Compensatory levy for delayed tax payment remains payable despite a court stay on recovery.

Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 was treated as a compensatory levy for delayed payment, despite the use of the word "penalty". A court stay only suspended recovery and did not extinguish the underlying tax liability, so the period covered by the stay could not be excluded to avoid liability under the provision. The assessee continued to retain money due to the State, and later authorities cited to the contrary did not displace the earlier binding view. The demand under section 24(3) was therefore held valid.

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Issues: Whether the demand raised under section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 for the period during which recovery of tax was stayed by court orders was valid.

Analysis: Section 24(3) was treated as a provision for compensation for delayed payment, notwithstanding the use of the word "penalty". The earlier view that the provision operated as interest rather than a true penalty was followed. A stay order only postponed recovery or collection of tax and did not extinguish the tax liability. The period during which recovery was stayed could not be excluded for the purpose of avoiding liability under section 24(3), because the assessee continued to retain amounts that should have reached the State exchequer. The later authorities relied on by the petitioner were held not to displace the earlier binding view.

Conclusion: The demand under section 24(3) was valid and the challenge failed.

Ratio Decidendi: A stay of recovery does not place the statutory tax liability in suspension so as to exempt the assessee from compensatory liability for delayed payment under section 24(3) of the Tamil Nadu General Sales Tax Act, 1959.

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