Statutory interest on tax arrears may continue during stay periods and apply to pending demands without violating constitutional guarantees.

Section 23(3A) of the Kerala General Sales Tax Act was upheld as a valid fiscal provision requiring interest on tax arrears to continue running during periods of stay, because interest on unpaid tax is a statutory liability and the classification serves the legitimate revenue purpose of preventing delay. The provision was also held applicable to pending demands, since it does not create a new liability but regulates the period for which existing interest continues to accrue. The court found no violation of Articles 14 or 19(1)(g), and rejected arguments that the provision was arbitrary, unreasonable, or impermissibly retrospective. The constitutional challenge therefore failed.

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Issues: (i) Whether section 23(3A) of the Kerala General Sales Tax Act, 1963, which directs that the period of stay shall not be excluded while computing interest on tax arrears, is unconstitutional as violative of articles 14 and 19(1)(g) of the Constitution of India. (ii) Whether the provision is invalid for retrospective application to pending demands or for alleged unreasonableness and arbitrariness.

Issue (i): Whether section 23(3A) of the Kerala General Sales Tax Act, 1963, which directs that the period of stay shall not be excluded while computing interest on tax arrears, is unconstitutional as violative of articles 14 and 19(1)(g) of the Constitution of India.

Analysis: Interest on unpaid tax is a statutory liability arising by operation of law. The provision specifically declares that the stay period cannot be excluded in the calculation of interest, and it operates consistently with the scheme of section 23(3), which itself authorises interest on assessed tax remaining unpaid. The classification is justified in fiscal legislation, and the provision serves the legitimate purpose of preventing delay in payment and protecting the revenue from loss caused by withheld tax amounts.

Conclusion: The provision is not unconstitutional under articles 14 or 19(1)(g).

Issue (ii): Whether the provision is invalid for retrospective application to pending demands or for alleged unreasonableness and arbitrariness.

Analysis: The liability to pay interest had already arisen under the substantive charging scheme, and the impugned provision only regulates the period for which such interest continues to run. Application to pending demands is therefore not impermissible retrospectivity. The provision is neither arbitrary nor unreasonable, and it is supported by the settled principle that statutory interest compensates the State for delayed payment of tax. The court also noted that allowing the stay period to halt interest would encourage delay and unjust enrichment.

Conclusion: The provision is valid and enforceable against pending demands.

Final Conclusion: The challenge to section 23(3A) failed in full, and the original petitions were dismissed.

Ratio Decidendi: Where a taxing statute expressly provides that interest shall continue to run notwithstanding stay orders, such interest is a statutory incident of delayed payment and may validly apply to pending demands without offending constitutional guarantees.

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