Retrospective interest on central sales tax arrears upheld after amendment validated recovery and state-law collection provisions.

Amended section 9 of the Central Sales Tax Act made a dealer liable to pay interest on delayed tax payment and allowed State law provisions to govern the due date, rate of interest, assessment and collection. The Karnataka High Court treated the Finance Act, 2000 amendments, including section 9(2B), as validating recovery of interest on arrears of central sales tax and as giving retrospective effect to earlier recovery steps, acts and orders relating to such interest. The earlier Supreme Court ruling on absence of a substantive interest provision was distinguished because it predated the amendment, and the challenge to interest recovery was rejected.

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Issues: Whether interest could be levied and recovered on arrears of central sales tax for the assessment year 1998-99 in light of the amended provisions of section 9 of the Central Sales Tax Act, 1956.

Analysis: The recovery proceedings were initiated under section 13(3)(b) of the Karnataka Sales Tax Act, 1957 for arrears of central sales tax along with interest. The Court noted that section 9(2B) inserted by the Finance Act, 2000 expressly made a dealer liable to pay interest for delayed payment of tax under the Central Sales Tax Act and enabled application of the State law provisions for due date, rate of interest, assessment and collection. The accompanying amendments in section 9(2) were treated as giving retrospective effect to the recovery of interest and as validating earlier proceedings, acts and orders relating to such interest. The earlier Supreme Court decision holding that no interest could be levied in the absence of a substantive provision was distinguished because it predated the amendment, and the decision on retrospectivity in taxing provisions was found inapplicable on the facts.

Conclusion: Interest on the arrears of central sales tax was recoverable under the amended provisions, and the objection to levy of interest was rejected.

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