Sales tax refund adjustment can be made without prior notice, but excess tax must be refunded with statutory interest once liability ends.

Refundable sales tax could be adjusted against existing arrears under the refund-adjustment provision without prior notice, because the order was treated as a set-off under section 44(3) and not as rectification. The absence of notice did not invalidate the adjustment. Statutory interest at 6% applied after the prescribed period under section 44(4). Once the dealer complied with the Tribunal's order and no later-year arrears remained, the earlier adjustment could not be retained, and the full excess tax amount had to be refunded with interest running from the date the liability ceased.

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Issues: (i) whether the assessing authority could adjust the refundable amount against other tax arrears under section 44(3) without issuing prior notice to the assessee; (ii) whether the assessee was entitled to refund of the full excess tax amount together with statutory interest.

Issue (i): whether the assessing authority could adjust the refundable amount against other tax arrears under section 44(3) without issuing prior notice to the assessee.

Analysis: The adjustment order was held to be one made under section 44(3) of the Kerala General Sales Tax Act, 1963, which empowers the assessing authority to set off amounts refundable under section 44(1) or 44(2) against amounts due from the dealer on the date of adjustment. The Court held that the order was not one of rectification under section 43. It further held that the statute did not require prior notice before passing an order under section 44(3), and therefore the absence of notice did not vitiate the adjustment.

Conclusion: The adjustment under section 44(3) was upheld and the challenge based on want of notice failed.

Issue (ii): whether the assessee was entitled to refund of the full excess tax amount together with statutory interest.

Analysis: The Court held that the assessee was entitled to interest at 6% under section 44(4) after expiry of the statutory period. However, once the assessee complied with the Tribunal's order and no arrears remained for the later year, the amount earlier adjusted under section 44(3) could not be retained by the department. On that basis, the department was directed to refund the entire excess amount, with interest payable on the full amount from the date on which the liability was cleared.

Conclusion: The assessee was held entitled to refund of the full amount of Rs. 45,635 and to 6% interest for the relevant period.

Final Conclusion: The appeal succeeded in part, the adjustment was sustained for the earlier stage, but the assessee ultimately obtained full refund of the excess tax with statutory interest.

Ratio Decidendi: An amount refundable under the sales tax law may be adjusted against existing tax dues under the refund-adjustment provision without prior notice, and statutory interest on the refundable amount continues until the lawful basis for retention ceases.

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