Retrospective interest levy under the Central Sales Tax regime upheld for delayed tax payment before amendment.

Section 9(2B) of the Central Sales Tax Act was validated retrospectively by section 120 of the Finance Act, 2000, so the amended interest provisions were treated as operating from the inception of the parent Act. The governing principle applied was that interest on delayed tax payment is compensatory, and where tax remains unpaid after it becomes due, the revenue loss during the default period supports levy of interest under the validating amendment. On that basis, interest was held leviable for the earlier period, and the questions were answered in favour of the State.

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Issues: Whether the amended provisions relating to interest under the Central Sales Tax Act operated retrospectively from the date of the parent Act and could support levy of interest for periods prior to 12 May 2000.

Analysis: The questions referred arose from levy of interest on delayed payment of tax for assessment years prior to the amendment. The controlling provision was the validation introduced by section 120 of the Finance Act, 2000, by which section 9(2B) of the Central Sales Tax Act, 1956 was treated as having effect retrospectively from the inception of the parent Act. The governing principle applied was that interest on delayed payment is compensatory in nature, and where tax remains unpaid after it becomes due, the revenue loss during the period of default justifies the levy in accordance with the validating amendment.

Conclusion: The amended provisions were held to operate retrospectively, and interest was leviable for the relevant earlier period. The referred questions were answered in favour of the State and against the respondent.

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