Automatic statutory interest under sales tax law applies without separate demand, and payments are first appropriated towards interest.

Section 55C of the Kerala General Sales Tax Act, 1963 was treated as a clarificatory appropriation rule and applied to payments made on or after 01.01.2000, regardless of the assessment year to which the arrears related; amounts paid had to be adjusted first towards interest and then towards principal dues. Interest under Section 23(3) was described as arising automatically when tax or other assessed sums were not paid within the prescribed time, so no separate demand or express quantification in the assessment order was required, and completion of assessment within limitation did not remove the statutory liability. The revisional and appellate orders were sustained.

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Issues: (i) whether Section 55C of the Kerala General Sales Tax Act, 1963 could be applied to payments relating to an assessment year prior to its introduction and whether the amounts paid could be appropriated first towards interest; (ii) whether interest under Section 23(3) of the Kerala General Sales Tax Act, 1963 was leviable without a separate demand and despite the completion of assessment within the period of limitation.

Issue (i): Whether Section 55C of the Kerala General Sales Tax Act, 1963 could be applied to payments relating to an assessment year prior to its introduction and whether the amounts paid could be appropriated first towards interest.

Analysis: Section 55C was treated as a clarificatory provision governing appropriation of amounts due under the Act, including interest. The provision was held applicable to payments made on or after 01.01.2000, irrespective of the assessment year to which the arrears related. The statutory scheme required payment to be adjusted first towards interest and then towards principal dues.

Conclusion: The issue was answered in favour of the Revenue and against the assessee.

Issue (ii): Whether interest under Section 23(3) of the Kerala General Sales Tax Act, 1963 was leviable without a separate demand and despite the completion of assessment within the period of limitation.

Analysis: Interest under Section 23(3) was held to arise automatically when tax or other amounts assessed or due were not paid within the prescribed time. A separate demand was not necessary where the statute itself fixed the time for payment. The assessment order need not expressly quantify interest for the statutory liability to arise, and completion of assessment within limitation did not extinguish the liability to interest. The provision as substituted was held applicable to the relevant assessment year, and the subsequent amendment was treated as clarificatory.

Conclusion: The issue was answered in favour of the Revenue and against the assessee.

Final Conclusion: The revisional and appellate orders were sustained, and the challenge to the levy and appropriation of interest failed in full.

Ratio Decidendi: Interest payable under the sales tax statute accrues automatically by force of the statutory provision, without the need for a separate demand or express assessment order, and a clarificatory appropriation provision may be applied to payments made after its commencement regardless of the assessment year to which the arrears relate.

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