Compensatory sales tax interest applies to short payment from wrong exemption, under-disclosure, and misclassification of turnover.

Interest under section 23(3A) of the Kerala General Sales Tax Act is compensatory and applies not only where turnover is totally omitted from a return, but also where taxable turnover is under-disclosed, wrong exemption is claimed, or goods are classified at a lower rate, causing short payment of tax. The amendment was treated as clarificatory because the provision would otherwise not cover short payment arising from incorrect rate adoption or misclassification. Interest was therefore payable from the date tax would have fallen due on correct disclosure and classification, the earlier contrary interpretation was overruled, and the levy was restored, subject to a limited amnesty-related concession on the facts.

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Issues: Whether interest under section 23(3A) of the Kerala General Sales Tax Act is attracted where a dealer files a return but either omits taxable turnover, claims wrong exemption, or classifies goods at a lower rate resulting in short payment of tax.

Analysis: The provision was held to be compensatory in nature. The liability to interest does not depend only on total omission of turnover from the return, but also on omission to disclose taxable turnover correctly and to pay tax at the proper rate on the turnover returned. The amendment to section 23(3A) was treated as clarificatory, because the pre-amended provision would otherwise fail to cover short payment arising from wrong classification or incorrect rate adoption. The interest is therefore payable from the date on which tax would have fallen due had the turnover been included at the correct rate in the return. The earlier contrary view was held not to be the correct interpretation and was overruled.

Conclusion: Interest under section 23(3A) is leviable on short payment caused by omission, wrong exemption, or misclassification of taxable turnover, and the contrary view was overruled.

Final Conclusion: The revisions succeeded and the interest levy was restored, while a limited amnesty-related concession was directed in favour of the respondents on the peculiar facts.

Ratio Decidendi: Interest under the sales tax provision is compensatory and is attracted whenever the dealer fails to disclose or pay tax on taxable turnover at the correct rate, not merely when turnover is totally omitted from the return.

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