Supreme Court tax-rate declaration blocks recovery beyond the lawful levy and renders excess demand unenforceable.

Recovery notices demanding tax above the rate declared by the Supreme Court were unenforceable because tax can be collected only by authority of law and the law declared under Article 141 binds all authorities. In the Ujala products assessment under the Kerala VAT Act, the Supreme Court had fixed the applicable rate at 4%/5% and clarified that excess tax already paid would not be refundable. Departmental demands seeking amounts beyond that rate, including penal interest, were therefore beyond the lawful levy and liable to be set aside.

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Issues: Whether revenue recovery notices demanding tax in excess of the rate declared by the Supreme Court were legal and enforceable.

Analysis: The assessment related to sale of Ujala products under the Kerala Value Added Tax Act, 2003. The Supreme Court had already declared that the applicable rate of tax was 4%/5% and had also clarified that excess tax already paid would not be refundable. The binding effect of the law declared by the Supreme Court under Article 141 of the Constitution of India, together with the mandate that tax can be collected only by authority of law under Article 265 of the Constitution of India, rendered the departmental demand beyond the admitted rate unenforceable. The recovery notices sought collection of amounts over and above the lawful rate with penal interest, which could not be sustained.

Conclusion: The notices demanding tax beyond 4%/5% were illegal and liable to be set aside; the issue was decided in favour of the assessee.

Ratio Decidendi: Once the Supreme Court has declared the applicable tax rate, departmental recovery cannot be enforced for amounts demanded beyond that declared rate, because tax collection must have authority of law and the law declared by the Supreme Court is binding on all courts and authorities.

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