Interest on self-assessed sales tax follows a binding judicial declaration, while penalty depends on bona fide default and compliance.

Tax on the excise duty component became part of the tax due under the Kerala General Sales Tax Act once the Full Bench declaration made the liability legally enforceable, so interest under section 23(3) applied from the monthly return periods beginning January 1993, but not for the earlier period. Penalty under section 45A required more than a technical breach; the continued non-payment after the binding declaration was treated as lacking bona fides, yet the Court granted conditional relief by directing that the penalty would stand exonerated if the interest arrears were paid within one month, and would otherwise remain sustained.

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Issues: (i) whether interest under section 23(3) of the Kerala General Sales Tax Act, 1963 was leviable on delayed payment of sales tax on excise duty component from the period after the Full Bench decision declaring the liability; and (ii) whether penalty under section 45A of the Kerala General Sales Tax Act, 1963 was sustainable for non-payment of that tax.

Issue (i): whether interest under section 23(3) of the Kerala General Sales Tax Act, 1963 was leviable on delayed payment of sales tax on excise duty component from the period after the Full Bench decision declaring the liability.

Analysis: The amended provision covered default in payment of tax due under the Act within the prescribed time, including tax payable under the self-assessment scheme along with monthly returns. The liability on excise duty, once declared by the Full Bench of the Court in the assessee's own case, became part of the tax due under the Act. The Court held that tax on excise duty became due after the pronouncement of the Full Bench decision, and the assessees were in default from the monthly returns filed from January 1993 onwards. Interest was therefore attracted from the relevant due dates, but not for the period prior to the Full Bench decision.

Conclusion: Interest under section 23(3) was rightly leviable from the monthly return period beginning January 1993, and was not sustainable for the prior period.

Issue (ii): whether penalty under section 45A of the Kerala General Sales Tax Act, 1963 was sustainable for non-payment of that tax.

Analysis: Penalty was considered in the light of the requirement of contumacious, dishonest or fraudulent conduct rather than a mere technical breach. The Court found that after the Full Bench decision, the continued non-payment of tax on excise duty lacked bona fides. At the same time, considering that the assessees were public sector companies and in view of the substantial interest liability upheld, the Court granted a conditional relief: if the arrears of interest were cleared within one month, the penalty for the specified assessment years would stand exonerated; failing such payment, the penalty would remain sustained.

Conclusion: Penalty under section 45A was conditionally set aside subject to payment of the interest arrears within one month, and otherwise sustained.

Final Conclusion: The challenge succeeded only in part: interest was upheld for the post-January 1993 period, the earlier period of interest was deleted, and the penalty was made dependent on timely discharge of the upheld interest liability.

Ratio Decidendi: Tax payable under the Act includes tax that becomes legally due by virtue of binding judicial declaration, and failure to pay such self-assessed tax within the prescribed time attracts statutory interest; penalty requires a further finding of deliberate or contumacious default, though bona fides may still be negatived on the facts.

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