Compensatory interest on unpaid sales tax accrues from the statutory due date despite interim stay and pending final assessment.

Under the Tamil Nadu General Sales Tax Act, interest on unpaid tax was treated as an automatic compensatory liability arising from the statutory due date. An interim stay of the section 3-A levy only suspended enforcement while it operated; when the writ proceedings ended as infructuous, the assessee remained liable for tax and consequential interest for the stay period. The court also held that interest under section 24(3) could accrue before final assessment, because monthly returns and payment were required by the prescribed due date and the statutory scheme did not make interest depend on completion of assessment. The demand for interest was sustained.

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Issues: (i) Whether interest under section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 was payable for the period during which the levy under section 3-A remained stayed in writ proceedings that were later disposed of as infructuous. (ii) Whether interest under section 24(3) could be levied only after final assessment, when the tax had been paid before assessment was completed.

Issue (i): Whether interest under section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 was payable for the period during which the levy under section 3-A remained stayed in writ proceedings that were later disposed of as infructuous.

Analysis: The interim order only kept the levy inoperative during its currency and did not erase the statutory obligation. When the writ petition was later disposed of as infructuous, the assessee was restored to the original position and remained liable to pay the tax and the consequential interest for belated payment. Interest under the Act was treated as compensatory, and the principle that no act of court should prejudice a party supported the Revenue's claim.

Conclusion: The liability to pay interest during the stay period was upheld in favour of the Revenue.

Issue (ii): Whether interest under section 24(3) could be levied only after final assessment, when the tax had been paid before assessment was completed.

Analysis: The statutory scheme required monthly returns and payment of tax on the basis of actual turnover by the due date. Under sections 13(2), 24(1) and 24(3) read with rule 18(2), interest became payable automatically on any amount remaining unpaid after the prescribed date, irrespective of whether a final assessment had been made. The provisions of the Tamil Nadu enactment were held to be materially different from the Rajasthan provisions considered in J.K. Synthetics, and that decision was held inapplicable.

Conclusion: Interest was held leviable even though payment preceded final assessment, and this issue was decided in favour of the Revenue.

Final Conclusion: The writ petitions failed, and the demand of interest on delayed payment of tax was sustained.

Ratio Decidendi: Under the Tamil Nadu General Sales Tax Act, 1959, interest on unpaid tax is an automatic compensatory liability arising from the statutory due date, and an interim stay later ending without relief does not extinguish that liability.

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