Interest on disputed sales tax liability is not leviable where differential tax is paid only after final assessment determination.

Interest under Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 is not leviable on differential tax where the dealer's liability remained disputed and the tax was paid only after the assessment issue was finally determined. The applicable principle is that statutory interest arises only when the tax liability has crystallised or where admitted returns have already fixed the liability and default follows thereafter. On the facts stated, the dealer had claimed exemption, the controversy on the mode of taxation was resolved later, and the revenue could not rely on Section 13 to sustain interest. The interest demand was therefore unsustainable and the levy was set aside.

---

---

Issues: Whether interest under Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 could be levied on the differential tax paid after the underlying tax dispute was resolved.

Analysis: The petitioner had filed returns and claimed exemption, and the tax was ultimately paid only after the legal controversy regarding the manner of taxation was settled. The liability to pay interest depends on whether the tax liability had crystallised so as to attract the statutory levy. Applying the principle recognised in the earlier decision on the same question, interest is not leviable where the dealer did not admit the return and the differential tax was paid after final determination of the assessment liability. The reference to Section 13 did not assist the revenue on the facts, because the case did not involve a situation where admitted returns had already fixed the tax liability and default thereafter attracted interest.

Conclusion: The demand of interest under Section 24(3) was not sustainable and the levy was set aside in favour of the assessee.

Ratio Decidendi: Interest under the sales tax law cannot be demanded on differential tax where the dealer's liability remained disputed and the tax was paid only after the assessment issue was finally determined.

---