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Issues: Whether amounts paid after insertion of section 55C of the Kerala General Sales Tax Act, 1963 were to be appropriated first towards interest and only thereafter towards principal, and whether section 59 of the Indian Contract Act required appropriation of the payments towards principal as requested by the dealer.
Analysis: Section 55C created a clear statutory rule that any payment of tax or other amount due under the Act must first be adjusted against interest and only the balance against principal, notwithstanding any request to the contrary. The provision also contained a saving clause for payments already set off towards principal before the section came into force, but the payments in question were all made after 1 January 2000. The Court held that the rule in section 59 of the Indian Contract Act did not govern a single tax debt with accrued interest in the manner suggested, and that the assessment-year principle did not assist the petitioner because the governing law for appropriation was the law in force when the payment was made. The non obstante language and the plain text of section 55C left no scope for insisting on appropriation towards principal merely because the payer requested it.
Conclusion: The challenge failed. The payments were liable to be appropriated first towards interest under section 55C, and the petitioner was not entitled to insist on appropriation towards principal.
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