Compensatory interest under sales tax law upheld as valid fiscal recovery measure; remission provision also survived constitutional challenge.

Section 13(2) of the Karnataka Sales Tax Act was construed as a compensatory interest provision, not a penalty, because its substance was to compensate the State for delayed tax payment and deter default. The challenge under Articles 14 and 19(1)(f) failed since uniform treatment of defaulting assessees and graduated interest for delay were treated as legitimate fiscal recovery measures. Section 13(2A) was upheld as a beneficial remission provision and not an instance of excessive delegation, as it operated within prescribed conditions and legislative control. Applying severability, the charging provision was held independent and capable of surviving even if the remission provision were invalid.

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Issues: (i) Whether section 13(2) of the Karnataka Sales Tax Act, 1957 provides for payment of penalty or interest; (ii) Whether section 13(2) is violative of articles 14 and 19(1)(f) of the Constitution of India; (iii) Whether section 13(2A) suffers from excessive delegation and violates article 14 of the Constitution of India; (iv) Whether, if section 13(2A) were invalid, section 13(2) would also fail for want of severability.

Issue (i): Whether section 13(2) of the Karnataka Sales Tax Act, 1957 provides for payment of penalty or interest

Analysis: The provision was construed in the light of the scheme of the Act, earlier decisions of the Court, and the nature of the liability arising on default in payment of tax. The use of the word "penalty" was held not to be decisive; in substance, the levy was intended to compensate the State for delayed payment and to deter defaulting assessees. The Court declined to reopen the earlier construction approved in prior decisions.

Conclusion: Section 13(2) was held to provide for interest and not penalty.

Issue (ii): Whether section 13(2) is violative of articles 14 and 19(1)(f) of the Constitution of India

Analysis: The Court held that a defaulting assessee can be treated uniformly and that graduated interest rates for delayed payment are a legitimate part of the recovery machinery in fiscal legislation. The levy was not found to be arbitrary, disproportionate, or expropriatory. The challenge under article 19(1)(f) was rejected as unsustainable.

Conclusion: Section 13(2) was held not to be violative of articles 14 or 19(1)(f) of the Constitution of India.

Issue (iii): Whether section 13(2A) suffers from excessive delegation and violates article 14 of the Constitution of India

Analysis: The remission power under section 13(2A) was treated as a beneficial provision conferring relief on assessees and as a power vested in the State Government subject to prescribed conditions and legislative control. The Court held that such delegation, accompanied by rule-making and laying requirements, did not amount to excessive delegation.

Conclusion: Section 13(2A) was held not to suffer from excessive delegation and not to violate article 14 of the Constitution of India.

Issue (iv): Whether, if section 13(2A) were invalid, section 13(2) would also fail for want of severability

Analysis: Applying the doctrine of severability, the Court held that section 13(2A) is an independent and separable provision and that section 13(2) can stand and operate even if section 13(2A) is removed. The provisions were not so inextricably linked as to require both to fall together.

Conclusion: Section 13(2) was held severable from section 13(2A) and would survive even if section 13(2A) were invalid.

Final Conclusion: The constitutional and interpretative challenges failed, and the writ petition was dismissed with costs.

Ratio Decidendi: A fiscal levy imposed on default in payment of tax, though described as penalty in the statute, may be construed as interest when its substance is compensatory and recovery-oriented; such a levy is valid if it applies uniformly to defaulters, and a separable remission provision does not invalidate the charging provision.

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