Penal interest on revised sales tax liability was not leviable where the return was timely, complete, and bona fide paid.

Penal interest under section 23(3) of the Kerala General Sales Tax Act is attracted only on a strict construction of the provision and not where the assessee filed the return on time, disclosed all relevant particulars, and paid the admitted tax on a bona fide computation. Where the additional liability arose only after a later reassessment based on subsequent judicial authority, the earlier payment of tax shown in the return did not amount to default. The demand for penal interest was therefore unsustainable on these facts, distinguishing situations involving failure to file a return, non-payment of disclosed tax, or non-compliance with a valid demand.

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Issues: Whether penal interest under section 23(3) of the Kerala General Sales Tax Act, 1963 is leviable where the assessee filed the return in time with full particulars, paid the admitted tax on the basis of a bona fide computation, and remitted the differential tax only after a subsequent assessment and demand following a later judicial pronouncement.

Analysis: Interest under section 23(3) is penal in nature and must be construed strictly. The controlling principle applied was that an assessee who has disclosed all relevant particulars in the return and paid the tax according to that return does not commit a default merely because the assessment is later revised on the basis of a later declaration of law. The Court distinguished cases where no return was filed, tax disclosed in the return was not paid, or the amount remained unpaid despite a valid demand. On the facts, the return was filed bona fide, the tax shown therein was paid, and the additional liability arose only after subsequent reassessment based on later judicial authority.

Conclusion: Penal interest under section 23(3) was not leviable against the assessee on these facts and the demand for such interest was unsustainable.

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