Compensatory interest on unpaid sales tax upheld where statutory provision applied, including retrospectively extended Central Sales Tax demands.

Interest on unpaid sales tax was treated as compensatory for continued use of revenue money, not as a penal charge. The Rajasthan High Court upheld levy under section 11B on tax that remained outstanding on and after the date the provision came into force, rejecting the argument that no interest could run on pre-insertion liabilities once they continued unpaid. The Court also upheld interest on outstanding Central Sales Tax demands after the provision was retrospectively extended to those demands, noting that no challenge to the validating amendment was raised and that the amended statute governed the liability.

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Issues: (i) Whether interest under section 11B of the Rajasthan Sales Tax Act, 1954 could be levied on outstanding sales tax dues for periods prior to its insertion with effect from 2 May 1969. (ii) Whether interest could be levied on outstanding Central Sales Tax demands after the provision was retrospectively extended to such demands.

Issue (i): Whether interest under section 11B of the Rajasthan Sales Tax Act, 1954 could be levied on outstanding sales tax dues for periods prior to its insertion with effect from 2 May 1969.

Analysis: Interest was treated as compensation for the use of money that ought to have been paid when due. Once tax became payable and remained unpaid, the liability became an outstanding debt, and the assessee continued to use money belonging to the revenue. Section 11B was viewed as giving effect to this compensatory principle and not as a penal provision. The Court also noted that the challenge did not concern levy of interest for a period before the provision existed, but only the continuance of interest on amounts still outstanding after insertion.

Conclusion: The levy of interest on unpaid tax outstanding on and after the date of insertion of section 11B was upheld.

Issue (ii): Whether interest could be levied on outstanding Central Sales Tax demands after the provision was retrospectively extended to such demands.

Analysis: The Court noted that, after the Supreme Court decision relied upon by the petitioner, the interest provision had also been extended retrospectively to Central Sales Tax demands from the same date as section 11B in the Rajasthan Sales Tax Act. Since no challenge to the validity of that retrospective amendment was raised before it, the existing statutory amendment governed the matter and the earlier Supreme Court ruling did not assist the petitioner.

Conclusion: The levy of interest on outstanding Central Sales Tax demands was upheld.

Final Conclusion: The petition was rejected because the interest provision was held applicable to the outstanding dues in question, including dues under the Central Sales Tax regime after retrospective extension.

Ratio Decidendi: Interest on unpaid tax is compensatory in nature and may be levied on outstanding dues once the statutory provision applies, including where the provision is retrospectively extended to the relevant tax liability.

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