Retrospective interest on delayed tax remittance upheld for stayed recovery periods under Kerala sales tax law

Section 23(3B) of the Kerala General Sales Tax Act was treated as a clarificatory interest provision, not an arbitrary levy, because interest on delayed tax payment was already embedded in section 23(3). The Court held that computing interest on the amount finally determined, without excluding the stay period during appeal or revision, did not violate Articles 14, 19(1)(g), 20, 21 or 301. It further held the amendment retrospective, applying to cases where recovery had been stayed, on the principles of restitution and public policy. The levy of interest for the stay period was therefore sustained.

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Issues: (i) Whether section 23(3B) of the Kerala General Sales Tax Act, 1963 is unconstitutional as violative of Articles 14, 19(1)(g), 20, 21 and 301 of the Constitution of India; (ii) Whether section 23(3B) operates retrospectively and applies to demands where recovery was stayed during appeal or revision, so that interest is payable for the stay period.

Issue (i): Whether section 23(3B) of the Kerala General Sales Tax Act, 1963 is unconstitutional as violative of Articles 14, 19(1)(g), 20, 21 and 301 of the Constitution of India.

Analysis: The liability to pay interest on delayed payment of tax was already built into section 23(3); the disputed provision only clarified that, where tax is finally settled in appeal, revision or other proceedings, interest is to be computed on the amount finally determined and the period of stay is not to be excluded. The provision was treated as a collection measure and a deterrent against delay in remitting tax collected for the State. In that setting, the levy of interest was held neither arbitrary nor unreasonable, and the constitutional challenge was rejected.

Conclusion: The challenge to the validity of section 23(3B) failed; the provision was upheld.

Issue (ii): Whether section 23(3B) operates retrospectively and applies to demands where recovery was stayed during appeal or revision, so that interest is payable for the stay period.

Analysis: The amendment was held to be clarificatory in nature and therefore retrospective. The Court applied the principles of restitution and the maxim that no act of the court should prejudice a party, holding that a dealer cannot retain tax amounts during a stay period without liability for interest once the amount is ultimately found due. Excluding the stay period from computation of interest was considered contrary to public policy and public interest.

Conclusion: Section 23(3B) was held to apply retrospectively, and interest was held payable even for the period during which recovery remained stayed.

Final Conclusion: The statutory levy of interest on belated remittance of tax, including for the period of stay, was sustained and the writ appeals and original petitions were dismissed.

Ratio Decidendi: A clarificatory amendment governing interest on delayed remittance of tax is retrospective, and where tax is ultimately found due, interest remains payable for the period during which recovery was stayed.

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