Penal interest on unpaid sales tax accrues from the return due date without a separate demand notice.

Under the Kerala General Sales Tax Act, penal interest under section 23(3) accrues automatically from the statutory due date for filing the return when taxable turnover is not returned and the tax remains unpaid, even if the assessee later pays after assessment. The absence of a filed return does not defer liability until assessment, and the distinction between self-assessment and regular assessment does not avoid interest liability. A separate demand notice is not required before levying such interest, because the default itself triggers the statutory consequence. The provision operates independently of the penalty regime under section 45A(1)(c).

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Issues: (i) Whether penal interest under section 23(3) of the Kerala General Sales Tax Act, 1963 could be levied from the date the return became due when the assessee did not file any return and the tax was later paid after assessment. (ii) Whether prior service of a separate demand notice was necessary before levying penal interest under section 23(3).

Issue (i): Whether penal interest under section 23(3) of the Kerala General Sales Tax Act, 1963 could be levied from the date the return became due when the assessee did not file any return and the tax was later paid after assessment.

Analysis: Rule 21(7) required the dealer to file a return of taxable turnover with proof of payment by the prescribed date. The turnover was found taxable and the assessed tax was ultimately paid without demur. The absence of a filed return did not postpone liability until assessment; once tax remained unpaid on the statutory due date, the default attracted interest under section 23(3). The distinction drawn between self-assessment and regular assessment did not assist the assessee, and the reasoning in the later Supreme Court authority on non-filing of returns supported accrual of interest from the due date for return.

Conclusion: Penal interest was leviable from the date the return became due, notwithstanding the absence of a filed return and the later assessment.

Issue (ii): Whether prior service of a separate demand notice was necessary before levying penal interest under section 23(3).

Analysis: The liability under section 23(3) was treated as arising automatically when tax due under the Act remained unpaid. The provision was contrasted with the penalty provision in section 45A(1)(c), which operates in a different field. The Court held that the absence of a notice for interest could not defeat liability where the statutory default had already occurred.

Conclusion: A separate demand notice was not a prerequisite for levying penal interest under section 23(3).

Final Conclusion: The assessee remained liable for penal interest on the unpaid tax from the statutory due date, and the contrary view of the single Judge was set aside.

Ratio Decidendi: Where a taxable turnover is not returned and the tax remains unpaid on the date prescribed for filing the return, interest under the sales tax statute accrues automatically from that due date, and its levy does not depend on prior service of a separate notice.

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