Entry tax interest under Section 7(2) was unsustainable where tax was paid before later clarification on liability.

Interest under Section 7(2) of the Karnataka Tax on Entry of Goods Act applies only to default in payment of tax declared under Section 7(1), while Section 8(2) concerns assessed tax that remains unpaid. Where entry tax on cutting tools was clarified only later and the dealer had already paid the tax before the interest order and well before the clarification, the case did not fall within Section 7(2). The levy of interest was therefore unsustainable, and the Tribunal's view in favour of the dealer was upheld.

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Issues: Whether interest under Section 7(2) of the Karnataka Tax on Entry of Goods, 1979 could be levied on the dealer for the relevant assessment years when the tax liability on cutting tools was clarified later and the tax had already been paid before the clarification.

Analysis: Section 7(1) requires a registered dealer to disclose and pay advance tax on the basis of the return filed, and Section 7(2) applies where there is default in payment of tax that has been declared under Section 7(1). By contrast, Section 8(2) governs cases where tax has been assessed and remains unpaid. On the facts, the liability of entry tax on cutting tools was under dispute and was clarified only later. The dealer had already paid the tax and related amount before the order imposing interest and long before the clarification issued by the Commissioner. In these circumstances, the case did not fall within the ambit of Section 7(2).

Conclusion: The levy of interest under Section 7(2) was not sustainable and the decision of the Tribunal was upheld in favour of the dealer.

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