TNVAT interest demands must clearly separate admitted tax interest from assessed-addition interest before final sustenance.

Under the TNVAT regime, interest on admitted tax accrues automatically under Section 42, but a demand must clearly separate interest on admitted tax from interest arising from assessed additions. A notice that does not bifurcate these components and is issued without a clear show cause basis creates uncertainty in the levy. The demand was not quashed, but the assessee was directed to appear before the Assessing Authority for a fresh hearing, component-wise identification of tax and interest, and reconsideration of the applicable rate of interest.

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Issues: Whether the interest demand under the TNVAT regime could be sustained without a prior show cause notice and without a clear bifurcation between interest on admitted tax and interest on tax arising from additions in assessment, and whether the rate of interest required reconsideration.

Analysis: Interest on admitted tax is attracted automatically under Section 42 of the TNVAT Act. However, the impugned notice did not distinguish between interest relatable to admitted tax and interest relatable to additional turnover, and no show cause notice had been issued for the levy of interest. The lack of bifurcation created uncertainty as to the basis of the demand. The challenge to the notice was therefore rejected, but the assessee was directed to appear before the Assessing Authority so that the tax and interest components could be separately identified and the applicable rate of interest could also be considered afresh.

Conclusion: The demand was not quashed, but the assessee was entitled to a fresh hearing and reconsideration of the bifurcation and rate of interest.

Final Conclusion: The writ petitions were disposed of with directions for personal hearing and fresh determination of the interest demand on a component-wise basis.

Ratio Decidendi: Interest on admitted tax may operate automatically, but a demand must clearly segregate the interest attributable to admitted tax from that attributable to assessed additions before it is finally sustained.

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