Penal interest under the Pondicherry Sales Tax Act applies only to unpaid tax under the relevant assessment notice.

Penal interest under section 27(3) of the Pondicherry General Sales Tax Act, 1967 is compensatory and arises only when tax assessed under the relevant assessment order remains unpaid within the time specified in the notice of assessment. Where a best judgment assessment and related penalty were cancelled, a fresh assessment was made under section 16(1), and the differential tax had already been paid before the fresh order, no unpaid amount remained within the prescribed time. The provision could not be applied by importing the broader Tamil Nadu approach, because the Pondicherry wording is different. On these facts, the levy of penal interest was unsustainable.

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Issues: Whether penal interest under section 27(3) of the Pondicherry General Sales Tax Act, 1967 could be levied after a best judgment assessment was cancelled and a fresh assessment was made under section 16(1), when the differential tax had already been paid before the fresh assessment order.

Analysis: The scheme of the Act distinguishes between punitive penalties under section 13(3) and section 18(3), and the levy under section 27(3), which is compensatory in nature. Section 27(3) is attracted only when tax assessed under the Act or an instalment thereof is not paid within the time specified in the notice of assessment. The Court held that the expression "within the time specified in the notice of assessment" cannot be divorced from the fresh assessment made under section 16(1). Once the original best judgment assessment and the penalty under section 13(3) were cancelled, and the petitioner had already paid the tax found due under the fresh assessment, no unpaid amount remained within the time fixed by the notice of assessment. The Court also held that the broader approach adopted under the Tamil Nadu statute could not be mechanically applied because the Pondicherry provision was differently worded.

Conclusion: Penal interest under section 27(3) was not leviable on the facts, and the levy was unsustainable.

Final Conclusion: The writ petition succeeded and the impugned levy of penal interest was set aside.

Ratio Decidendi: Under section 27(3) of the Pondicherry General Sales Tax Act, 1967, penal interest can be levied only where tax assessed remains unpaid within the time specified in the notice of assessment arising from the relevant assessment order; if the tax due under a fresh assessment has already been paid, the levy does not arise.

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