Penal interest follows the original demand notice even after appellate reduction, with no fresh notice required for the balance due.

Penal interest under section 23(3) of the Kerala General Sales Tax Act accrues from the original notice of demand for the amount that remains payable after appellate reduction. The statutory scheme treats assessed tax as due within the time stated in the demand notice, and default triggers interest on the outstanding balance. Where assessment is reduced in appeal or revision, section 23(5) requires only proportionate reduction of interest, not a fresh demand. The original notice continues to govern recovery for the reduced liability, and a new notice is unnecessary solely because the assessment was modified on appeal.

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Issues: Whether penal interest under section 23(3) of the Kerala General Sales Tax Act, 1963 accrues from the date of the original notice of demand or only from the date of the appellate order, and whether a fresh notice of demand is necessary after the tax liability is reduced in appeal.

Analysis: Under section 23(1), the tax assessed under the Act is payable within the time specified in the notice of demand, and default makes the outstanding amount immediately due. Section 23(3) makes penal interest payable when the tax or other amount assessed or due is not paid within the prescribed time or within the time stated in the notice of demand or appellate order. Section 23(5) provides that where the assessment is reduced in appeal or revision, the penal interest must be reduced proportionately. On that scheme, the original demand notice continues to operate for the amount that remains payable after appellate modification, and interest does not begin only from the appellate order. The earlier Full Bench rulings on automatic liability for penal interest and on the non-necessity of a fresh notice of demand supported this view. The legislation concerning continuation and validation of recovery proceedings was also treated as preserving the original demand for the reduced balance.

Conclusion: Penal interest is payable from the original notice of demand on the amount that remains due after appellate reduction, and no fresh notice of demand is required solely because the assessment was modified in appeal.

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