No. 14D could be issued only where the dealer had admitted tax due in the monthly return; if no liability was admitted, Rule 21(10) could not be used to raise a demand and the authority had to proceed by provisional assessment under Rule 21(9). The article also states that retrospective levy of turnover tax is not unconstitutional merely because it operates retrospectively; it becomes invalid only if a constitutional limitation, including a fundamental right, is shown to be breached. On the stated reasoning, demand notices based on Form No. 14D were quashed, while the challenge to retrospectivity failed.

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Issues: (i) whether a demand in Form No. 14D could be issued under Rule 21(10) of the Kerala General Sales Tax Rules, 1963 when the dealer had not admitted any tax liability in the monthly return; and (ii) whether the retrospective levy of turnover tax from 1 April 1992 was unconstitutional.

Issue (i): whether a demand in Form No. 14D could be issued under Rule 21(10) of the Kerala General Sales Tax Rules, 1963 when the dealer had not admitted any tax liability in the monthly return.

Analysis: Rule 21 requires monthly returns and, under sub-rule (7), payment of the tax due for the month along with the return. Rule 21(10) operates only where the return is filed without proof of payment of the full amount of tax payable. Form No. 14D is framed on the basis that the dealer has admitted tax due in the return. Where no liability is admitted, the assessing authority cannot invoke Rule 21(10) to raise a demand as though the amount were admitted; the proper course is to proceed under Rule 21(9) and complete a provisional assessment before demanding tax.

Conclusion: The demand notices in Form No. 14D were jurisdiction and were liable to be quashed; this issue was decided in favour of the assessee.

Issue (ii): whether the retrospective levy of turnover tax from 1 April 1992 was unconstitutional.

Analysis: Retrospective taxation is not invalid merely because it operates retrospectively. It can be struck down only if it infringes a constitutional limitation, particularly a right guaranteed under Part III or some other constitutional prohibition. On the pleadings, no violation of any fundamental right or other constitutional provision was established.

Conclusion: The retrospective levy was not held unconstitutional; this issue was decided against the assessee.

Final Conclusion: The notices of demand and the consequential threat of penalty were quashed, but the challenge to the retrospective operation of the levy failed.

Ratio Decidendi: A demand under the monthly-return procedure can be issued only for tax actually admitted as due in the return; if no liability is admitted, the authority must resort to provisional assessment, and retrospectivity of a tax levy is not unconstitutional absent a demonstrated breach of constitutional limitation.

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