Interest on penalty cannot be demanded before final determination of penalty liability under pending revision proceedings.

Under Rule 16(3) of the Central Sales Tax (Orissa) Rules, 1957, interest on penalty is linked to the final determination of the amount ultimately found due when an appeal, revision or reference is pending. Where the revisional authority has not yet decided whether the penalty is payable, or in what amount, interest on that penalty cannot be demanded. The Orissa High Court accordingly quashed the interest demand, while leaving ultimate liability to depend on the outcome of the pending revision.

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Issues: Whether interest on the penalty could be demanded pending disposal of the revision under Rule 16(3) of the Central Sales Tax (Orissa) Rules, 1957.

Analysis: Rule 16(3) makes interest payable on the tax together with the penalty, if any, ultimately found due from the dealer, where an appeal, revision, or reference has been preferred. The proviso further shows that the liability to pay interest is linked to the final determination of the amount due in the pending proceeding. Until the revisional authority decides whether the penalty is payable and, if so, in what amount, the question of interest on that penalty does not arise. A broader contention as to whether the rule covers penalty at all was not answered because it would have become academic in view of the pending revision.

Conclusion: Interest on the penalty could not be demanded before disposal of the revision, and the liability to pay such interest was quashed.

Final Conclusion: The petition succeeded, and the interest demand was set aside while leaving the question of ultimate liability to depend on the outcome of the pending revision.

Ratio Decidendi: Under Rule 16(3), when an appeal, revision, or reference is pending, interest on penalty can be enforced only after the penalty is finally determined and found due.

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