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Issues: Whether the assessee could be treated as a defaulter for the purpose of penalty under section 13(2) of the Karnataka Sales Tax Act, 1957 during the period when the Supreme Court's interim order restrained coercive recovery of the assessed tax but permitted assessment and demand.
Analysis: The demand was validly raised pursuant to the assessment permitted by the Supreme Court. Under section 13(1), the tax demanded had to be paid within the prescribed time, and on failure to do so section 13(2) operated automatically. The interim order only restrained recovery proceedings; it did not prohibit voluntary payment by the assessee or suspend the statutory consequence of non-payment after service of demand notice. The stay order therefore postponed coercive recovery but did not obliterate the liability to penalty. The earlier Division Bench decision on the same statutory scheme was followed, and the reliance placed on the Rajasthan decision was held inapplicable on its facts and under a different statutory setting.
Conclusion: The assessee was liable to be treated as a defaulter for the relevant period, and penalty under section 13(2) was recoverable despite the subsisting stay against recovery.
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