Statutory interest for omitted tax return entries is independent of the five per cent penalty threshold under KVAT law.

Interest under section 36 of the Karnataka Value Added Tax Act, 2003 was held payable where tax that ought to have been declared in the return was omitted and later found on reassessment. The court treated section 36, including failure to declare tax or interest, as operating independently of the penalty regime in section 72(2). The five per cent understatement threshold in section 72(2) was confined to penalty and did not qualify the levy of interest. A revised return filed within the prescribed period did not cure the omission, so the challenge to the interest demand failed.

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Issues: Whether interest under section 36 of the Karnataka Value Added Tax Act, 2003 was leviable on tax omitted from the returns and later found on reassessment, notwithstanding the contention that section 72(2) of the Act applied only where the understatement exceeded five per cent.

Analysis: Section 36 provides for interest where tax that ought to have been declared in the return has been omitted, and sub-section (2)(c) specifically covers failure to declare tax or interest that should have been declared. Section 72(2) is a penalty provision dealing with understatement or overstatement beyond five per cent of actual liability. The two provisions operate in different fields. The presence of a five per cent threshold in the penalty provision does not import that threshold into the levy of interest under section 36. The liability to interest arises independently of the penalty regime, and the omission was not cured by a revised return within the prescribed period.

Conclusion: Interest under section 36 was rightly levied, and the assessee's challenge based on section 72(2) failed.

Ratio Decidendi: Liability to statutory interest for omission of tax from a return is independent of the penalty threshold under section 72(2), and the five per cent condition for penalty does not al the levy of interest under section 36.

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